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For people not experienced with bitcoin: For some types of bitcoin wallets the user retains their own private key, whereas with other wallets they have to trust

by drcode 12y ago

For people not experienced with bitcoin: For some types of bitcoin wallets the user retains their own private key, whereas with other wallets they have to trust a 3rd party (like coinbase) with their keys. This second type isn't really a wallet any more, per se... it's more like a bank that you are trusting with your money. Of course, bitcoin startups really want to use the second model, where THEY control the money, which gives them many more avenues for profit: As any salesman knows, the closer you are to the money in a business, the more money you're likely to make yourself. This means bitcoin companies are bending over backwards to say "look how safe your money is!" However, be aware if you ever buy bitcoins, it is much better to store your own bitcoins or use a wallet that allows you to manage your own private keys, or use a (now trendy) multisig wallet where the wallet company can't move money without your permission. If a bitcoin bank says "We insure our bitcoins" your best response is "No thanks, I'd rather not have to trust you with my money in the first place." The whole raison d'être of bitcoin is that such trust isn't necessary.

imaginenore 12y ago
You actually didn't give a single good reason not to trust insured 3rd party storage. You just jumped to conclusion while shitting on companies that are improving bitcoin security.
- wehadfun 12y ago
  Mt. Gox provided a very good reason not to trust a 3rd party
  - jeremyjh 12y ago
    Though it was it was not the first (or second, or third) such example.
  - imaginenore 12y ago
    Mt. Gox didn't offer insured storage.
- drcode 12y ago
  This is like saying "You never gave a good reason not to stab yourself in the eye". The fact is that web wallets are available that are just as user friendly as coinbase that don't require you to do this. (trust a third party and/or stab yourself in the eye)
NotAtWork 12y ago
I would trust lots of professionals will my bitcoins more than I'd trust myself, especially if they had the right insurance policies in place. The problem is that Coinbase only insured themselves against damage from coins-in-transition being accidentally lost or being stolen. That doesn't actually cover most of the cases that I'm worried about, because while a 3% loss would be annoying, it's nothing compared to the other failure modes and should be a loss that's sustainable by Coinbase independent of this insurance policy. The problem isn't fundamentally exchanges holding the coins, but rather, exchanges holding coins so irresponsibly currently.
aaron-lebo 12y ago
For the vast, vast majority of people, they will be much better off letting someone else handle their wallet. Even for those of us who are computer savvy, the lengths you have to go to in order to make sure that your wallet is completely secure and redundant isn't easy. I feel a lot more secure with the bank holding my money. This is why the whole notion of Bitcoin's success is paradoxical. To really succeed it probably has to be pushed by these third-parties, which is an advantage over our current banking system because the core protocol will still be neutral, but only to an extent: third parties will almost certainly build features that lock people in on top of it. This is a far cry from the vision some proponents have of a completely decentralized system.
- wehadfun 12y ago
  >For the vast, vast majority of people, they will be much better off letting someone else handle their wallet. Why?
  - aaron-lebo 12y ago
    As I stated, it does take some work to make sure your wallet is secure and redundant (or even just your private key). Most people are just barely computer-literate, and therefore can't realistically do that. For them, third party services are a much better option.
    - georgemcbay 12y ago
      Or I could just skip all of the convenience and regulatory stuff that will have to be built up around bitcoin to make them mainstream usable and just continue to use US Dollars which already have all that infrastructure in place. Using bitcoin for currency as a whole (IMO) is almost like a misguided application rewrite -- sure, at the beginning it has all these advantages of being light and nimble and having limitless possibility, but by the time you add all the stuff users actually want/need back into the system you wind up pretty much right back where you started with the old heavy app, perhaps with a shift of power behind the scenes (from the old architect to the new architect, if those are different parties), but nebulous real advantages for end users at the end with a lot of transitional pain in between.

by drcode 12y ago

imaginenore 12y ago

You actually didn't give a single good reason not to trust insured 3rd party storage. You just jumped to conclusion while shitting on companies that are improving bitcoin security.

wehadfun 12y ago
Mt. Gox provided a very good reason not to trust a 3rd party
- jeremyjh 12y ago
  Though it was it was not the first (or second, or third) such example.
- imaginenore 12y ago
  Mt. Gox didn't offer insured storage.
drcode 12y ago
This is like saying "You never gave a good reason not to stab yourself in the eye". The fact is that web wallets are available that are just as user friendly as coinbase that don't require you to do this. (trust a third party and/or stab yourself in the eye)

NotAtWork 12y ago

I would trust lots of professionals will my bitcoins more than I'd trust myself, especially if they had the right insurance policies in place. The problem is that Coinbase only insured themselves against damage from coins-in-transition being accidentally lost or being stolen. That doesn't actually cover most of the cases that I'm worried about, because while a 3% loss would be annoying, it's nothing compared to the other failure modes and should be a loss that's sustainable by Coinbase independent of this insurance policy. The problem isn't fundamentally exchanges holding the coins, but rather, exchanges holding coins so irresponsibly currently.

aaron-lebo 12y ago

For the vast, vast majority of people, they will be much better off letting someone else handle their wallet. Even for those of us who are computer savvy, the lengths you have to go to in order to make sure that your wallet is completely secure and redundant isn't easy. I feel a lot more secure with the bank holding my money. This is why the whole notion of Bitcoin's success is paradoxical. To really succeed it probably has to be pushed by these third-parties, which is an advantage over our current banking system because the core protocol will still be neutral, but only to an extent: third parties will almost certainly build features that lock people in on top of it. This is a far cry from the vision some proponents have of a completely decentralized system.

wehadfun 12y ago
>For the vast, vast majority of people, they will be much better off letting someone else handle their wallet. Why?
- aaron-lebo 12y ago
  As I stated, it does take some work to make sure your wallet is secure and redundant (or even just your private key). Most people are just barely computer-literate, and therefore can't realistically do that. For them, third party services are a much better option.
  - georgemcbay 12y ago
    Or I could just skip all of the convenience and regulatory stuff that will have to be built up around bitcoin to make them mainstream usable and just continue to use US Dollars which already have all that infrastructure in place. Using bitcoin for currency as a whole (IMO) is almost like a misguided application rewrite -- sure, at the beginning it has all these advantages of being light and nimble and having limitless possibility, but by the time you add all the stuff users actually want/need back into the system you wind up pretty much right back where you started with the old heavy app, perhaps with a shift of power behind the scenes (from the old architect to the new architect, if those are different parties), but nebulous real advantages for end users at the end with a lot of transitional pain in between.