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Author Topic: can a bitcoin 'bank' exist?  (Read 2151 times)
mav
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December 31, 2011, 03:10:40 AM
 #1

Simple question - will I ever be able to store my bitcoin with an organisation who will provide secure storage for it, whilst at the same time allow me easy access to it (like a bank currently does with my cash)?

In the past, online-wallet sites have been untrustworthy. We all know that... Is it ever going to change? What does it take to be considered both trustworthy and secure?

People (especially non-geeks) would definitely go for this, and would gladly pay a fee to have someone look after their bitcoin if it reduced the risk of loosing it due to n00bness or a virus or whatever. (Who could currently safetly store even $100K in cash without a bank? Not many people I don't think)

What does it take to have an entity that can provide this sort of thing - security and trust being the two biggest hurdles as far as I can tell. How does this 'bank' become trusted? And can it ever be truly 'secure' eg social engineering etc.

Will it ever happen? Are there fundamental reasons why it won't?

Very few people keep suitcases of cash or bars of gold either at home or even under their own security offsite etc, yet bitcoin as it stands expects people to do this. Seems kinda strange nobody has been able to offer this service yet.
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BitPay Business Solutions
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December 31, 2011, 03:14:10 AM
 #2

http://flexcoin.com

BitPay : The World Leader in Bitcoin Business Solutions

https://bitpay.com

Does your website accept bitcoins?
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December 31, 2011, 03:14:30 AM
 #3

Flexcoin kind of fits the bill.

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mav
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December 31, 2011, 03:36:20 AM
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flexcoin is a really amazing site, a great idea, I am very impressed.

However, what distinguishes it as trustworthy as compared to something such as MyBitcoin? How do you verify that this organisation will keep your coin for you?

I guess this boils down to philosophy more than technology, but I can imagine a lot of people would genuinely wonder how to verify the trust of what is essentially 'just another website'.
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December 31, 2011, 06:47:08 AM
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Strongcoin and blockchain.info require little to no trust thanks to their browser encryption, and they let you print paper copies of your private keys.  Stashes of cash or gold take up space and need security, and banks need your deposits as reserves for their fractional magic to generate profits of them.  A flash drive or piece of paper don't take up much space and don't require much physical security. And there is no fractional magic profits yet with Bitcoin. Not much incentive for banking services.

Losing hundreds of Bitcoins with the best scammers in the business - BFL, Avalon, KNC, HashFast.
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December 31, 2011, 07:05:25 AM
 #6

I print paper wallets from a saved offline copy of bitaddress.org.

Call me skeptical but I don't trust websites that offer browser side encryption. That's because they could be compromised and changed to disable such encryption anytime.   No one is going to "view source" and audit the page with each use, so the benefit is illusory.

The address generator at bitaddress.org is a single static html page needing no network.  It can be saved to a flash drive.  If you save a copy of bitaddress.org's homepage and it still works on a computer with no Internet connection, it's probably safe.

Companies claiming they got hacked and lost your coins sounds like fraud so perfect it could be called fashionable.  I never believe them.  If I ever experience the misfortune of a real intrusion, I declare I have been honest about the way I have managed the keys in Casascius Coins.  I maintain no ability to recover or reproduce the keys, not even under limitless duress or total intrusion.  Remember that trusting strangers with your coins without any recourse is, as a matter of principle, not a best practice.  Don't keep coins online. Use paper wallets instead.
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December 31, 2011, 07:16:35 AM
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I print paper wallets from a saved offline copy of bitaddress.org.

Call me skeptical but I don't trust websites that offer browser side encryption. That's because they could be compromised and changed to disable such encryption anytime.   No one is going to "view source" and audit the page with each use, so the benefit is illusory.

The address generator at bitaddress.org is a single static html page needing no network.  It can be saved to a flash drive.  If you save a copy of bitaddress.org's homepage and it still works on a computer with no Internet connection, it's probably safe.

i've been looking for an easy way to generate 11 separate wallets.

i just opened bitaddress.org on another tab in Chrome.  i then turned off the wifi connection on my laptop and the address generator continues to work just fine.

are the addresses this html page is generating totally safe and considered an offline wallet?
MORA
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December 31, 2011, 09:11:40 AM
 #8

Very few people keep suitcases of cash or bars of gold either at home or even under their own security offsite etc, yet bitcoin as it stands expects people to do this. Seems kinda strange nobody has been able to offer this service yet.

Some use safety deposit boxes, you could do the same thing with bitcoins.
Make a few offline private/public keys, print them and put in safe, store a copy of just the public keys, and transfer surplus to the stored addresses.

A bit difficult to get them again, but its safe if the private keys have never been on a internet enabled machine.

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December 31, 2011, 04:47:15 PM
 #9

are the addresses this html page is generating totally safe and considered an offline wallet?

I sure hope so, I have thousands of BTC on Bitaddress.org printouts (mine were generated on a machine that never saw the internet ever)

Companies claiming they got hacked and lost your coins sounds like fraud so perfect it could be called fashionable.  I never believe them.  If I ever experience the misfortune of a real intrusion, I declare I have been honest about the way I have managed the keys in Casascius Coins.  I maintain no ability to recover or reproduce the keys, not even under limitless duress or total intrusion.  Remember that trusting strangers with your coins without any recourse is, as a matter of principle, not a best practice.  Don't keep coins online. Use paper wallets instead.
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December 31, 2011, 05:35:15 PM
 #10

are the addresses this html page is generating totally safe and considered an offline wallet?

I sure hope so, I have thousands of BTC on Bitaddress.org printouts (mine were generated on a machine that never saw the internet ever)


You can download the entire code for Bitaddress and run locally offline. It will prevent that that possible case where they have been hacked and a tiny snibbit of code has been changed that no one would notice for a little while. I think it would be great if they just made a github repo that you could download from, and this way you can keep track of any changes easily.

You should also consider using botg.sh if you run linux on any boxes. I am going to be switching to that for PrintCoins this way I don't have to copy and paste from Bitaddress (I'll just enter quantity and denomination and click print)
https://github.com/RobKohr/PHP-Bitcoin-Address-Creator/blob/master/lib/botg.sh

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December 31, 2011, 06:13:51 PM
 #11

flexcoin is a really amazing site, a great idea, I am very impressed.

However, what distinguishes it as trustworthy as compared to something such as MyBitcoin? How do you verify that this organisation will keep your coin for you?

I guess this boils down to philosophy more than technology, but I can imagine a lot of people would genuinely wonder how to verify the trust of what is essentially 'just another website'.

Trust takes time. Transparency and enough real world info for accountability go a long way as well.
I would like to know where Flexcoin LLC is registered?  (I checked PA and Fl and could not find anything.)
Who owns it? (real life names)
Where do they live?
Are there any plans to 'bond' some amount to protect against loss of the coins in either 'hot' or 'cold' storage?

If you're not excited by the idea of being an early adopter 'now', then you should come back in three or four years and either tell us "Told you it'd never work!" or join what should, by then, be a much more stable and easier-to-use system. - GA
It is being worked on by smart people. -DamienBlack
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January 01, 2012, 12:45:46 AM
 #12

For a bank as a store of money, I think that there is no reason to store your coins with a bank.

I think having a seed for a deterministic wallet stored on multiple machines and backed up on paper that needs to be combined with a password of some strength is all you need. Once you have that, you don't need a bank.

Let's say there are some large number of users that use a single bank, and it is open about its book for transparency's sake (very important to prevent fractional reserves). How many millions of dollars could they be trusted with. Does the trust really matter? Remember, the criminal underworld is becoming an early adopter of bitcoins. People that would have no problem pulling up to some bank owner's house in a black Cadillac and some serious muscle ready to brute force a password out of someone. At that point, it isn't a matter of trust. The bank will be compromised by its weakest link.

This isn't a fantasy folks, and that is a reason so many coins should never be trusted with one individual. That combined with the trust in that person's moral fiber is a bit much.

Bitcoin banks only work when they don't have the ability to walk off with your money. Especially with a money system such as bitcoin which has no legal recognition. If someone took or lost your coins, what are you going to do about. Try to sue for virtual currency? That would be the same as trying to sue for WoW gold, or Zynga goats.

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mav
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January 01, 2012, 01:05:40 AM
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I think having a seed for a deterministic wallet stored on multiple machines and backed up on paper that needs to be combined with a password of some strength is all you need. Once you have that, you don't need a bank.


So for the 99% of people who don't even own multiple machines let alone know that they should use them in this manner and least of all even care to use them (laziness etc)... what about them? I think they need a bank. You grandmother would never use multiple machines to store bitcoin, but she can use fiat cash and she can use a bank. Hence, imo, she can't use bitcoin. I think this is a big part of allowing adoption of bitcoin as a currency, and the current attitude of 'its safe as it is' contributes somewhat to the hinderance of uptake.


...and some serious muscle ready to brute force a password out of someone. At that point, it isn't a matter of trust. The bank will be compromised by its weakest link.


This applies as much to regular people as much as to banks if not moreso. Banks can use the collective money from fees to provide legitimate security and 'hired muscle' to protect wealth that an individual never could. Any responsible/trustworthy bank would do this

I always think to myself, if my boss paid me in hard cash, I would be nervous as hell trying to store that in my house or wherever. But really, this is exactly how bitcoin works, and it seems kinda, not unsafe, just... absurd. It's not right to expect people to put themselves at those sorts of risks.
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January 01, 2012, 02:18:45 AM
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I think having a seed for a deterministic wallet stored on multiple machines and backed up on paper that needs to be combined with a password of some strength is all you need. Once you have that, you don't need a bank.


So for the 99% of people who don't even own multiple machines let alone know that they should use them in this manner and least of all even care to use them (laziness etc)... what about them? I think they need a bank. You grandmother would never use multiple machines to store bitcoin, but she can use fiat cash and she can use a bank. Hence, imo, she can't use bitcoin. I think this is a big part of allowing adoption of bitcoin as a currency, and the current attitude of 'its safe as it is' contributes somewhat to the hinderance of uptake.


...and some serious muscle ready to brute force a password out of someone. At that point, it isn't a matter of trust. The bank will be compromised by its weakest link.


This applies as much to regular people as much as to banks if not moreso. Banks can use the collective money from fees to provide legitimate security and 'hired muscle' to protect wealth that an individual never could. Any responsible/trustworthy bank would do this

I always think to myself, if my boss paid me in hard cash, I would be nervous as hell trying to store that in my house or wherever. But really, this is exactly how bitcoin works, and it seems kinda, not unsafe, just... absurd. It's not right to expect people to put themselves at those sorts of risks.

You present an interesting perspective ... worth thought. I'm not sure how to respond yet other than to say it is an interesting idea. Bitcoin wallets are quite different than keeping your physical cash in a physical wallet in your home. I, too, would feel uneasy keeping (say), $10k in cash in my house. But a bitcoin wallet can easily be kept encrypted. It can still be stolen, but if encrypted cannot be used by anyone other than yourself. As long as you keep backup copies your bitcoin will be safe. So, personally, I see this as a non-issue. But you would classify me as a 'geek', and perhaps this is why I am comfortable with a wallet kept 'at home'. Someone who you classify as 'grandma' may see things differently.

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January 01, 2012, 02:24:58 AM
 #15

My grandma kept her money in here sock drawer and under the mattress. She has no trust of banks.

It is fairly common for those who lived through the great depression. That and an affinity for condensed canned milk.

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January 01, 2012, 12:14:47 PM
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Anyone can open an account at www.bitcoin-central.net, deposit their bitcoins for safe storage and withdraw to pay their online purchases.

Now to store a large amount of bitcoins, it makes sense to use a paper wallet.

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January 01, 2012, 12:50:43 PM
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Yes, when real BANK of fiat money begin to deal with bitcoin.

Matthew N. Wright
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January 01, 2012, 12:53:27 PM
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can a bitcoin 'bank' exist?

It already does. Look up the definition of what a bank does, and you'll find that MtGox fits that description quite well.

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January 01, 2012, 03:53:23 PM
 #19

Yep there have been quite a few banks. I am waiting for MyBitcoin to open back up so I can put some bitcoins in.

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January 02, 2012, 01:10:44 AM
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Simple question - will I ever be able to store my bitcoin with an organisation who will provide secure storage for it, whilst at the same time allow me easy access to it (like a bank currently does with my cash)?

Not a simple answer.  Your cash is safe because the FDIC (Federal Deposit Insurance Corporation --> www.fdic.gov) insures your usd in a FDIC bank (which all of them are).  We don't have, and possibly don't want btc being insured by the FDIC.

With security you get less liquidity.  For every btc taking part in some networked system in which it can be transferred on a moments notice, is going to be under risk from threat agents.  When you move btc away from networked systems and into a storage situation there is substantially less, but different risk, and at the same time a liquidity problem rises up.

I wouldn't trust anyone with holding an amount of btc on my behalf that I couldn't walk away from with little regret.

Here is a little tip - You must take a risk based approach to how you hold your btc (this is from an older post of mine):

1 - Quick access spend thrift account (no more than 200 usd exposure) - Windows XP/7 with standard bitcoin software.  Password protect your login and make sure your running some decent anti-virus

2 - Medium access large account (no more than 5,000 usd of exposure) - VMware image of Ubuntu JeOS with OS based full disk encryption.  Has no services running (if it's running apache you fail) and a stable release of bitcoind.  Connect this only to known trusted nodes when needing to move coins

3 - Hard access mother account (all those secret coins generated the first year) - Every possible disk that ever held a private key is suspect.  Almost all of those should have been wiped with random data 5 times.  <-- before doing that, account key pairs should be replicated to 3 types of medium (dvdrw, flash drive, usb ext. hd) and each of these medium would be placed at separate bank security deposit boxes
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