If data would be stored on the decentralized nodes and accessible over the smart contracts, my zen would be way closer.
I fail to see how that's better. And if encryption is the solution, there could be encrypted centralized or decentralized apps.
Blockchain code literally runs in an open source, open memory environment. Which means you can guarantee the execution of code without interference.
(if you encrypt your data, then nobody else can see it, but you can't do anything with it on the chain and you might as well store it in S3 or wherever)
The problem is that most users don't agree with you. In fact, most users don't know enough to know to care about this. Those that do very often favor convenience above all else.
Blockchains don't solve the problem any better than existing centralized providers; in fact, they can literally only do worse on any dimension most users care about.