It is technically difficult to use bitcoin in a safe way. Even for people who are technically skilled, it is still wise to run the bitcoin client on a computer separate from your main web-browsing computer to ensure your bitcoins aren't stolen by malware. Thus the idea occurs to me that we could design bitcoin-only devices that are incapable of running anything but bitcoin software, ensuring they cannot be infected with malware, and ensuring your bitcoins remain in your control. Ideally, bitcoin-only devices would have these properties:
1) Easy to send and receive bitcoins for people who are not technically skilled
2) Easy to backup the bitcoins, in encrypted form, to a cloud backup service
There is no reason to design an entire device just for bitcoins since touch-screen based smartphones already have the hardware necessary for this. We could simply run a stripped down version of Android that comes with a bitcoin app, a backup app, and no other apps. No web browser, no Angry Birds, etc. Just bitcoin.
There would be one password to encrypt/decrypt the wallet file, and a separate, shorter password (a PIN) to access the wallet file any time you want to use it. The backup app could be Dropbox; the wallet file (preferably in a form compatible with the standard client) would be backed up, in its encrypted form, to Dropbox.
When browsing websites on your regular computer, you may wish to pay for something with bitcoins. The website would display a QR code with your would scan to send payment and you would send directly from your phone. The same process would work for real-life vendors.
To receive payments, the phone could display bitcoin addresses and QR codes on the screen. To receive payments over the internet, we would need a way to send the receiving address to the person sending you money. We could do this with email. The bitcoin app would just email the bitcoin address and QR code to the person who wants to send you money.
All of this could work with regular smartphones rather than a dedicated device. The point of having a dedicated device is entirely for security, to ensure that at no point malware is run on the phone that steals the bitcoins. Keep the device physically secure and you can be sure your bitcoins will not be stolen (as long as there are no remote exploits for the software on the phone), just like with real cash.
The Nexus S is a good device for this since it can be purchased unlocked. It might seem expensive to buy a $400 device just to serve as a bitcoin wallet, but it would be extremely convenient and secure. Many people pay $400 for leather wallets to store their fiat currencies, so $400 to store bitcoins is not unreasonable.
If your phone is stolen, they would need to know the password to access the bitcoins. That's even better than if your fiat currency wallet is stolen, since your fiat currencies would be gone for good, but your bitcoins would actually be safe (although you'd be out the $400 device).
Most of the software for this already exists, since I believe there are two Android bitcoin clients. Dropbox already exists as a backup service. All we're missing is a way to send the encrypted wallet file to Dropbox (again, preferably the wallet file should be in the same format as the standard desktop client, so that the bitcoins could be accessed on a regular computer if necessary).
We could sell the final product in this form:
* The device is a Nexus S with a custom version of Android where all apps are removed except a bitcoin client and Dropbox
* The bitcoin client is based on existing clients, except also includes the ability to backup the encrypted wallet to Dropbox
* The user logs in to their Dropbox account to sync the wallet file
* The user has one password to unencrypted the password file which they type in when the device is turned on
* The user has a separate, shorter password (a PIN), which they use every time they want to unlock the phone to send a payment
* The device would work over WiFi to connect to the bitcoin network
* The user could pay for 3G/4G internet access to be able to send money when they are not on a WiFi network
We could sell all this in one package. All the software would be open-source, naturally.
We could also offer all the software for download to use on any unlocked phone. All the software would also work on any Android phone, without having to remove all other software on the phone, but then it would be more susceptible to having the bitcoins stolen by malware.
In conclusion, we desire to make bitcoin more user friendly for regular folks and even technical folks who don't want to go through a bunch of trouble to use bitcoin. Having a device specifically designed for use with bitcoin is a solution to this. We can use any smartphone for this, and the Nexus S is a good choice since it comes unlocked. The device would have only bitcoin software and backup software on it. You could send payments to websites and merchants by scanning QR codes. You could receive payments by displaying a QR code/bitcoin address or by emailing the QR code/bitcoin address. The wallet file would be backed up in encrypted form to Dropbox, or another backup service. If the device is lost or stolen, your bitcoins are safe. Further, you would not have to worry about having your bitcoins stolen by malware because only the bitcoin software would be running on this device. This would make it easier and smoother for everyone to use bitcoin.
The only problem I see with this is that it would not be very easy to receive payments over the internet, since getting your address to the person who is paying you would be cumbersome.
Thoughts? (Apologies if someone has already had this idea.)