What's so bad about keeping money in an online wallet?

[dan123]

Yeah, I know they can take the money and run, but if it's a large company with many VCs invested it probably better than a paper wallet or flash drive for me.
Some of these online wallets store 90% of their keys and passwords offline, and require a text confirmation everytime you log in.

Now, I'm an idiot (i'm ok technical wise though).  There's probably a 1/100 chance if I do make a paper wallet, or write down the numbers or encrypt it in a hard drive, I'll lose the piece of paper, crumble it, erase my hard drive or do who knows what.

Now if a large US company online wallet goes under or gets hacked, I'm guessing the value of bitcoin would plummet anyway.  Maybe the best thing is to put it in 2 online wallets?

Maybe investing in the Winklevos twins fund once it's open would be the safest, but couldn't their keys get taken too.  Or would that be insured?

[pontiacg5]

Any time you do not control the private key you have to trust the ones who do. You not only have to trust that they won't outright steal your coins, but trust that they know exactly what they are doing, too. Lots more to go wrong with an online wallet than a paper one, when you consider all of the infrastructure behind an online wallet.

Bitcoin online wallets have been stolen and "hacked" many times, but bitcoin is still here and very near the ATH. It just makes sense to store bitcoins you don't intend to do much with in a paper wallet, and if you can't handle not loosing pieces of paper or files worth thousands of dollars I suggest you stay out now.

[dan123]

I'm not doing anything illegal, I don't care if they know everything I'm doing with the bitcoins.

I think a company like coinbase with a lot of VC money has a very low chance of losing bitcoins or getting hacked.  These online wallets that have been hacked/stolen haven't had the security/VC money/amount of users that coinbase does.  There's also a chance of someone breaking into a bank and stealing a safety deposit box filled with paper wallets.

[operrajunk74]

I'm not doing anything illegal, I don't care if they know everything I'm doing with the bitcoins.

I think a company like coinbase with a lot of VC money has a very low chance of losing bitcoins or getting hacked.  These online wallets that have been hacked/stolen haven't had the security/VC money/amount of users that coinbase does.  There's also a chance of someone breaking into a bank and stealing a safety deposit box filled with paper wallets.

What happens if coinbase goes bankrupt or their Bank accounts get freezed by DoJ. Will you be able to withdraw the coins? I doubt

[pontiacg5]

I'm not doing anything illegal, I don't care if they know everything I'm doing with the bitcoins.

I think a company like coinbase with a lot of VC money has a very low chance of losing bitcoins or getting hacked.  These online wallets that have been hacked/stolen haven't had the security/VC money/amount of users that coinbase does.  There's also a chance of someone breaking into a bank and stealing a safety deposit box filled with paper wallets.

Ok bud, if that is honestly the way you feel then I'm sure there's nothing I can say to change your mind. Can't say you were never warned though  

The chances of coinbase being hacked are astronomically higher than someone trying to hack you, especially if you make a paper wallet the right way.

And if you did store your paper wallets in a bank vault you could do so in a way where nobody would even know it was bitcoins they were looking at. By the time they figured it out your coins are already gone, because you were smart and put multiple copies in several places. You know, instead of all in coinbase.

[LondonLTC]

You are a fool if you choose to keep your coins in an online wallet. There is no way on earth I would do that for two reasons. Firstly, risk of hacking is very high with most exchanges and as they are unregulated and not supported by any government or institution your money is gone forever. Secondly you avoid the temptation to panic buy / sell - something too many get caught up in because of the easy access to their coins.

[ajax3592]

If you love your Bitcoins, get the paper wallet. It's the safest form, go figure how you'll store the private key.
End of Story.

[dan123]

But if coinbase was hacked, 90% of their stuff is stored on paper wallets. They list many other security features here:
https://coinbase.com/security

Now I'm taking their word for it, but i'll take that risk based on the number of users they have and the VCs behind it.  Other online wallets I wouldn't trust.  As for coinbase going bankrupt, it seems like they're doing very well and have many job openings.  

If the DOJ freezes their accounts, I'm guessing they have offices overseas and could operate from there.  But again, if something like this happened, the price of bitcoin will plummet.  I'd also hope to see some warning signs that the US is planning to do this and move my money out before then.  The US doesn't seem to be that hostile towards bitcoins now.

[bitsbetrippin]

Education of how to store, backup and restore will have to become a thing of common knowledge before the currency evolution really takes off. Until then people are going to be freaked out that there is a risk of loosing everything if you misplaced your paper backup and HD crashed.

We are working on an entire episode on how to do this for the masses of peope that havent taken the time to create a paper backup, private key, encrypt etc ... We will present this in the clearest way possible.

First episode 12.12.13
http://www.youtube.com/watch?v=K_NSTnYMdN0

[Sigmoid]

Think Wild Western bank robbery.

Someone hacks into their system, and drains all the coins. You're patently screwed then.

[dan123]

Think Wild Western bank robbery.

Someone hacks into their system, and drains all the coins. You're patently screwed then.

You are a fool if you choose to keep your coins in an online wallet. There is no way on earth I would do that for two reasons. Firstly, risk of hacking is very high with most exchanges and as they are unregulated and not supported by any government or institution your money is gone forever. Secondly you avoid the temptation to panic buy / sell - something too many get caught up in because of the easy access to their coins.

Coinbase isn't an exchange.  I'm also hoping they would add a feature like a savings account, so there would be a waiting period for a couple days to move any of those coins.

Also, would the Winklevoss fund be insured if it opens?

The way coinbase is setup, even if someone hacked into their online server and had full access to everything, they could only access a very small number of bitcoins.

I don't think the mass of people will take the time to store their bitcoins in a paper wallet.  People just won't do that.

[Sigmoid]

The way coinbase is setup, even if someone hacked into their online server and had full access to everything, they could only access a very small number of bitcoins.

I don't think the mass of people will take the time to store their bitcoins in a paper wallet.  People just won't do that.

Well it's their loss.

I mean sure, nobody says not to have an on-line wallet. But if you have a large sum of money (more than the average amount of cash you carry with you), you should put it on a paper wallet.

Having $100 in an online wallet can make it easier to order pizza for bitcoin, or whatever.

And there's nothing strange or new about this. Some 40 years ago, bearer bonds and materialized stocks were still a thing, and most rich people kept their reserves in a private safe somewhere in the form of paper.

If you have 100 bitcoins, keeping the code on any electronic device would be madness. Keeping them on an online server would be... Bugs Bunny and Daffy Duck flipping out insane.

Print it out, seal it in an envelope, stamp it down with your family signet ring, or whatever, and keep it in a floor safe.

[twizzla]

The way coinbase is setup, even if someone hacked into their online server and had full access to everything, they could only access a very small number of bitcoins.

I don't think the mass of people will take the time to store their bitcoins in a paper wallet.  People just won't do that.

Well it's their loss.

I mean sure, nobody says not to have an on-line wallet. But if you have a large sum of money (more than the average amount of cash you carry with you), you should put it on a paper wallet.

Having $100 in an online wallet can make it easier to order pizza for bitcoin, or whatever.

And there's nothing strange or new about this. Some 40 years ago, bearer bonds and materialized stocks were still a thing, and most rich people kept their reserves in a private safe somewhere in the form of paper.

If you have 100 bitcoins, keeping the code on any electronic device would be madness. Keeping them on an online server would be... Bugs Bunny and Daffy Duck flipping out insane.

Print it out, seal it in an envelope, stamp it down with your family signet ring, or whatever, and keep it in a floor safe.

you can always keep it on a secure usb... just dont plug it into a machine you dont trust (could be your own)
cold storage is always best. creating and storing the wallet info on a bootable, encrypted wallet usb is a good thing to do though. i like what you said about the paper wallet.

also, blochain.info wallets are always good... just be careful. ive recovered btc from there just by providing the password and the day i created the wallet... sketched me out

[jongameson]

What's so bad?  WHATS SO BAD?

what are you Fred Flintstone?

sites get hacked all the time.  even blockchain.info

so DONT COUNT ON IT!

[stromma44]

sites get hacked all the time.  even blockchain.info

blockchain.info does not have your private keys if I understand it.

[Numinous1]

Excuse me, this may seem like an ignorant question, but then this IS the Newbies room, so here goes.  What is a "paper wallet" and how do you make one?  This is the first time I have heard the term.

[Mineirovsky]

Excuse me, this may seem like an ignorant question, but then this IS the Newbies room, so here goes.  What is a "paper wallet" and how do you make one?  This is the first time I have heard the term.

A paper wallet is a paper with your public and private key in numbers and in QR Code, to scann with camera.
Just search on Google for 'Bitcoin paper wallet generator' to create some.