You can have the physical stock certificate. When you have an account at Robinhood they have your certificate in "custody". I know they don't hold a physical copy, but if you close your account and request a physical certificate they have to give it to you.
Of course you have to pay the fees associated with creating a physical copy, but you can get one and hold it yourself. This does make trading more difficult though as you would have to send your physical certificate when you want to sell your stock.
As far as shorting more than a 100% percent you are completely right in that it can be done in crypto and it can be done anywhere. Prior to regulation, banks were loaning out more dollars than they had on hand regularly.
Just as your example stated--the way you can expose this is if you withdraw the stock certificate. What happens in this case is that Robinhood will force the short sellers to cover and once the short sellers cover the short percentage will fall below 100% again.
Now that is the theory. What actually happens is that Robinhood does hold cash and if you request the certificate they will most likely cover your withdrawal on behalf of the short sellers and then the short sellers covers will go to Robinhood. Robinhood will act as a liquidity provider in the same way that crypto people provide liquidity to these liquidity pools on DeFi.
The same thing happens in banking with fractional reserve. If everybody tries to withdraw from Bank of America (BAC) at the same time then the Federal Reserve Bank will step in and provide liquidity on behalf of BAC to prevent a "Bank Run". Once BAC recalls some of their outstanding loans they can send money back to the Federal Reserve.
Now the Federal Reserve tries to protect against these kind of things by limiting how much Bank of America can lend, so that Bank of America can't irresponsibly lend and put the Fed at risk which puts the entire financial system at risk. They impose "Reserve Requirements".
Everything that I mentioned about with physical stock certificates applies to cryptos as well. You can withdraw all of your crypto and hold them yourself with your own private keys, but a lot of complicated financial actions are hard to do without intermediaries like Binance and Coinbase acting on your behalf.
I do think blockchain technology and smart contracts are getting better at helping people make transactions on chain, wallet to wallet, without intermediaries taking custody, but right now these intermediaries that are facilitating these wallet to wallet transactions are taking high fees. This same problem plays out in the housing market where people are more likely to hold physical title to their homes, but you generally use escrow to facilitate the purchase and sales and escrow charges really high fees. A lot of the Defi out there are acting like escrows.
Great article! There are very old historical examples of what you are saying and you see it in traditional banks which have existed long before stocks and crypto. These aren't new problems and we can learn from history. I think learning from history will allow blockchain technology to rebuild finance in a better way.
RE: Think what happened with $GME can't happen with bitcoin? Think again...