Thank you very much. I guess I'll just have to take this as a lesson learnt and do some research before I lose anymore money .
Would blockchain wallet be a trusted wallet for me to use? Someone's going to have a good Christmas on me this year .
T.I.A
Blockchain.info is a "hybrid" wallet.
The wallet software is downloaded and run in your browser. All of the private keys are encrypted with your password and then uploaded to a database that is operated by blockchain.info. Anytime you access your wallet and try to send bitcoins, the encrypted private keys are re-downloaded to the browser and decrypted with your password so that transactions can be created.
Since the password and decrypted keys are not sent to blockchain.info, they shouldn't be able to access, steal, or spend your bitcoins without your permission. Furthermore, they provide functionality to have the encrypted copy of your private keys sent to you (such as with dropbox, or email, etc).
Therefore, as long as:
- Blockchain.info hasn't been hacked
- Blockchain.info doesn't have any significant bugs in their software
- You have a reasonably recent backup of your keys
- You've chosen a strong password
- There isn't any malware running on the computer that you are accessing the wallet from
Then, you should be safe.
Blockchain.info is a very popular wallet and
many people use it because of its convenience. Generally it is secure enough for small amounts that you want to be able to use anywhere anytime. They have both web browser access and an app for most smartphones.
However, note a few concerns and decide for yourself if these concerns are enough to prevent you from using the wallet:
- If blockchain.info were to be hacked (or suddenly "go rogue"), it might be possible for someone to send faulty wallet software to your browser that captures your password or your keys. This would probably be noticed by some technically astute user within a few hours and reported here at bitcointalk to warn everyone.
- If you have a really weak password, someone might be able to extract your private keys from blockchain.info's database and then crack the encryption by guessing your password.
- If you don't have a backup of your keys and the blockchain.info website becomes inaccessible (their servers crash, they experience a DDOS, the government shuts them down, etc), then you won't be able to access your bitcoins. As long as you have your own backup of the keys, you can decrypt them with your password and load them into another wallet.
- If you have any malware running on the computer or smartphone that you use to access blockchain.info, that malware could capture your password as you type it, or could capture your keys as they are decrypted, and could then steal your bitcoins
- Blockchain.info has a bit of a reputation for lack of attention to detail. Because of this they have had some significant bugs in the past the resulted in generating duplicate private keys so that people lost bitcoins. They are occasionally "down" which can result in not being able to access your wallet until they are back up.
Personally, I have multiple wallets (you don't keep all your cash in one place do you?).
Thinking about cash for a moment, I generally have a small amount in my pocket (wallet) for ease of quick spending. This cash is at the most risk of being lost (falls out of wallet) or stolen (mugged or pick-pocket), so I don't carry very much. It is very convenient though, so I always have a little bit. Then there is money that I have in an insured bank account. This cash is quite safe (since even if it is stolen, the FDIC will replace it), but it is inconvenient since the bank has limited hours and I'd have to go to the bank to get the cash. I could use an ATM, but then I'd have to pay a fee. Since it is so safe, I tend to store a lot more here than I would in my pocket. Then there is money that I store in a secure location at my house. It isn't quite as convenient as my pocket, but it's more convenient than the bank. It isn't quite as secure as the bank, but its more secure than my pocket. This is the cash that I typically use to replenish my pocket after I've spent some. It's probably a few times more than what I'd typically carry in my pocket.
Treat bitcoins the same way.
So, you have a "secure enough" but very convenient wallet (such as blockchain.info, or coinbase.com, or Mycellium, or any "mobile" wallet) that you store a little bit of bitcoins for regular use. A small amount that you won't be horribly upset if it is lost/stolen, but enough that you won't feel like you can't buy something because you have too little.
Then at home on a computer that you know for certain doesn't have any malware, you run a wallet that keeps all your private keys locally stored and encrypted. Something like Electrum, MultiBit, or Bitcoin Core. You make sure that you understand how to properly back up the wallet and how often that needs to be done. This wallet can be used if you are at home, and it can be used to replenish your "mobile" wallet as you use up the bitcoins in there. You are careful with this computer not to get any malware on it. It isn't as convenient as a "mobile" wallet, but its more secure and so you feel comfortable storing several times as much bitcoins on it.
Finally, for longer term storage of bitcoins that you know you won't spend anytime soon, or for larger quantities of bitcoins that would feel devastating to lose, you have a wallet that is completely offline. Something like Armory Offline or a paper wallet. Spending from a wallet like this is very inconvenient, but it is much more secure. You couldn't easily use it for every day use, but it's great for peace of mind storage of bitcoins that you don't want to lose.
