It would be impossible for any entity to fraudulently post proof of on-chain reserves today.

Sure, the fraud might fool some subset of extremely uninformed people initially, but someone is bound to find the fraud when they check the chain with one of the hundreds of different open source clients that exist today. Immediately, they would post this astonishing finding on Twitter. Immediately, Twitter would blow up and out them as frauds. Immediately, all of the people who were initially fooled would know that this company is a fraud.

Well... you wouldn't know if the reserves that they show proof of are theirs or borrowed from someone else. In the real world "your keys" doesn't necessarily mean "your assets", that's the point.

Sure, but is the not a step in the right direction?

Personally, I don't think so. It's another attempt to replace 'trust', in this case trust on an independent party that audits the financial statements, with an even less reliable alternative that doesn't even work. This obsession with trustlessness is a mistake.

Well, you're wrong. Let's come back to this in 10-20 years and see who's right.

Maybe you do, but I don't need 20 years to figure out that 'crypto' can't succeed because of 1) limitations that are inherent to 'trustlessness', 2) isolation from and inability to deal with physical reality, 3) competitive disadvantage of distributed systems, and 4) lack of appeal to anyone who has normal, healthy relationships with other people (i.e. a social life).