what to charge for cold storage?

[the founder]

We literally are about to turn on cold storage, the technical side is done, the problem is pricing.  We really don't know what the market feels would be proper for this level of service.

This is how it works.

Let's say for example a user has 110 bitcoins stored at flexcoin and he uses about 10 of them day to day commerce.

So he decided that he can put 100 of them in cold storage.

He sends them over to coldstorage, which is literally sent do a backup that is offline.  The coins are taken off-line and sent to the off-line wallet.  
It's stored in true bank vault where we must physically take the USB wallet to the bank safe each day.  

At this point the coins are not available to anyone, including hackers.  They show up in his flexcoin account as a line item as "coins owned, in cold storage"

However he does collect his discount payments on those coins.  Which are based on transaction fees.  ( more here on that )

So basically he still earns money on those cold storage coins, and they are in a highly secure environment.

When a user requests his coins out of cold storage,  we must then go to the bank vault,  obtain the key,  and then bring them back, manually review the request (make sure nothing is fishy about it)  before releasing them back to the client.

The process takes about 2-3 days.

What's a fair price for this in terms of percentage?

Let's say it's a flat 100 coins,  1% of course would mean 1 bitcoin.

We need to work on a percentage basis otherwise it wouldn't scale properly, and our assumption is the guy that has a total of 2 bitcoins wouldn't be using this service.  

feedback?

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[Piper67]

You can use any fee you want, but it's hard to foresee an online wallet solution that does not include cold storage in some form in the near future. I have a feeling, ultimately, the cold storage will just have to be part of the service you provide, without additional cost.

[the founder]

You can use any fee you want, but it's hard to foresee an online wallet solution that does not include cold storage in some form in the near future. I have a feeling, ultimately, the cold storage will just have to be part of the service you provide, without additional cost.

this is the only user definable cold storage solution on the market... 

[Piper67]

You can use any fee you want, but it's hard to foresee an online wallet solution that does not include cold storage in some form in the near future. I have a feeling, ultimately, the cold storage will just have to be part of the service you provide, without additional cost.

this is the only user definable cold storage solution on the market... 

Of course, and I and others applaud you for it. All I'm saying is that cold storage, or some similar solution to make our BTC secure, will necessarily become part of any online wallet out there. I can guarantee the others are looking into this as we speak. Once they have a system in place, some will start offering it free of charge to lure us to them.

For now, you can start with any fee you feel is reasonable, and since cold storage is an option, the customers will either choose it or not if they feel the fee is too high.

[m0w3r]

Maybe start with whatever the fee is for a trade on the exchanges.  Possibly that's too low for the manual effort you're describing though.  

[onesalt]

So what you're saying is you're starting a bank that uses credit based on bitcoins. For a piece of software specifically designed to avoid using centralised exchanges and fiat money this is essentially amounting to the same goddamn thing.

[the founder]

Maybe start with whatever the fee is for a trade on the exchanges.  Possibly that's too low for the manual effort you're describing though.  

well that's the problem,  currently our fee is set for a fraction of what the exchanges charge.. but this requires manual effort.. it cannot be automated.. it's designed on purpose not to be automated.

[FreeMoney]

I mean what are you saying? The coins held by you and not in cold storage are vulnerable enough that people ought be willing to pay to make them safe?

[FreeMoney]

Maybe start with whatever the fee is for a trade on the exchanges.  Possibly that's too low for the manual effort you're describing though.  

well that's the problem,  currently our fee is set for a fraction of what the exchanges charge.. but this requires manual effort.. it cannot be automated.. it's designed on purpose not to be automated.

It's only manual to get them back right? Sending into cold storage should be as automatic as a withdraw, right?

There is a delay in getting the coins out right? So it's manual, but you can do it in batches, right? Not that much labor to do it 2 or 4 times a day.

[the founder]

Maybe start with whatever the fee is for a trade on the exchanges.  Possibly that's too low for the manual effort you're describing though.  

well that's the problem,  currently our fee is set for a fraction of what the exchanges charge.. but this requires manual effort.. it cannot be automated.. it's designed on purpose not to be automated.

It's only manual to get them back right? Sending into cold storage should be as automatic as a withdraw, right?

There is a delay in getting the coins out right? So it's manual, but you can do it in batches, right? Not that much labor to do it 2 or 4 times a day.

correct....  now remember you still collect discount payments while in cold storage.

[superpc]

Why charge?  Is it to keep up the service?

[Vod]

this is the only user definable cold storage solution on the market... 

My service (launching within the next week) also stores coins in a couple offline wallets.  Even though we are not a bank, we have bitcoins that are the sum of user accounts below the minimum needed for transfer.  

I agree with other posters that cold storage is a required feature of any service that stores coins - it is not an add on or a service.

[FreeMoney]

Maybe start with whatever the fee is for a trade on the exchanges.  Possibly that's too low for the manual effort you're describing though.  

well that's the problem,  currently our fee is set for a fraction of what the exchanges charge.. but this requires manual effort.. it cannot be automated.. it's designed on purpose not to be automated.

It's only manual to get them back right? Sending into cold storage should be as automatic as a withdraw, right?

There is a delay in getting the coins out right? So it's manual, but you can do it in batches, right? Not that much labor to do it 2 or 4 times a day.

correct....  now remember you still collect discount payments while in cold storage.

Charge the exact amount of the payments?

Really though I don't get why and how you are paying people and doing the work of holding their coins. Maybe it makes sense, I just haven't investigated your model yet.

[nmat]

You should expect that most people want things free.

The question is: how costly/time consuming are those trips? I think that you should try to minimize the trips so that you can offer this extra service with very low fees or even free. It would be a cool way to attract new users.

[Meatpile]

The other option to is to offer a "good enough" service that can be automated. Such as a remote server that can unmount the usb drive/ whatever.

Then you make damn sure that nothing can remount the device unless they hack into root level access.

Even more sophisticated would be to look for a one way filesystem perhaps? That allows writing files once, then not being able to read or delete them. Until the time comes to do a bunch of manual stuff to get the file out again.

[Littleshop]

If you have extra bitcoin yourself let's say 200, you can put that in cold storage then only add when the customer storage exceeds that.  Add in groupings to minimize trips.

If your business grows and has volume, many customer requests could be accommodated before you need a physical move to occur. 

[the founder]

Maybe start with whatever the fee is for a trade on the exchanges.  Possibly that's too low for the manual effort you're describing though.  

well that's the problem,  currently our fee is set for a fraction of what the exchanges charge.. but this requires manual effort.. it cannot be automated.. it's designed on purpose not to be automated.

It's only manual to get them back right? Sending into cold storage should be as automatic as a withdraw, right?

There is a delay in getting the coins out right? So it's manual, but you can do it in batches, right? Not that much labor to do it 2 or 4 times a day.

It's in the fee schedule ..  It tells you the model

correct....  now remember you still collect discount payments while in cold storage.

Charge the exact amount of the payments?

Really though I don't get why and how you are paying people and doing the work of holding their coins. Maybe it makes sense, I just haven't investigated your model yet.

[Alex Thornton]

I recommend making cold storage free initially to drive early adoption. Your first goal should be to grow and become the dominant bank before competitors arrive.

It amazes me that most Bitcoin exchanges charge fees right now. They should instead focus on attracting customers today and monetize later. How else can they hope to diplace Mt. Gox?

Good luck.

[the founder]

I recommend making cold storage free initially to drive early adoption. Your first goal should be to grow and become the dominant bank before competitors arrive.

It amazes me that most Bitcoin exchanges charge fees right now. They should instead focus on attracting customers today and monetize later. How else can they hope to diplace Mt. Gox?

Good luck.

I'm am not sure about the exchanges,  because our goal isn't exactly the same as theirs...  ours is to make bitcoins an actual usable currency...  their goal is to covert bitcoins to other currencies.

That's a way differing mission.   

We would rather see everyone use bitcoins to do normal commerce.

[casascius]

I'm not sure why cold storage should ever involve going anywhere to "put" coins in a vault.

Simply generate a bunch of key pairs, put two copies of all the private keys in the vault.  Keep the public keys/bitcoin addresses outside the vault and online.  When someone "sends" to cold storage, one need merely send the bitcoins to the bitcoin addresses you've kept, and voila, they're already in cold storage without having to pay a visit.

Although the question has been brought up, "does cold storage mean you're really not secure", to me that's not the point.  The real value is having a live human being scrutinize the transaction before allowing it to pass.  If I have 100 BTC and declare 90 of them to be "cold", what I'd hope that means is if someone keylogs my password and hacks my account, they're only going to get 10 BTC, because the other 90 BTC can only be released if they call me or do some other sort of verification to ensure that the transaction is legit.