That is a funny example to use because the US Government has a service specifically designed to help you in that situation: https://www.bep.gov/services/mutilated-currency-redemption

Yes obviously if your money is completely burned then it's gone, but that is generally pretty unlikely to happen. Losing your digital key is many orders of magnitude more likely to happen in my opinion. And there is - by design - absolutely no way to get it back. That makes using blockchain for anything serious completely untenable in my opinion.

It doesn't need to be completely burned to be gone:

"No redemption will be made when (...) Fragments and remnants presented which represent 50% or less of a note are identifiable as United States currency but the method of destruction and supporting evidence do not satisfy the Treasury that the missing portion has been totally destroyed"

Not that unlikely, in my opinion.

Accidentally burning money is a very low probably event. Forgetting passwords or any type of memorized secret is the most likely default outcome, and chance only increases with time passing.

For at least 12,000 years, humans have been getting very good at holding on to physical things.

Digital things, not so much. I'm a professional in the field, yet I've lost digital data in the past few years. Normal users who work in other fields? Lost cause.

> If you accidentally burn cash you cannot recover it. The paper in your hand isn't replicated in another place.

Which is (one reason) why most people use a bank account and don't hide their money in big bundle of cash under their pillow?