The author asserts that removing intermediaries (with blockchain) is a solution to a non-existent problem, as there are a lot of trusted intermediaries.
Blockchain lets us do some stuff now that was impossible before (single ownership of digital assets jumps out), but a big chunk of the economic benefit is going to come from reduced transaction costs.
I do not send money to my wife on bitcoin, I use venmo or bank accounts and it is free and immediate.
Other cryptocoins including BTC, Ethereum, Litecoin or whatever do not have lower transaction cost than traditional currency. In fact I would argue that since public blockchain require mining transaction costs can never be that much lower than traditional currency.
If that middleman is in a big enough market with low barriers to entry and lots of competition, and is able to drive cost down with smart tech, it doesn't really matter to most users whether he exists or not.
Decentralised systems never promised low transaction costs. A private party running a database can do it cheaper and faster than a set of decentralised actors working for some incentive to establish the same database. That seems pretty much inevitable.
They did promise something else. Trustless-systems. But it hasn't been shown yet that consumers value this. (e.g. see our most valued companies like Facebook to which we routinely trust data (from secrets to nudes) we'd never, ever share with anyone else)
Blockchain's value proposition, as I've always interpreted it, isn't 'material' in the sense that transaction costs or speed are, but more based on the culture and the relationships of the 'value network'. i.e., the relationships aren't based on trust+laws, but on code+math. And it doesn't appear to me that the market values these relationships/culture, but it seems that the market does value the material aspects. hence there being no real blockchain users of blockchain applications. (except for the whole store of value thing, which drives basically all the price changes, but nobody envisioned the blockchain to solely be digital gold and nothing else).
In simple terms even if my bank was evil and occasionally abused my trust to steal my money it would still be cheaper to me than trying to use Bitcoin as money and paying the high transaction fees and suffering the long transaction wait times.
Sure perhaps if there was no one I could trust as an intermediary and everyone was evil and would steal large amounts of money from me then a decentralized blockchain based monetary system would be worth using. But as it is the potential risk of an intermediary abusing my trust is minimal to nonexistent compared to the very real expense and wastefulness of the blockchain based systems.
The same thing applies to almost all usage of blockchain. Sure it works, but trusting an intermediary just works better, and cheaper.
Effort vs reward. Maybe the reward is low, and the cost (e.g. in electricity to do the proof of work) is getting out of hand.
The question is, do the costs and downsides of cryptocurrencies outweigh the benefits of not having to trust a third-party intermediary? The author is arguing no, and for the overwhelming majority of real-world cases, I would tend to agree.
In the original paper, the way mining worked was by Proof-of-Work (PoW), which wastes a bunch of energy to make sure it's unprofitable to attack it.
There is research into mining without wasting energy by using alternatives to PoW, like Proof-of-Stake (PoS). I don't think there's consensus about whether any of them actually work.
Now, maybe we'll solve those problems in ways that don't requite more trust, but until then, cryptocurrencies will we far riskier than the existing financial system.
That cannot happen with a bank account.
It's a moot point anyway - as has been said, bitcoin's a commodity not a currency.
I just mentioned, elsewhere in this thread, a couple major players in the cryptocurrency space who have proved to be untrustworthy. And a lot of people got burned in part because they believed the hype that removing the need for trust from the management of the "physical" currency is equivalent to removing the need for trust from the financial system itself.
That might have been true thousands of years ago, before the birth of finance, when everything really did run on just cash. Things are more complicated than that nowadays, though. Cash is such a small corner of the money supply in a modern economy. A few percent of the bits that people bother to try and count, and there's a lot more that goes uncounted. A distributed trustless public ledger for the cash doesn't really help with the trust issues for that stuff. Frankly, it only helps with the small subset of money for which I'm least worried about trust.
Perhaps blockchain is superior to a trusted intermediary, perhaps not. But it isn't gonna take off in the developed world until it proves its utility in the undeveloped world.