In addition to the semi-automatic Bitcoin<->PayPal exchange service I'm working on right now, I guess we'll also need a Bitcoin web UI to make the product a breakthrough hit. For many people it's too difficult or bothersome to install and run a node on their own computer, or maybe some don't even have a computer of their own.
A web UI also makes it easier to use your coins from any location with an Internet connection. The need to make backups all the time decreases, as the server does it automatically. Of course you can also download backups of the coins onto your own computer.
The service would have the advantages and disadvantages of centralization: easier access and no need to maintain the program on your own machine, but on the other hand it makes the system more vulnerable. A server storing a lot of money becomes an attractive target for hackers, so banking grade security would be required. A central server is also easier to be shut down for political reasons, so maybe backups should be maintained in different countries.
- The coins stored on the server would be encrypted with the username and password, so if someone gets the disks, he can't read the coins easily. When setting your password, there should be a widget that shows the password strength.
- For additional security you could order a list of 100 one-use keys snail mailed to your home. Each time you log in, one of these would be required, so all your money can't be stolen by just intercepting the username and password. This technique is used by some banks here.
Well I see several problems with this system, most of which are the reasons it seems Bitcoin is being implemented in the first place.
First off, one question, for you and all of Bitcoin.
Paypal has terms in their Acceptable Use Policy, that states transactions related to "currency exchanges" are forbidden. Is this sort of transaction considered a currency exchange? If so, I see problems arising from exchangers using methods like paypal, just like other e-currencies have problem finding easy funding sources.
I think the program is lightweight enough that anyone can install it quite effectively without any problems. For those who don't want to run a node, they don't have to. Using only the program is even easier and faster than logging into a web account and checking any transactions there.
The idea of a server holding all information and being centralized is exactly what Bitcoin is fighting. Truly, it is unnecessary. I could do a bank transfer everytime I wanted to give my neighbor money, or I could just hand them money out of my pocket. In a sense, a web server would be the bank, and the bitcoin program would be out of pocket. There's no real need for the extra step.
I think you are making much more work for what is already a well implemented program that runs on it's own. Central servers in different countries? 100 one use key orders? You could not even run a node from a web app, so technically all this extra work would only be so you could check your account online.
If anything(which may already be in the works?) bitcoin could be used with your mobile phone to check balances and send them to other members. I never tested this system, but something like www.opencoin.org
has interested me.
I understand the reasons you feel the way you do, but I honestly just feel it's a lot more work that is unnecessary, and it is causing problems in which Bitcoin is trying to solve in the first place.