On decentralization vs performance: (1) Future blockchain technologies might give the network ability to trade off between decentralization and performance, sharding and Lightning network are some examples. (2) Another way is to have decentralization models inspired by representative democracy, like users voting for validator nodes.
On securely storing coins: (1) Some bitcoins will be stored on stock or futures exchanges, which might have deposit insurance. (2) Also, most people can carry <$500 cash and never lose them or get mugged, this means people might be comfortable with owning small amount of cryptocurrencies.
On fund recovery: (1) Like BTC/ETH blockchain scaling, there might be innovative ideas to do it, like allocating mining rewards to a fund recovery pool, then vote on-chain for whose funds to recover. Also there is a proposal on recovering mathematically stuck funds. (2) Crypto insurance schemes. (3) If "most people" tolerate centralization, give them centralized crypto banks.
On privacy: Bitcoin seems to be both privacy-friendly and transparency-friendly. (1) If you want to buy porn, credit card sounds like a bad idea, so you pay for porn in bitcoins or gift cards. But FBI can trace your bitcoin porn purchases if they make an effort to. (2) Another part of privacy can be achieved with secure multiparty computation, some smart contract dApps might need them. (3) For Big Brother, central bank can create a fiat cryptocurrency to track every tax evaders and money launderers using the blockchain. (4) For transparency, unerasable information on blockchain helps a lot, and Canadian government is trailing the use of blockchain to publish scientific funding information.
Small pockets of adoption (that will never have trillion dollar valuation): (1) Asking for tips and donations internationally is easier if all you need to write is your bitcoin address. Dogecoin seems to be a tipping coin. (2) Paying for things that you shouldn't use your credit card for: Porn, VPNs and gambling. American credit card company blocking purchase of a VPN solution in Europe = frustrated user googling for local bitcoin ATMs.
Alternative path to mass adoption: Banks and stock exchanges will use blockchains (either their own or on top of BTC/ETH), lawyers and politicians will use public blockchains as a way to permanently publish information. Elections will be powered by blockchains. Blockchains will be used everywhere but no one will be aware of it.