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Author Topic: Idea: Bitcoin wallet with a legally-binding warranty for corp/institutional use  (Read 827 times)
Mike Caldwell
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The Casascius 1oz 10BTC Silver Round (w/ Gold B)

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September 12, 2012, 05:59:58 PM

I have an idea of a service/product I would like to consider providing.  This would be a product that caters towards managers of investment funds, money/asset managers, institutions, and the like.

The PROBLEM: The typical money management firm may have heard of Bitcoin and may have made a decision that directing some client funds into Bitcoins might be a good idea (even if it's just part of the "speculative" category), but has no clue where to start in terms of acquiring Bitcoins on their clients' behalf, how to account for their existence, and how to protect them from theft.

A money manager very well could download the client and manage the bitcoins "himself".  But he is totally on the hook if the coins are lost due to theft, computer ineptitude, hacking, or... you name it.  That would be a risk that a money manager would know he couldn't manage himself, and would dutifully steer clear of.

The SOLUTION would be twofold:

1 - A physical Bitcoin wallet product that is, essentially, an object that contains a private key (or multiple keys, or multiple keyparts produced by multiple parties) as well as some sort of tamper-evident resistance to show that the private key has not been viewed.  Such a wallet will need to be a fair bit more elaborate in terms of security and tamper-detection features than a Casascius Coin, but conceptually would be the same. (imagine a sealed metal box covered in a giant fancy hologram, and inside is an intact casascius coin and an intact bitbill, and the private key is based on using EC math to combine the keys inside both objects)... these security enhancements would mainly exist to protect the manufacturer against a slimeball client who would be willing to throw serious resources at compromising the key without tripping the tamper evidence, and then falsely claiming fraud

2 - An affidavit (notarized guarantee) that the private key in the box really corresponds to the Bitcoin address on the affidavit, along with a legally-binding guarantee (up to an agreed dollar/BTC amount) that any bitcoins properly sent to the address will never be stolen as long as the physical wallet is intact.

3 - optional - an affidavit certifying that Bitcoin address A really contains at least X BTC (as observed on the block chain), so the money manager can have some sort of actionable knowledge that he really has BTC without ever having to care about the block chain.

The RESULT is that a money manager could feel confident that he really has the bitcoins he is told he has, because if it turns out he doesn't, he has recourse to make his clients whole.

I have a hunch that if this idea were deemed to have merit, it could be the basis for a pretty profitable company, simply because a personal guarantee is only worth what one could squeeze out of the individual offering the guarantee.  If investment funds suddenly felt safe buying BTC due to the existence of a solution like this, the need for "backing" could quickly escalate into the millions USD and well beyond what I could ever provide.  On the flipside, these "guaranteed bitcoin wallets" could easily be priced for three- or four-figures USD, which, to a group of guys who can create an honest wallet and know they'll never have to pay any losses, would be a pretty good and easy cash cow.

Companies claiming they got hacked and lost your coins sounds like fraud so perfect it could be called fashionable.  I never believe them.  If I ever experience the misfortune of a real intrusion, I declare I have been honest about the way I have managed the keys in Casascius Coins.  I maintain no ability to recover or reproduce the keys, not even under limitless duress or total intrusion.  Remember that trusting strangers with your coins without any recourse is, as a matter of principle, not a best practice.  Don't keep coins online. Use paper or hardware wallets instead.
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