Topic: Bitcoin Axiom #0 - If you do not have the private keys for your bitcoins ... (Read 3843 times)

Nailed it.

If your house was like Bitcoin - secured by the laws of the universe itself, mathematics, you'd be fucked if you lost your keys.

blockchain.info runs mostly on the client, the server does not have your private keys in a usable form, and you are free to export them.

For most users, that's perfectly fine. The software you use manages your private keys for you and stores them in the wallet-file. If you use any of the standard Bitcoin wallet clients (Bitcoin Core, Multibit, Electrum, etc...) that's good.

If you use a web-service to manage your Bitcoins, then you don't have your private keys on your computer and you're 100% reliant on the web-service to keep your money safe. This is not recommended (except for small amounts for convenience).

I have moved my bitcoins around many, many times. I have never been asked to produce a private key, and I don't even know where to find them. Is that wrong?

I'm working on this for bitaddress.org
But without needing to have an 'Encrypted private key' be Encrypted with another key which is then split using Shamirs scheme. You could just select m and n and the number of keys left in the safety deposit box such that you need to have access to the box plus other key parts to spend. Thereby accomplishing the goal quoted above.

Update

Bitcoin Axiom #0 - If you do not have provably secure [air gap generated] private keys for your bitcoins, then you have no bitcoins.

Keeping your Bitcoin on an exchange is like buying paper gold! If you don't have the physical gold in your hand, despite what that neat little piece of paper says, you don't own any gold!

If you keep your Bitcoin on an exchange, as proved by the 744,408 Bitcoin that people thought they owned because their computer screen said that their Mt. Gox account held X ammount of coins, you may one day find out that you in fact DO NOT own any Bitcoin!!  

+1 to Holliday and D&T.

Private keys are like bearer bonds where if you have the bond, you own it, no questions asked.  You could do what you wanted with them, clip the coupons and get paid etc.  But you had to store them somewhere safe from thieves, natural disasters and the like.  There was no way to get them back if destroyed by fire for example.  If there were "bearer deeds" for houses, and you lost it, the house would no longer be yours.  Private keys are not analogous to house keys, despite the name.

As far as the complicated nature, yes, the internet and everything from credit cards to cars is complicated but we abstract the complicated portions downward so it seems simple.  Bitcoin will have that eventually so people can protect themselves better.

Query: if you could store 100 bitcoins in one address or in 10000, which makes more sense? From a protection standpoint, the 10000. From an easy of use standpoint as of now, the former.  Soon though, you'll be able to store each whole coin in 10 or 100 places so that you won't lose much if one private key is exposed. It will all be abstracted down so you do t even know it though.  

The suggestions above help prevent the loss of keys by storing them in a distributed fashion or encrypting them so that they are inaccessible even if viewed. Compared to bearer bonds, that is good.

The point is that you should have your own coins under your control or you just have a ledger entry for them on someone's books.

:-)

Well the power of good software is that it makes complicated, difficulty things easy.  Bitcoin is incredibly complicated, hell the protocols bitcoin relies upon TCP/IP are also complicated.

Sharim secret sharing ( http://en.wikipedia.org/wiki/Shamir's_Secret_Sharing ) is an algorithm for sharing a secret as "pieces" between multiple people where some subset is needed to recreate the original secret.  So encrypt your cold storage wallet using SSS which requires n of m keys.   Distribute the m keys to yourself and friends.   Even if n of them conspire against you they would need to be able to retrieve the encrypted keys from secure storage.  Someone which has the encrypted and doesn't know the keyholders would not be able to gain access.

If you are super paranoid put the encrypted secret in deposit boxes in banks in different countries.

Axiom #0 is an absolute truth, but it is somewhat abused by services like blockchain.info in order to provide a false sense of security to its customers.

Despite of what the operators of blockchain.info and similar services like to say, having the exclusive possession of your private keys is *not* the only security measure you should follow to take counterparty risk out from the equation. A third-party service like blockchain.info can still steal users coins in a trivial way just by injecting code, as it happened when strongcoin "intercepted" 1k coins to return them to OzCoin after a hack. More info also in this post and this one.

Very good answer, and you are correct in this case.
No private key, no coins.

Of course I do.  My (and all) bitcoins are decentrally stored on the blockchain spread across hundreds of thousands of computer all over the planet.  A wallet contains no bitcoins, it contains keys which allows one to authenticate a request to transfer those bitcoins to the control of a different key (a transaction).   The Bitcoins are in the blockchain, they are always in the blockchain.  I still retain control over the future movement of those Bitcoins if I retain control over the private key(s).  They key(s) don't need to be online.  Now with offline signing the keys don't ever need to be online.

That's fine and dandy, but if you have no computer, you still have no bitcoins.

If I put an infinitely strong lock on the house, how does that change my analogy? If I lose the key, the key is lost, it don't matter what type of locks I had.

Here's a riddle for you: will an infinitely strong lock protect you better than a weak lock if I have your key?

Bitcoin is the most advanced form of wealth storage the world has ever known.  Using an offline computer to generate private keys and storing those keys encrypted in multiple geographic locations nearly eliminates all threats including theives, hackers, natural disasters, government confiscation and, yes, corrupt third parties such as exchanges.

This is clever, apt and well said.

That's the moment you realize you should have been buying XCP all along.

What if I told you that you could store your bitcoins not on a computer and you could make multiple redundant encrypted copies to ensure you retain control even if a single copy remains?

That's because your house has weak locks. Put an infinitely strong lock on the house, and try the analogy again.