There's a distinction that Kong is not payable on demand, until after expiry, but I'm not sure it's a useful distinction. Unlike a conventional bond, there isn't a question of default by the issuer; the Etherium is locked up in a smart contract, rather than relying on the issuer honouring the bond at maturation.
Rarely do users of cash care about the property of it being payable on demand by the issuer (conventionally a central bank), only the property that it be practical for physical commerce.
Here the risk is that the note becomes physically damaged in some trivial way and the value is lost forever. Maybe it's bent too far over in one direction, maybe something heavy falls on it, etc, etc.
That physical cash can become damaged is nothing new. Maybe this implementation could be easily damaged in some way, I don't think this threatens the concept of silicon cash generally.
The notes are more durable than linen currency and less durable than polymer currency. We found this to be an acceptable tradeoff. Most of the note can be destroyed but the funds still claimable. There is an envelope of durability properties associated with physical cash - Kong fits within most of these. Of course there is opportunity for improvement which we hope to address in future versions.
I'm not sure what you're making that assertion on the basis of. The note has redundant electrical connectors. You could melt the bulk of the note down and still claim the Etherium from the secure element. Hypothetically you could have redundant SEs.
Rarely do users of cash care about the property of it being payable on demand by the issuer (conventionally a central bank), only the property that it be practical for physical commerce.