Direct "payments" to Xapo

[HCP]

I have a query about Xapo that I am hoping someone here can help with, because the "Support Centre" on Xapo is truly dreadful and doesn't offer any real information.

I have a Xapo wallet, that is getting "direct payments" from a couple of faucets that I have been messing about with to dip my toes in the bitcoin waters and get a feel for how everything works. I've also received a couple of payments from faucetbox.com.

The 2 types of payments show up differently in Xapo. One saying it is an external transaction, wihtout any sort of transaction ID, but I can find them in the blockchain by searching on my wallet address. The other transactions, the direct payments, just seem to magically appear out of thin air.

So how does the blockchain know that I "own" these bitcoins? There doesn't seem to be any record of these payments on the blockchain... are they imaginary? Are they backed by Xapo and when I go to spend/send these coins out it will all magically work?

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[erikalui]

Xapo is not a wallet like blockchain (blockchain wallets are ones you own as they provide you with the private key) while Xapo owns the private addresses to your bitcoin address and if you check the My Address section, you'll find a new bitcoin address everytime (that's again a blockchain address only). When you receive money from blockchain/coinbase or any other wallet, it's considered an external address while if you receive coins from a xapo user, it gets deposited immediately as it's within the wallet itself. Xapo is a safe wallet to use for faucet payments as you aren't charged any fee for sending/receiving bitcoins as they take care of the same.


Wen you get payment from an external address, it's on blockchain network due to which you can see the coins in your wallet. Also, when you spend coins from your xapo wallet, the coins are sent via blockchain network (for which you don't get any transaction ID but can see the transaction on blockchain by entering the said bitcoin address to which you sent your coins). These coins are sent by the Xapo bitcoin address that pays the tx fee but you won't see them when you check your Xapo bitcoin address.

[HCP]

Ahhhhh so in effect... there is some hidden 'real' bitcoin wallet hiding in the backend that actually holds all the bitcoins... and what I see is just Xapo's record of what is allocated to my Xapo "account"?

So when I get sent X coins to my 'address'... Xapo actually receive the coins to their address, and then record in my wallet that I now have +X coins.

When I send Y coins from my wallet... Xapo is actually sending coins from their address, and then record in my wallet that I now have -Y coins.

Is that correct?

[erikalui]

Ahhhhh so in effect... there is some hidden 'real' bitcoin wallet hiding in the backend that actually holds all the bitcoins... and what I see is just Xapo's record of what is allocated to my Xapo "account"?

So when I get sent X coins to my 'address'... Xapo actually receive the coins to their address, and then record in my wallet that I now have +X coins.

When I send Y coins from my wallet... Xapo is actually sending coins from their address, and then record in my wallet that I now have -Y coins.

Is that correct?

That's perfectly right.

[Hazir]

I just want to leave a warning that XAPO might bite you in the ass in the end. It is extremely centralized wallet. They invigilate you and monitor your every transaction.
I understand that you are faucet user and want to collect your dust earnings without transaction fees. That is the only thing Xapo is good for.

1. Be sure to never use Xapo with VPN or block your IP somehow while using their service.
2. Never gamble or send/receive BTC from/to other 'illegal' service.
3.You have to be over 18 years old to use this wallet.

[HCP]

Thanks for the clarifications and warnings. It does indeed seem like one needs to have an awful lot of trust in Xapo and that they will no abscond with your coins.

Which is fine when you are talking about a few satoshis when you're just playing around with bitcoin to figure out how it all works.

If they choose to take it all or block the account I stand to lose like 0.02¢ or something equally insignificant.

However, when you start talking about 'real' amounts >0.01BTC etc, why on earth would anyone use a system like Xapo?

The risks clearly outweigh the benefits... as I've learned in the last week or so since starting with BTC, if you dont have the private keys, you don't own anything. Even the new block chain.info doesn't provide private keys anymore, so that is a no go.

Looks like the desktop, paper and hardware wallets are going to be the way to go as I get 'serious' about BTC

And maybe a 'hot' wallet with some scraps in it for quick, easy access.

[cpfreeplz]

Thanks for the clarifications and warnings. It does indeed seem like one needs to have an awful lot of trust in Xapo and that they will no abscond with your coins.

Which is fine when you are talking about a few satoshis when you're just playing around with bitcoin to figure out how it all works.

If they choose to take it all or block the account I stand to lose like 0.02¢ or something equally insignificant.

However, when you start talking about 'real' amounts >0.01BTC etc, why on earth would anyone use a system like Xapo?

The risks clearly outweigh the benefits... as I've learned in the last week or so since starting with BTC, if you dont have the private keys, you don't own anything. Even the new block chain.info doesn't provide private keys anymore, so that is a no go.

Looks like the desktop, paper and hardware wallets are going to be the way to go as I get 'serious' about BTC

And maybe a 'hot' wallet with some scraps in it for quick, easy access.

I couldn't have said it better myself
Do not, under any circumstances store anything of real value on a centralized wallet. It will bite you in the ads, we just never know when.