the knowledge you'll get most of your deposits back if the bank goes bust? (government mandated insurance schemes like FDIC/FSCS are really expensive for banks... this makes up a big part of your bank fees)
the bank's capability to match up long term loans with short term deposits?
people really want a 25 year mortgage, but also want instant access to their savings, the banks (mostly) match up these two incompatible goals: this is a useful function
and the transaction-scripting possibilities described in a lot of these comments are interesting but why couldn't banks implement the same thing? mainly because they are trying to protect you & intercept fraud etc.
My ideal version of Bitcoin is more like this -- you put money in the bank & then it becomes crypto currency. You can pass it around as much as you want & then at the end of the day if you ever want cash you submit coins to the bank & get cash. It's so simple & negates a ton of Bitcoin's problems. But it's not as romantic & get rich quick-y so the community will hate it. I think the allure of the black market, "f__k the systemmm", and pyramid scheme is 90% of why bitcoin is defended so intensely.
I think it's complicated legally though and that's why financiers want nothing to do with it. After all, if banks told you you could go 0% transaction fee if you incur some risk of losing your account altogether (if your wallet gets deleted or an admission that they might steal it or that you'll have to sell back your money at a new market price, plus the fact that you're entering an imbalanced market where early adopters have greater hordes of wealth for the same buy-in price) I think most customers would flat out reject it anyway.
It's also a very strange approach that a lot of the arguments take where they claim that because of the distributed nature it's safer than dealing with corporations. The Bitcoin network has its own points of failure (exchanges, hello?) that users have gotten burned for trusting. They are establishing new Gods, not eliminating the concept entirely. A public record does not mean that the system has no possible points of fault. A big part of banking is controlling these possible fault points to protect customers. As with lots of corporate/gov services, they are trying to design it so that it is strong/reliable/simple-to-use/stable.
Oh, and duh!! Lots of Bitcoin services (exchanges, transaction processors) CHARGE FEES! It's only when it's floating around the ecosystem ether that it is fee-less. If it gets to the level of everyday use, I'd wager there will be as many protectionary fees as with USD except maybe in certain situations: sending money to a friend, or a no-refunds type of transaction where ordinarily you'd pay cash (which incidentally is more off-the-grid than BTC would be at that point).
The problem with your suggested system is that it introduces a mandatory third party into all transactions, even where only two parties are desired. Bitcoin makes that third party optional.
You're correct that there are fees, but these are much more flexible and usually much lower than current fees (see international wire transfers).
Basically what I'm describing is Bitcoin but instead the exchanges are banks and without mining. The whole system would be pretty much the same beyond that.
I basically think that mining was a trick used to help adoption, but it's a big part of the destabilization of the currency. Forget banks if you don't like the idea (I suggested them because deposits could be FDIC-insured). What if the ecosystem started from scratch and Gox just inputted money 1-to-1? $1000 = 1 BTC, and then if you need to print more BTC, just put more money in the bank & raise the cap.
Think again - mining is closely tied to a "proof of work", a guarantee that the coins are not created out of thin air. That property is lacking from the system you are suggesting. How do you prove that your "DollarPegCoin" is actually backed by anything?
I agree that this has caused an inelastic supply and wild price fluctuations, and these will continue, but it serves an additional purpose besides being an adoption incentive.
I grant you, just like with the Internet there is a transition point where to get on the internet you have to pay high fees (similar to exchange fees) but once internet is cheap and everywhere then lots of services become cheaper and more accessible.
The same goes on with bitcoin. As adoption grows you won't need to exchange for USD, EUR or whatever as much, therefore no exchange fees.
Banks will have to adapt, re-purpose themselves to a certain extend.
I'm excited to see when they open source the code. I think a key part of this model that is missing from Bitcoin is that for this to work they'll have to keep an actual bank account to pay out to users whatever was put in. With Bitcoin once you buy a coin that cash is gone. The burden of maintaining the value of the system is then, somewhat paradoxically, on the buyer.
EDIT: Ugh, WHYYYY?!!! They mint a finite amount (100 billion XRP) and Ripple Labs plans to donate 55 billion to "users, charitable organizations, and strategic partners". This is MY WHOLE BEEF with cryptocurrencies. They are all redistributing wealth in a way that hasn't proven to be mathematically sound just cuz they're like "eh what's the big deal us originators can just print ourselves as much money as we want for a while". Now again faced with a situation where something that is supposed to be currency is now a trading platform with somewhat arbitrary rules that make the market difficult to predict.