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I think this is a step in the right direction. Everyone can lose a portable device or it can get stolen, so protecting the potentially sensitive data is important.
I think what people are complaining about is not full-disk encryption itself, but the fact that people are not used to being responsible for their cryptographic keys.
I think we should educate people regarding this responsibility. We did it with regular keys we use to unlock our homes.
I migrated my home- and webservers from Debian to FCOS a while ago and I’m very happy with how everything works.
Troubleshooting butane/ignition was a bit of a pain in the butt but worth it imo. I suggest just reading through the FCOS docs, they guided me well while setting everything up. I use podman on my webservers and docker on the homeserver (bc nextcloud aio is not fully podman compatible). I use the installer to build a pre-configured ISO that I can deploy where I want to.
Someone in the comments mentioned Flatcar, which I think looks compelling as well, since it’s basically the same but more of a community effort.