One easy way to resolve all of these problems is to build an escape hatch in the contract so that in the case of theft, loss, or other special circumstance you can invoke arbitration and mint a new token if needed.

It’s important to understand that these tokens aren’t going to replace the existing legal system (much though the anarchist/libertarian wing of the crypto community might wish it). They just enable certain transactions to occur with lower overhead and time delay. This is about improving friction in the happy path, not providing new solutions for every conflict case.

Personally I don’t think there is a reason to put your primary residence one the blockchain (you don’t trade it that often). But it’s interesting for places where you might want to trade assets at higher frequency (eg micro loans, supply chain finance, etc) and maybe there is a real-estate trust angle too.