Bitcoin Forum

Hello,
I read somewhere that your BTC are less at risk if, instead of keeping them on your BTC account (say at Bitstamp), you transfer and keep inyou PC wallet (say Electrum), until you need to use them.
Is this true ?  ::)(if there is a simple answer to this question). Thank you !

Yes.

Yes if the amount is not that big but its better to store bitcoin in paper wallet or hardware wallets like trezor. Electrum is more secure than any exchange platform but not 100% secure.

Thanks to both of you.
Could you please elaborate a little on the reasons why it is safer : Bistamp could go "bankrupt" for example (like MtGox) or become unacessible, or ...?
And also, why is Electrum vulnerable - if my PC fails without a backup ?

Yep, that's exactly right. Bitstamp could disappear off the face of the planet and you will no longer have your bitcoins. But if you have them stored in your own wallet, then they are your bitcoins that no one can touch.

It basically varies from person to person depending on how much they trust. I have no problem in using a pc wallet but the time to set it up and match it with the network is too much. If you want store your coins in coinbase it is trusted from years and i currently have no problems with it

Because they can get hacked and they can't just return you back your bitcoins. Bitfinex have recently gone through a major security breach and many have lost millions due to bitfinex poor security (and this is not the first time for them) https://en.wikipedia.org/wiki/Bitfinex_hack

If you don't make proper backup of your wallet than you may lose good amount of bitcoin like this guy here https://bitcointalk.org/index.php?topic=1830282.0

Also someone can access your wallet physically and you may loss all bitcoin you have there.

Here is completely separate section for discussion about Electrum wallet, check it out
https://bitcointalk.org/index.php?board=98.0

Online wallets are never as secure.  You know that if the service fails or your account gets hacked with username and password (since people can access it from anywhere) you're screwed.  Electrum will only be vulnerable if either your PC fails without a backup (unlikely if you're responsible) or your computer is infected with malware which can access it (also unlikely if you're responsible).  The key is that if something goes wrong with your Electrum wallet you know that you are capable of sorting it out in most cases and it's actually your Bitcoin rather than being held by an exchange which could fail or enact legal precautions at any time.

Thank you very much to all of you for your clear and precise answers. I understand very well. The only "price to pay" seems that it takes some time to send the BTC back to Bitstamp if I want to sell them and get Euros of USD instead.

I have another (beginner's) question : are the platforms like Bistamp "playing" with our Bitcoins, like banks do with our money, for example speculation, buy USD and sell ...I suppose it cannot be done with BTC ?

Simply speaking, if you put your bitcoins in an exchange(or even a web wallet) you're at the mercy of others. Everything is controlled by them. From how you'd be able to withdraw your own funds, to how much they say you have.

Electrum or desktop wallets on the other hand, means you control your funds. And only you have a say on how you'd use it.

I for one would rather lose money because I made a mistake/own stupidity(I could take measures to avoid this, like learning what and what not to do)
than have my funds stolen/'lost'' by others due to exit scams, supposed hacks, etc (how do you guard against that.)

Well, some users do keep some amount on their web wallets or exchanges but just make sure it's 'small amounts' only, something you can afford to lose.
Keep your main funds in desktop/paper/hardware wallets.

They do make money from trading/conversion fees and such. But yeah, they probably use the funds. I wouldn't be surprised.

Having bitcoins in a wallet on your computer is dangerous if you have a computer virus or other malware, or if you fail to store a good backup in a secure location.

If you use an account from a service (such as BitStamp), then you don't actually have any bitcoins at all.  All you have is a promise.

You GIVE your bitcoins to the service.  Then the service creates an entry in their own database keeping track of how many bitcoins you've let them have.  This entry is called an "account".  Then they give you a promise that they will send the same number of THEIR bitcoins wherever you ask them to whenever you ask them.  You have to decide if you trust that they will always keep that promise and if you trust that they will always be able to keep that promise.


Since most bitcoin exchanges are not well regulated by any governments and do not typically undergo any audit by an independent third party, it is impossible to know for sure if they are "playing" with your bitcoins.  Most of them claim they are not.  You have to decide if you trust them.

If you have a big amount of bitcoin and you are skilled technically on keeping your bitcoins in your pc is the best way to go. But if you are not technically inclined then if you keep your bitcoin in your pc and then you encounter a virus or you hardware was damaged and you dont know what to do you will eventually lost your bitcoins. And so if you doesnt know the necessary things that there are to learn about keeping bitcoin in your pc then just keep it on web wallet but dont place it on one site but on different sites so you will have a lesser risk.

Very interesting and helpful, thank you to those who answered.

I realise now that the platforms like Bistamp are doing what banks are doing. You also never know whether a bank is going to give you back the money that you "have" in your account...! It is simple and convenient, for sure, but not that safe at all.

I beleive that, having been using computers for decades without serious trouble, I will be able to keep a safe back-up of my wallet, on a hard disk. I will get some clarifications on how to use Electrum on the specialised section of this forum. The use of Electrum (and possibly other wallets) is not so easy to understand in detail - I just sent and received money so far, without any attempt to understand more.

just remember that anything that exists on hardware (like your hard disk) is vulnerable to either being hacked if not encrypted properly or you had something like a keylogger on your system and accidentally open the wallet on that system.

or is susceptible to hardware failure such as your HDD not working again because of electrical shock or something similar.

remember to make a hard copy (write down the seed on paper) of your wallet.

There is a simple answer,Yes!
Giving you a simple example : -

When you open an account on an exchange,your money by default is stored into their wallet.The wallet you don't have full access to.They have control over your funds as technically,that wallet isn't yours.
By keeping your coins in a wallet such as electrum,you get full control over your bitcoins.
If the exchange gets hacked or just what if the owner decides to run away with your coins stored on their wallet,you cannot do anything.Simply because you never had control over that wallet.
If the wallet is locally installed on your PC,unless someone hacks your computer or you lose the keys,your coins are always safe.

Thank you !

The two main worrying issues that I see in the "Bitcoin system" (if I can use this expression) are :

1 - It is extremely complicated, beyond the comprehension of ordinary users : blockchain, nodes, cryptography, the way they "create" BTC, to name buy a few.

So if a non-expert thinks that some of his money has disappeared for some reason, he must rely on what experts will tell him : experts from Bitsamp, from Electrum, those from a third party (provider to who you paid a sum), etc...
It's very different from other currencies : when you make a deposit into your bank account, everyone clearly understands the "behaviour" of the money. For BTC, if something happens during a transaction (or at any time), you are completely in the hands of the experts.

2 - There is no central authority to refer to in case of litigation : Bank / financial authorities, justice and laws are, as far as I seen, rather useless in case of BTC transaction litigations. I may be wrong... I understand that this is inherent to the nature of a non-centralised, "non-official", non-State currency. But then the system suffers from this unclear (or absence of) legal regulations, in my opinion.

Bitcoin is fairly complicated but a lot of this are not things that need to be known if people use Bitcoin in their everyday lives.  Many wallets already simplify Bitcoin transactions enough for most people to easily understand, and while knowledge is always a great thing, people don't need to have it, just as many people don't understand exactly how the Internet works but they still use it.

The system can suffer from its lack of regulation but I do think that it's an essential part of what Bitcoin is, and there are still services that build up trust and that people know will keep safe.  You also know that if more major merchants accepted Bitcoin, they would be legitimate as Bitcoin isn't inherently illegal.

As far as regulations and laws are concerned, I agree that this may not be as important as the common consensus and trust about this currency. In addition, we know what the "people at the top" can do with law and Justice (actually in many cases they don't comply with the law)... now that currencies are not based on their equivalent gold or silver value, even banknotes have only the value that is commonly agreed.
Still, when I read about the BTU (sort of competitor to the BTC if I understand ?) I feel that my BTC money is threatened and no one but some unknown (uncontrolled) specialists will decide what happens to it...completely independant of any law or rule.

About the first point, although you are right that in everyday use, we don't need to know how it works (as for computers or airplanes), the problem is very different when a large amounts of money - say, your working life's savings - is at stake : when I transfer money to buy a car or a flat, there is no way to "loose" the money. If the money is sent from my account, it arrives to the seller's bank...Whereas with bitcoins, I have seen people complaining about their BTC never arrived.
I've read "experts" explanations about the guy's Electrum fees being too low (I didn't even know there were fees) - but how do you know in the end what really happened - unless you are an expert and can look into the crypto-algorythmic-blockchain maths...?

I'm also using electrum is much safer and you really have full control of all your transactions as long as you have your password and your keys,everything is ok with electrum and on about coinbase,you better check the scam accusations section,one guy was scammed by coinbase to the tune of 700 bitcoin,better read that story

Just like mostly members said here its really safe to put up your bitcoin on electrum rather than on an exchange wallet because the risk on losing those bitcoin is high when you do store it on those wallets but if you do have only a small amount of bitcoin then i think it should be fine.

Bitcoin in Bitstamp is nothing more than an IOU from them to you. You don't have coins any more, just a credit. They can force details out of you to retrieve them, they may get hacked again, you're 100% dependent on their competence, good will  and luck.

Thank you for the warning. :'(

I think things are clear on this subject. I'would add the following comment, though :

Beyond the comparison between online wallet and PC-based wallet, it seems that the value and behaviour of the BTC is anyway in the hands of (groups of) people A- whom I don't know, and 2- who can decide things like : "BTU" is best", or "a hardfork" (?) is needed", or "the blockchain needs big changes", etc... (all matters in which I am completely incompetent of course), and I am absolutely unable to know what would happen, including big drop in value of the BTC, and even - I don't know - a breakdown of the whole "system" ? Or am I too pessimistic ?

yep. that all sounds about right. but the same goes for many markets. everyone's at the mercy of either a small group of insiders or the will of the herd. that's the bet you're taking.

if that makes you uncomfortable then shop elsewhere. most people here are pissing in the wind and hoping it lands in the right place.

Risk is everywhere, but there are different kinds and magnitudes of risks. It's not about feeling comfortable or uncomfortable of course. I make my own investment choices, taking into account all facts that I know.

I'm just highlighting some very peculiar aspects of the BTC : those crypto-mathematical-IT factors are completely unintelligible for most of us, and in addition, the (groups of) people playing with it "in the dark", so to speak, are unknown .... and they play by rules that we ignore or don't understand. Finally, no laws whatsoever can prohibit malevolent or dangerous behaviours...- whilst in the world of normal currencies, at least people and Companies have a name, regulations and laws exist, are written and known - even if not enforced properly sometimes. You therefore can broadly understand the rules and the risks, and, to some extend, courts and lawyers can help you win if some one does something.

I think this is worth thinking about, because it is very unique to the BTC system (although probably true for other alternative currencies) ; it's unprecedented and not comparable to, say, buying stock, bonds, gold, diamonds or classic cars - all of which work within a relatively well-known frame, and in general with identified players.

Now, I reckon that the value of the BTC essentially relies on the trust that buyers and holders put in it, and it has worked quite well in the last 4-5 years. If more and more people trust it, the value will be stable or rise more than other assets, it will continue to grow. And although the current period is a bit worrying, I am confident that it will continue to "work" well, for many reasons : need for alternate investment vehicle, independent from the banking system and from governments, very low costs and fees, very fast transfers, etc... Good luck to the BTC !

it's the ultimate free for all basically.

it attracts everyone from hedge funds to basement dwelling psychopaths. that boundless potential is what's so attractive to so many. and there's also boundless potential for it all to turn to shit in a second. that's the nature of the beast and it's not gonna change any time soon.

Both contains risks but Bitstamp contains a much higher risk as they are a third party looking after your bitcoins. This is against the core philosophy of bitcoin which is to be you your own bank in charge of all your money (bitcoins).

In Electrum you are as safe as your PC is free from viruses, spyware,malware or keyloggers. If you think that your PC is clean of such threats then Electrum surely is safer to hold your bitcoins there.

For ultimate security it is always advised a hardware wallet.

If you have your bitcoin in a web wallet there are lots of risk, like a hacker gaining access, an employee getting access, the site goes bankrupt, the site decides to take everyones coins, most of the risk are nullified by you having your own wallet and securing your coins yourself.

Thank you. I understand.
I also learned that a "hot" wallet (located on an online PC) is also potentially vulnerable, whilst storing BTC in a properly created "cold" wallet is really the safest method (people interested may look at this other post : "Backing up an Electrum wallet" : https://bitcointalk.org/index.php?topic=1814313.new#new ).

Thank you to all of those who are helping beginners to feel more comfortable with this complex subject...

Both are third party service providers, but electrum as a wallet service commuter has gained good reputation and will try to gain more positive testimonials. Bitstamp at times might levy terms and conditions in the withdrawal limit and so on making the users get frustrated.

Actually, I begin to think that Bistamp is not up to its relatively good reputation.

During the first year, I felt comfortable with the ergonomy of the site, the functionnalities, and with the relationship with their Customer Support, it looked professional and reliable.
But recently they started sending those messages about their "know your client" questionnaire, and they demand with insistance scans of their clients' income and bank statements, among other things, and ask questions, all of which is in my opinion quite intrusive. I understand that laws against money laundry make them do it. But they don't specify clearly what is mandatory by the law - and what is just feeding their own "marketing database" (or will be sold to third parties for example).
Also, receiving several time the same email request, directed to the same support message - although I already answered their questions -  makes me feel like talking with a robot  - not good.

I know that I am off-topic here, may be some of us having a good experience of them (or of other similar providers) may start a specific topic on this.

with electrum you own the keys to your bitcoin tresor.
In bitstamp you own a promise that they open their tresor to give your bitcoin back.

use electrum.

Yes, I 've read a couple of comments along the same line. A properly used wallet is much safer than a web-wallet.
However, I don't think that you can buy and sell BTC (against USD or EUR for example) without using a platform like Coinbase, Bitstamp or Kraken..or..?

It is my understanding that it is the Private Key that gives you access to your money, and so it is really this that you should have written down in the event that Electrum disappeared. The seed phrase wouldn´t be of any use if that happened. Or am I wrong here?

But, isn't if our hardware damage we can backup before? Yeah I think for safety our funds,
I am also use a desktop wallet like electrum but we must be carefully with any virus
and keeping our hardware from any what can make it damaged.

Electrum certainly safer than putting your Bitcoin in your Bitstamp account, because in electrum you have access to private key, and importantly also your computer don't have viruses.