Bitcoin Forum

What is your opinion on services which claim to hold your bitcoins?

On one hand, I can see a use case for such services. Someone who doesn't want the responsibility of taking care of their computer security or believes that their computer security is not good enough but wants to hold bitcoins could find them useful.

For example, a journalist who travels around the world and visits dangerous places might not want to keep their bitcoins locally in case their computer goes missing. Even paper wallets could be stolen.

I was on Freebitco.in the other day and saw this:

http://s29.postimg.org/pt64hrpmf/xapo.png

According to Wikipedia (link (http://en.wikipedia.org/wiki/Xapo)), Xapo is supposed to be an online wallet and vault for the storage of bitcoins. It seems legitimate but then again, almost all of these services do until suddenly they aren't. I know Circle is also offering a similar BTC storage service too (link (http://en.wikipedia.org/wiki/Circle_%28company%29)). Both claim to insure their customers' deposits and that any bitcoins stored with them are safe.

History, on the other hand, tells a different story. Ever since MyBitcoin got "hacked" in 2011, the track record of third party services (e.g. inputs.io, Mt. Gox, Flexcoin, etc.) which claim to hold your bitcoins for you has not been very positive.

Reading Satoshi's posts, it seems that he was distrustful of banks on all levels. I'm not sure if Satoshi ever used these words himself, but the phrase "be your own bank." shows up a lot during discussions about Bitcoin. So does the phrase "if you don't hold the private key, you don't have any bitcoins". I wonder what Satoshi would think of these Bitcoin "banks" ? Do you think they are providing a legitimate service as Bitcoin continues to evolve and become more mainstream or are they a parasite upon the Bitcoin world?

If I hold my own money and if it gets lost, I'm personally responsible for all of it. I like to be in control of what I do. If I screw up and I didn't take enough measures to make it safe, then that's due to my own fault. That is why I prefer not to leave others handle on my behalf.

Banks in general are centralized and every thing is recorded and they don't just pack everything up one day and run away, which is not the same with so called Bitcoin Banks. So keeping funds in such is same as asking a stranger to hold your money.

the average joe cant hold his bitcoins on his crappy maleware PC. deleeting one "file" on the computer and your money is gone  :D ? no way. in the long run there will be services with insurance (already there) that keep the funds. most people will use these services.


and we need more and cheap hardware wallets.

We can't start accusing any company here . They may be legit and may be scammers .
but I personally don't trust anyone but my self to store my Bitcoins so in case if I lost them I don't blame anyone else but my self & It was basically my fault .

My opinion?  It's still a bit too early.  Although some of these services are claiming that the deposits are insured, it isn't well understood (or well tested) exactly what would happen if these "insured" deposits are stolen.  Most of these services aren't regularly audited by any third party to prove that they are continuing to secure the bitcoins as they describe, and there aren't many regulations forcing these businesses to handle the bitcoins in any particular secure fashion.

Eventually bitcoin banks will be as common and ubiquitous as fiat banks, but we aren't there yet.  I figure it will be another decade at least.


Well, here's what he said about it back in 2010:


Sounds like he didn't trust them with large amounts of bitcoins, but thought they presented an acceptable amount of risk for smaller amounts of bitcoins (pocket change amounts for micropayments and misc expenses).


I think that some are attemptig to provide a legitimate service, and that many are parasites on the Bitcoin world.  I think it is nearly impossible to tell the difference between the two at this time and will require better audits, regulation, and insurance before we will be able to distiguish those that can be relied on from those that can pack up and disappear.

For me, I would rather lose my coins due to a security bug in my own computer, than lose coins to an exchange or an online service which takes my coins .

There's a difference between banks and online wallets. We don't need banks and they're unnecessary with bitcoin, but if you wanted to travel with bitcoin you can keep them on your phone, or use an app like blockchain.info (which is an online service too), or you can just keep the private keys written down somewhere and input them when needed. Personally I prefer to keo my coins offline and secure, but online wallets have their place and blockchain.info is very safe in my opinion and useful for your everyday spends.

I have no doubt that some big player in the Bitcoin world will go down in 2015 and they will take a lot of bitcoins with them. If you are allowing someone else to store your bitcoins (and you aren't using a multi-sig address), then you are making a tragic mistake.

Blockchain is online BTC wallet, which is developed well enough  ;)

Seems like solid bitcoin banks might be needed for those who arent well-versed in security.

The keyword here is multi-sig. One key at the "bank", one at your smartphone, one safely stored away. I think, that is a scenario, you can teach everyone, who can use online banking.

I agree with this too. However, if BTC is to become well and truly mainstream then people who aren't very familiar with technology will have trouble keeping their bitcoins secure without entrusting them to a third party. The average 50+ year old man or woman isn't going to want to bother with cold storage, paper wallets, etc. Also many people have terrible computer security habits. My parents, for example, managed to get their laptop infested with malware because they kept clicking on popups which displayed false error messages and security warnings and "DOWNLOAD" buttons. Not everyone is a computer expert.


Some exchanges have already been audited. For example, Bitstamp, Kraken, an OKCoin have all had audits done by third parties and passed so it would be nice if these new Bitcoin banks do the same thing.

As for Bitcoin insurance, the whole concept seems quite difficult to implement. Ideally, I would like to see the insurance be in the form of a reserve denominated in BTC to protect against price swings but I'm not sure if its feasible for a company to hold so much BTC to cover 100% of users' deposits. Mt. Gox, for example would have needed close to 1 million BTC in reserves to cover everyone's deposits after they blew themselves up.

Also most traditional insurance companies today practice fractional insurance, i.e. they don't have enough reserves to cover everyone's payment obligations. In Bitcoin land however, it's quite common for services to have most or all of their bitcoins disappear at once (e.g. MyBitcoin, inputs.io, Mt. Gox) so in these cases, even having an insurance policy in place would still have been hopeless.


That sounds about right. I'm not sure what happened to Vekja.net but MyBitcoin got hacked months after Satoshi wrote that post so he was definitely right to be cautious. It's pretty much what I think as well. Online wallets are good for pocket change amounts. You wouldn't keep thousands of dollars in a wallet in your back pocket. But $50? $100? No problem.


Well, Xapo and Circle both offer services labeled as "vaults", so I think it's kind of in the middle. They definitely have the appearance of a bank in the sense that you have a spending account and a cold storage savings account. Both claim to insure users' deposits (like a bank) and Xapo gives you a debit card linked to your account (also like a bank).

Another one is Elliptic, again another insured vault:

http://www.elliptic.co/vault (http://www.elliptic.co/vault)


Blockchain is an online wallet, but it's a bit different than other online wallets since you actually have control over your private keys. The encryption is client-side and the site operators don't actually know your private keys. I wouldn't trust it for holding large amounts of bitcoins but it's far more secure than a typical online wallet.

I hope you are trolling. As was mentioned earlier I wouldn't use blockchain.info for anything more than spending money while I'm out, for example.

That's what I am, though I don't travel to war zones, and I don't see why I should use a bank for my bitcoins. It just takes some organization. I have encrypted back-ups in several places, and I can switch to a new computer in a few minutes if something happens to my laptop. I had to change computers twice last year, and BTC is quick. The biggest problem is to install the software I'm used to, and all my various settings. This takes more than a day!

In terms of security, Blockchain.info kind of in between online wallets and offline wallets. They're not as bad as inputs.io was because you can control your own private keys.


So I take it you store your bitcoins on the cloud?

I use online services and Elektrum to serve my day to day spending. Rest goes into my offline wallet.

You have a point regarding inputs.io lol. I think you can also get copies of your keys from coinbase now, or am I mistaken? (I don't use coinbase).

No, but I guess I could.

I would love to deposit my bitcoins and earn interest on them, if I am convinced that these services are safe.
On the other hand, if I had to pay for somebody securing and keeping my coins, I would think twice.

There's a few things in life that you shouldn't do because it usually ends badly. Don't let a stranger drive your car, watch your house when you're out of town or hold your bitcoins. The words bitcoin and bank don't go together.

I run them through the same due diligence as I do before choosing a PayPal like service or before choosing my stocks broker or being conned into opening an account with a rather new bank. So I end up with trusting my own wallet.

i think use wallet in pc better, you can backup the wallet file and setup password on it . I'm only afraid another day i lost memory and forgot the password :)