Secure Wallet Service - would you use it?

[Stormy]

Hello everyone and welcome.  I'm thinking of starting an online secure wallet service.  Basically, the current Bitcoin architecture is fine, but it has some serious security flaws.  As we've seen lately with "allinvain" losing 25,000 BTC and the trojan that steals wallet.dat files, people need an easier way to secure their wallet and prevent theft of all their coins.

What I'm proposing is a secure website where anyone can create a Bitcoin wallet.  It is stored in an encrypted format on a server, and can be accessed from any web browser.  Whenever you want to send Bitcoins from your wallet, you need to authenticate with a password that you choose, and a text message is sent to your cellphone, which you type into the website.  This 2-factor authentication is more secure than most online banks and ensures that even if someone hacks your computer and captures your password, they still can't transfer funds out of your wallet.

To clarify - this would not be a Bitcoin bank.  The wallet belongs to you and you alone.  Nobody is going to lend your Bitcoins to other users like a traditional bank.  This is just a secure wallet storage facility with 2-factor authentication.

I plan to fund this project by charging a small transaction fee for sending coins - something like 0.05%.  I realize Bitcoin was designed to be a currency without transaction fees, but there is a cost to send the text messages and designing a website that is secure is not an easy challenge.

Would anyone be interested in such a service?

[1713900735]

1713900735

[1713900735]

1713900735

[SomeoneWeird]

Hello everyone and welcome.  I'm thinking of starting an online secure wallet service.  Basically, the current Bitcoin architecture is fine, but it has some serious security flaws.  As we've seen lately with "allinvain" losing 25,000 BTC and the trojan that steals wallet.dat files, people need an easier way to secure their wallet and prevent theft of all their coins.

What I'm proposing is a secure website where anyone can create a Bitcoin wallet.  It is stored in an encrypted format on a server, and can be accessed from any web browser.  Whenever you want to send Bitcoins from your wallet, you need to authenticate with a password that you choose, and a text message is sent to your cellphone, which you type into the website.  This 2-factor authentication is more secure than most online banks and ensures that even if someone hacks your computer and captures your password, they still can't transfer funds out of your wallet.

To clarify - this would not be a Bitcoin bank.  The wallet belongs to you and you alone.  Nobody is going to lend your Bitcoins to other users like a traditional bank.  This is just a secure wallet storage facility with 2-factor authentication.

I plan to fund this project by charging a small transaction fee for sending coins - something like 0.05%.  I realize Bitcoin was designed to be a currency without transaction fees, but there is a cost to send the text messages and designing a website that is secure is not an easy challenge.

Would anyone be interested in such a service?

No offence, but noone is going to trust you with only one post :\

[Vladimir]

Counterparty risk is too high without any reasonable control available to mitigate it. This would be true even, if, say Satoshi himself offered such service.

[Stormy]

I appreciate the quick replies.  I've been mining for a few months now but have just been lurking on the forums and didn't feel the need to create an account earlier.

Trust is a huge issue.  I plan on offering the service for free in the beginning - people can create a wallet, send a fraction of a coin, test it out, and see how it works.  Hopefully trust will be built in the system, as I share more details about the steps I am taking to secure your wallet.

I am also thinking about adding an "advanced" feature where your wallet is encrypted on our servers using a strong passphrase that you have to remember and use every time you login.  That would provide the ultimate level of security, in that even I couldn't decrypt your wallet, however, it also means that if you forget your passphrase, your wallet is truly lost forever, along with all of the coins in it.

I believe for most people, this is too high of a level of security.  Having some secondary security questions that must be answered for a password retrieval are needed, so that coins aren't lost forever.

But, for those advanced users that want the ultimate in security - a strong passphrase that only they know, combined with a second authentication token provided by SMS, will give a security level that is stronger than even using Truecrypt on your local drive - after all, truecrypt is vulnerable to keylogging software.

I wanted to detail some of the advantages of a secure wallet service, as I see it:

• New Bitcoin users would not have to download or install any software on their computer.
• No need for each user to download the entire blockchain or store it locally.  We keep the entire blockchain updated on our servers so it creates a much lighter load on the Bitcoin peer-to-peer network.
• Access to your wallet to send or receive coins from any computer with a web browser.
• Access to your wallet from mobile devices such as iPhone, Android and iPad.
• Possible future mobile payment applications similar to Dwolla - would require merchant APIs and integration.

When you think about it - in the future Bitcoin will have many banks.  Most Bitcoin users will not be downloading and installing software on their home computers.   It is too much for the average person that just wants to add some coins to their wallet and spend them to worry about backing up their wallet, securing it, and maintaining a Bitcoin client plus the entire blockchain on their computer.

Personally I don't like the fractional reserve banking system that we have in the US, where banks receive deposits and then lend out between 10-30 times the amount of money in the form of mortgages and credit card debt.  For this reason, I think a secure wallet service where no money is lended, but the money stays in your wallet forever, is keeping with the spirit of Bitcoin.

Trust can be verified through the blockchain - you will be able to verify that I never touch your wallet except when you authorize me to.

Thanks for reading this long post, and kind regards.

[ibisy70]

I would give anything a shot, but i dont trust anyone with a large portion of BTC.

[Stephen Gornick]

Whenever you want to send Bitcoins from your wallet, you need to authenticate with a password that you choose, and a text message is sent to your cellphone, which you type into the website.  This 2-factor authentication is more secure than most online banks and ensures that even if someone hacks your computer and captures your password, they still can't transfer funds out of your wallet.

So this is an online service like MyBitcoin.com except each transfer out requires a PIN that is received via SMS or other method? [edit: see my next reply]

While this is marginally better than simply username / password credentials, it still isn't the combination I'm looking for.  I'm wanting a wallet server, like what Webcoin promises to offer.
  - http://bitcoinjs.org/specs/wallet/1.0/draft/wallet-api.html
  - http://forum.bitcoin.org/index.php?topic=14128.0

[Stephen Gornick]

I am also thinking about adding an "advanced" feature where your wallet is encrypted on our servers using a strong passphrase that you have to remember and use every time you login.

But even if this is done right, on first use you would then have my decrypted wallet on your host.  I'm still having to trust that you don't keep a copy.

[Stormy]

Whenever you want to send Bitcoins from your wallet, you need to authenticate with a password that you choose, and a text message is sent to your cellphone, which you type into the website.  This 2-factor authentication is more secure than most online banks and ensures that even if someone hacks your computer and captures your password, they still can't transfer funds out of your wallet.

So this is an online service like MyBitcoin.com except each transfer out requires a PIN that is received via SMS or other method? [edit: see my next reply]

While this is marginally better than simply username / password credentials, it still isn't the combination I'm looking for.  I'm wanting a wallet server, like what Webcoin promises to offer.
  - http://bitcoinjs.org/specs/wallet/1.0/draft/wallet-api.html
  - http://forum.bitcoin.org/index.php?topic=14128.0

I think the Wallet API specification is a great starting point, but it does lack the security of 2-factor authentication.  What if we extended the Wallet API to allow you to not only host your wallet on our servers, but to also sync it to any of your devices?  The extension to the wallet API would be necessary to add the SMS text message as part of the wallet sync procedure for new clients, so that if your PIN is compromised your wallet is still secure.

[brocktice]

This is only really useful for large sums of money IMO. I think it might be better to offer truly offline "storage wallets". When the user wants their wallet, you send them a copy GPG-encrypted to them along with a LiveCD for safely accessing the wallet. Obviously this is high-latency. There have been better solutions proposed, but in the short term this would work.

You'll need to build some trust, yes. I wonder, since I use my real name, have been around since the $0.06 days, and have a good trust rating in the forums, how much would people trust me to store their wallets? What if I did it through my company?

[Stormy]

I am also thinking about adding an "advanced" feature where your wallet is encrypted on our servers using a strong passphrase that you have to remember and use every time you login.

But even if this is done right, on first use you would then have my decrypted wallet on your host.  I'm still having to trust that you don't keep a copy.

Right, you would have to trust that we only generated your decrypted wallet in memory, and it was not stored to persistent storage in unencrypted format.  Also, you would have to trust that every time we decrypt it to perform a transaction, we don't keep an unencrypted copy somewhere on persistent storage.

[Bert]

"a strong passphrase that only they know, combined with a second authentication token provided by SMS, will give a security level that is stronger than even using Truecrypt on your local drive - after all, truecrypt is vulnerable to keylogging software"

This would still allow a government to cease your assets, because there is nothing stopping the passphrase being logged by the site itself, under legal pressure.

Client --> Server
       SSL
           ^
           |
         Log passphrase after SSL

For an advanced user, I don't see how it adds anything. Here is all the cash I own, nice kind stranger, please protect it for me. No thanks.

(The real problem is that most of the people on this forum are not your target audience, but we are good people to point out flaws. Please don't take offense at any reply.)

[Stormy]

This is only really useful for large sums of money IMO. I think it might be better to offer truly offline "storage wallets". When the user wants their wallet, you send them a copy GPG-encrypted to them along with a LiveCD for safely accessing the wallet. Obviously this is high-latency. There have been better solutions proposed, but in the short term this would work.

You'll need to build some trust, yes. I wonder, since I use my real name, have been around since the $0.06 days, and have a good trust rating in the forums, how much would people trust me to store their wallets? What if I did it through my company?

Meatspace storage of wallets would be a good idea for very large sums of money, but I think most people are better off doing this themselves through a bank safe deposit box.  It's also a very customer service intensive business and requires hiring a lot of staff.

[Stormy]

"a strong passphrase that only they know, combined with a second authentication token provided by SMS, will give a security level that is stronger than even using Truecrypt on your local drive - after all, truecrypt is vulnerable to keylogging software"

This would still allow a government to cease your assets, because there is nothing stopping the passphrase being logged by the site itself, under legal pressure.

Client --> Server
       SSL
           ^
           |
         Log passphrase after SSL

For an advanced user, I don't see how it adds anything. Here is all the cash I own, nice kind stranger, please protect it for me. No thanks.

(The real problem is that most of the people on this forum are not your target audience, but we are good people to point out flaws. Please don't take offense at any reply.)

None taken.  This is why I wanted to discuss the idea first before implementing it, to let you guys poke holes in it and see if it's a worthy project.  For the advanced option, what if we took the same approach that Hushmail uses, where encryption is done in either client side javascript or a full java/flash app (although I dislike having to run plugins just to access your wallet)?  That would probably be a better option for the truly paranoid (which I admit I am one myself)...   

[brocktice]

This is only really useful for large sums of money IMO. I think it might be better to offer truly offline "storage wallets". When the user wants their wallet, you send them a copy GPG-encrypted to them along with a LiveCD for safely accessing the wallet. Obviously this is high-latency. There have been better solutions proposed, but in the short term this would work.

You'll need to build some trust, yes. I wonder, since I use my real name, have been around since the $0.06 days, and have a good trust rating in the forums, how much would people trust me to store their wallets? What if I did it through my company?

Meatspace storage of wallets would be a good idea for very large sums of money, but I think most people are better off doing this themselves through a bank safe deposit box.  It's also a very customer service intensive business and requires hiring a lot of staff.

Not that hard actually:

1. Write a script that creates a wallet, dumps an address from it, encrypts it, and then creates another wallet etc.
2. Keep list of addresses.
3. When someone wants to open an account, give them the address.
4. When they want to withdraw, decrypt wallet, encrypt to them, put on flash drive, mail.
5. When they confirm receipt, shred original.

[Bert]

For the advanced option, what if we took the same approach that Hushmail uses, where encryption is done in either client side javascript or a full java/flash app (although I dislike having to run plugins just to access your wallet)?  That would probably be a better option for the truly paranoid (which I admit I am one myself)...   

No Java or flash on the iPhone/iPad's (which is really your target market), that and the Android (which has java and flash). Not that Java/Adobe are known for great security. There are just so many reports on CERT (http://search.us-cert.gov/) of Java and Adobe vulnerabilities.

[Bitman_Begins]

Do I take it that if there's this Trojan about that nicks your bitcoins inside wallet.dat files then you'd actually be better off just not getting a wallet? Or is that less secure. Probably a stupid question.

Question: A Paid service? Hehe...?

[bitprotection]

Hello all I hadn't had a chance to get on the forum because been busy working on the service as with all the things going on out there the time is now ...

...we are  in the process of doing this and the response has been pretty good with over 300+ sign ups so far.

We plan on offering 2 ways to do this but our biggest benefit is we provide 100 percent coverage of your bitcoin wallet regardless of what happens to it.

(theft of coins out of the wallet,erasing/HD crashes,lost wallets to name a few)

The 2 ways are:

1.) to upload a copy of your wallet and we can provide a encrypted back it up  and still provide coverage against it.  Keep in mind this is a copy of it so still  you keep the original wallet. In other words, this isn't a pull down , put back service. 

2.) If you choose to not upload it we can still provide protected coverage. More details to come regarding this.

Feel free to check out my sig. and put your e-mail in for more information.

Just wanted to get into this forum and introduce myself!

[Stormy]

For the advanced option, what if we took the same approach that Hushmail uses, where encryption is done in either client side javascript or a full java/flash app (although I dislike having to run plugins just to access your wallet)?  That would probably be a better option for the truly paranoid (which I admit I am one myself)...   

No Java or flash on the iPhone/iPad's (which is really your target market), that and the Android (which has java and flash). Not that Java/Adobe are known for great security. There are just so many reports on CERT (http://search.us-cert.gov/) of Java and Adobe vulnerabilities.

Right, if you could do it in javascript, preferably (Wallet API or something similar) you could theoretically do it on any browser.  The paranoid among us could peruse the javascript to verify that passphrases are never sent across the wire.

[Stormy]

This is only really useful for large sums of money IMO. I think it might be better to offer truly offline "storage wallets". When the user wants their wallet, you send them a copy GPG-encrypted to them along with a LiveCD for safely accessing the wallet. Obviously this is high-latency. There have been better solutions proposed, but in the short term this would work.

You'll need to build some trust, yes. I wonder, since I use my real name, have been around since the $0.06 days, and have a good trust rating in the forums, how much would people trust me to store their wallets? What if I did it through my company?

Meatspace storage of wallets would be a good idea for very large sums of money, but I think most people are better off doing this themselves through a bank safe deposit box.  It's also a very customer service intensive business and requires hiring a lot of staff.

Not that hard actually:

1. Write a script that creates a wallet, dumps an address from it, encrypts it, and then creates another wallet etc.
2. Keep list of addresses.
3. When someone wants to open an account, give them the address.
4. When they want to withdraw, decrypt wallet, encrypt to them, put on flash drive, mail.
5. When they confirm receipt, shred original.

This is an interesting concept as well, although it is different than what I had in mind.  I think your idea is great for a vaulting service for high value Bitcoin wallets, although I want my service to be much more liquid and easy to get BTC in and out.

[Stormy]

Do I take it that if there's this Trojan about that nicks your bitcoins inside wallet.dat files then you'd actually be better off just not getting a wallet? Or is that less secure. Probably a stupid question.

Question: A Paid service? Hehe...?

Basically, by keeping your wallet on a remote server, if someone hacks your home computer, they never get a copy of it, so they can't spend your Bitcoins.  Even if that person installs a virus, trojan, or keylogger on your home computer and steals your password to our site, unless they steal your cellphone too, they can't spend your coins because our service will send you a text message with a 4 digit code every time you try to spend coins.

If done properly, it should be more secure than keeping an unencrypted wallet on your home computer.