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Author Topic: Question for weusecoins.com  (Read 3389 times)
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December 20, 2011, 11:36:10 PM
 #21

By that measure all bitcoin related sites,  such as Mt. Gox,  Installwallet,  Tradehill and Flexcoin fall under the notion that the only safe server is one that is completely unplugged and bricked.   

We had a huge uphill battle in terms of trust due to the thieves at Mybitcoin but I have to stress that if we as a community go that route there would be no such thing as a bitcoin related site,  ewallet,  or exchange... as all of them would require some sort of centralization in order to function.

I do disagree with your opinion,  HOWEVER I do understand where you are coming from.

I never had coins at mybitcoin,  but I felt the pain for months afterwards as people wouldn't trust any ewallet due to what happened.

Call me crazy-paranoid, but I don't use Mt. Gox and I don't direct new users to them. With the errors I have seen them commit and the time they were cracked, I suspect they have less bitcoins then their db have recorded for their users (unless their profits have been big enough to fill in the gap). Who knows what really happened that one day when someone cleaned their clock and they had to "roll back" trades. They push around huge lumps of coins that suggest the whole operation has a decent manual aspect to it, and coins probably get "lost."  I wonder what would happen if everyone withdrew all of their BTC from gox in one day. Would there be a run on the bank?

Anyway, sorry to get off track on my tirade.

I don't trust any service to store the private keys of my wallet, and it would be wrong to tell a new user who knows nothing about bitcoin or past mistakes to trust any of these services. Especially since there are ones out there that do not store your password on their servers (strongcoin, my wallet, and android wallet).

Centralized private key storage is a bad idea and gives a huge incentive to hackers and the owners of said services to walk off with potentially hundreds of thousands of dollars worth of bitcoins.

Your faith in your own security makes me feel you have not dealt with actual cyber attacks yourself. And hell, if you have a few hundred thousand dollars of bitcoins on a server that you control, there are brute force techniques that are much older than computers that would be effective in getting your server password off of you. Bitcoin is being adopted by the criminal underworld and they will know where you live.

Sorry if that sounds a little too threatening, but it is the reason I would be careful in setting up an ewallet service (and I have considered this all myself at one point).

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December 21, 2011, 04:41:22 PM
 #22

Centralized storage may be a bad idea, but is there any way around it?  I can't see any way for an exchange to exist without an escrow party (or a lot of scamming without escrow).  Escrow means centralized.  I mean, perhaps the escrow could simply act as such after a trade is booked (i.e., both parties send their funds to the escrow, to then be redistributed to the parties), but that introduces a TON of lag time with trades, which is just asking for problems.

So, what is the solution?  I really don't see any besides centralized storage.
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December 21, 2011, 07:48:17 PM
 #23

Centralized storage may be a bad idea, but is there any way around it?  I can't see any way for an exchange to exist without an escrow party (or a lot of scamming without escrow).  Escrow means centralized.  I mean, perhaps the escrow could simply act as such after a trade is booked (i.e., both parties send their funds to the escrow, to then be redistributed to the parties), but that introduces a TON of lag time with trades, which is just asking for problems.

So, what is the solution?  I really don't see any besides centralized storage.

An exchange can't get around it as far as I can see. This is why you should only keep coins in the exchange for a limited time while doing an exchange. Get them back to the safety of your wallet once you are done.

Your wallet should be the safe place for coins, and an ewallet provider should not be trusted with plain text private keys. Ever. It would be the same as everyone in a city giving a homeless man their cash to hold onto in a cardboard box that he occasionally might walk away from (but his cat will watch it for him). If it disappears, either he made off with it, his cat made off with it, or someone got around his perfect security (duct tape). No one will ever know what happened.

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December 21, 2011, 10:05:30 PM
 #24

Centralized storage may be a bad idea, but is there any way around it?  I can't see any way for an exchange to exist without an escrow party (or a lot of scamming without escrow).  Escrow means centralized.  I mean, perhaps the escrow could simply act as such after a trade is booked (i.e., both parties send their funds to the escrow, to then be redistributed to the parties), but that introduces a TON of lag time with trades, which is just asking for problems.

So, what is the solution?  I really don't see any besides centralized storage.

An exchange can't get around it as far as I can see. This is why you should only keep coins in the exchange for a limited time while doing an exchange. Get them back to the safety of your wallet once you are done.

Your wallet should be the safe place for coins, and an ewallet provider should not be trusted with plain text private keys. Ever. It would be the same as everyone in a city giving a homeless man their cash to hold onto in a cardboard box that he occasionally might walk away from (but his cat will watch it for him). If it disappears, either he made off with it, his cat made off with it, or someone got around his perfect security (duct tape). No one will ever know what happened.
I agree completely.  I have never kept more of a balance in MtGox than I need to to conduct the trading I wish to conduct.
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December 23, 2011, 03:41:43 AM
 #25

Centralized storage may be a bad idea, but is there any way around it?  I can't see any way for an exchange to exist without an escrow party (or a lot of scamming without escrow).  Escrow means centralized.  I mean, perhaps the escrow could simply act as such after a trade is booked (i.e., both parties send their funds to the escrow, to then be redistributed to the parties), but that introduces a TON of lag time with trades, which is just asking for problems.

So, what is the solution?  I really don't see any besides centralized storage.

An exchange "could" be partially decentralized.  The handling of fiat money would need to be centralized however that authority could issue tokens to represent a promise to repay in fiat currency.  Once tokenized the rest of exchange could be handled in a decentralized manner.

For example say an entity created a crypto digital token which stored USD and could be transfered from party to party.  You deposit $500 USD and they issue you an address with 500 USDCoins.  Each coin represents a promise to repay $1 USD. 

Now with these tokens and contracts in block chain you could build a decentralized exchange.  For example to execute a trade you would transfer Bitcoins to an address of the seller and they would transfer a certain number of USDCoins to your USDCoin address.  To cashout you would redeem them at the issuing authority or use some third party who would offer alternative payout methods.

Where the digital space and meatspace boundry connect there will always be the need for a trusted third party but one could limit the extent of that trusted third party.
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