How so?

makes them very vulnerable to permanent loss via attacks or accidents. even Luke got a bunch of coins stolen.

All currency is like this regardless of where it's stored

Why should we care. Fiat money is also a massive risk for majority of people because majority of people is mathematically illiterate. Everything is a massive risk.

Average bitcoiner with any hardware wallet would be safer than Luke with his setup. He was not following best practices.

Enjoy your 21M limit then. Fractional reserve will easily make it 210M if not much more. Glad I am storing value with Monero, where states encourage self-custody through delistings.

Different risk levels for different people, but much less risky than having a single entity damage everyone at the same time. A few, at different times and different losses, get damaged, versus everyone, at the same time of with everything on the line, get damaged.