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.