If I hold my own money and if it gets lost, I'm personally responsible for all of it. I like to be in control of what I do. If I screw up and I didn't take enough measures to make it safe, then that's due to my own fault. That is why I prefer not to leave others handle on my behalf.
I agree with this too. However, if BTC is to become well and truly mainstream then people who aren't very familiar with technology will have trouble keeping their bitcoins secure without entrusting them to a third party. The average 50+ year old man or woman isn't going to want to bother with cold storage, paper wallets, etc. Also many people have terrible computer security habits. My parents, for example, managed to get their laptop infested with malware because they kept clicking on popups which displayed false error messages and security warnings and "DOWNLOAD" buttons. Not everyone is a computer expert.
My opinion? It's still a bit too early. Although some of these services are claiming that the deposits are insured, it isn't well understood (or well tested) exactly what would happen if these "insured" deposits are stolen. Most of these services aren't regularly audited by any third party to prove that they are continuing to secure the bitcoins as they describe, and there aren't many regulations forcing these businesses to handle the bitcoins in any particular secure fashion.
Eventually bitcoin banks will be as common and ubiquitous as fiat banks, but we aren't there yet. I figure it will be another decade at least.
Some exchanges have already been audited. For example, Bitstamp, Kraken, an OKCoin have all had audits done by third parties and passed so it would be nice if these new Bitcoin banks do the same thing.
As for Bitcoin insurance, the whole concept seems quite difficult to implement. Ideally, I would like to see the insurance be in the form of a reserve denominated in BTC to protect against price swings but I'm not sure if its feasible for a company to hold so much BTC to cover 100% of users' deposits. Mt. Gox, for example would have needed close to 1 million BTC in reserves to cover everyone's deposits after they blew themselves up.
Also most traditional insurance companies today practice fractional insurance, i.e. they don't have enough reserves to cover everyone's payment obligations. In Bitcoin land however, it's quite common for services to have most or all of their bitcoins disappear at once (e.g. MyBitcoin, inputs.io, Mt. Gox) so in these cases, even having an insurance policy in place would still have been hopeless.
I wonder what Satoshi would think of these Bitcoin "banks" ?
Well, here's what he said about it back in 2010:
- snip -sites like
vekja.net and
www.mybitcoin.com have been experimenting with account-based sites. You create an account on a website and hold your bitcoins on account there and transfer in and out. Creating an account on a website is a lot easier than installing and learning to use software, and a more familiar way of doing it for most people. The only disadvantage is that you have to trust the site, but that's fine for pocket change amounts for micropayments and misc expenses. It's an easy way to get started and if you get larger amounts then you can upgrade to the actual bitcoin software.
Sounds like he didn't trust them with large amounts of bitcoins, but thought they presented an acceptable amount of risk for smaller amounts of bitcoins (
pocket change amounts for micropayments and misc expenses).
That sounds about right. I'm not sure what happened to Vekja.net but MyBitcoin got hacked months after Satoshi wrote that post so he was definitely right to be cautious. It's pretty much what I think as well. Online wallets are good for pocket change amounts. You wouldn't keep thousands of dollars in a wallet in your back pocket. But $50? $100? No problem.
There's a difference between banks and online wallets. We don't need banks and they're unnecessary with bitcoin, but if you wanted to travel with bitcoin you can keep them on your phone, or use an app like blockchain.info (which is an online service too), or you can just keep the private keys written down somewhere and input them when needed. Personally I prefer to keo my coins offline and secure, but online wallets have their place and blockchain.info is very safe in my opinion and useful for your everyday spends.
Well, Xapo and Circle both offer services labeled as "vaults", so I think it's kind of in the middle. They definitely have the appearance of a bank in the sense that you have a spending account and a cold storage savings account. Both claim to insure users' deposits (like a bank) and Xapo gives you a debit card linked to your account (also like a bank).
Another one is Elliptic, again another insured vault:
http://www.elliptic.co/vaultBlockchain is online BTC wallet, which is developed well enough
Blockchain is an online wallet, but it's a bit different than other online wallets since you actually have control over your private keys. The encryption is client-side and the site operators don't actually know your private keys. I wouldn't trust it for holding large amounts of bitcoins but it's far more secure than a typical online wallet.
