Interesting idea. Unfortunately it gives an incentive to depend more on third party services...
It is kind of trade off, you can rely on third party services to get better day to day user experience, but you can not rely on them to do mission critical transactions. However, it is the day to day small casual spending that created most amount of transactions, so settlement based design will dramatically reduce those transactions on blockchain
There are many brilliant idea from traditional financial systems, not every thing is bad. If you avoid taking too much risk on them, they still can provide better service.
You only need to avoid two things from legacy financial system: fiat money and fractional reserve banking. In this case, centralized service platform indeed have the ability to do fractional reserve banking (like MTGOX), so it is important only put small amount of bitcoin there
Why should I take this trade off? To unload the blockchain? I'm just a drop in the ocean... What guarantees others will also take this trade off?
Sorry being so skeptical. But although this is a good idea in theory I think it wouldn't work in practice. I don't see myself stop relying on my online wallets to start relying on third party services to hold my coins.
We can avoid taking risks... But the risk is still there. Even with small amounts. Small amounts from many of us make quite a big cake
what if another Mt. Gox comes on stage?
Everyone would be screwed. Again.