Topic: is it better to keep btc's on a site or the bitcoin software? (Read 1680 times)

Um, no.  Assuming valuable files can be stolen from your computer is being street smart, not paranoid.  Computers being "pwned" isn't something that "could happen", rather it "does happen" and "is happening right now".

The most popular piece of malware I've seen (fake antiviruses) routinely scape your computer (and e-mail them to the hacker) for saved eBay passwords, PayPal passwords, e-gold passwords (when that was around), the very second the malware makes it onto your machine, and Bitcoin wallets will be the very next thing on the list if they're not already.

Oh, hey, just so you know what happens when your wallet gets stolen by a hacker... your Bitcoin client will see the theft transaction in the block chain and will automatically display it for your convenience as the latest sent transaction in your wallet, in the form "To: (thief's Bitcoin address)", right under your new balance of 0.00... it will look exactly the same as if you sent the transaction yourself from your own computer.

If and when you see that, your coins are permanently gone.  Watch for that in your Bitcoin client, next time you visit a website that suddenly causes popups that your computer is "infected with 37 trojans, scan for viruses now", which I'm certain you've seen a time or two yourself.

Don't forget to wear your tin hat whilst doing it!

Here is the safest, 100% hacker proof way to store Bitcoins.

1. Set up a computer that has no access to the Internet whatsoever.

2. Install and run Bitcoin on it (from removable media, e.g. USB flash memory stick).  Copy the first auto-generated address you see onto a piece of paper, or better, print it out.  Save a copy as a Notepad file on your flash memory stick.  There is no need to wait for the block chain to download (which shouldn't be happening anyway if you're offline)

3. Back up the wallet.dat file it creates onto your USB stick.  Better yet, do it onto two USB sticks.  It's located at %APPDATA%\Bitcoin\wallet.dat.  Keep both copies safe and secure.  Don't insert the flash drive into any computers until you're ready to spend.

4. Send all your Bitcoins to that address you generated and saved in step 2.  Use Block Explorer to keep track of your balance.

5. Format the hard drive of the computer, or at least delete your wallet.dat from it, or never connect it to the internet.

Main point: The software doesn't have to talk to the network for you to receive bitcoins.  By providing no means for your private keys to be reached from the Internet, they cannot be remotely stolen by anyone.

When ready to spend:

1. Go into a brand new installation of the Bitcoin software, and exit it completely (so it's not on your taskbar, etc.)

2. Go into the %APPDATA%\Bitcoin folder and delete all files with the extension .DAT.

3. Copy your prized wallet.dat into the folder

4. Restart Bitcoin and let it rebuild everything.  Coins will appear when the block chain is downloaded (possibly hours).

5. Spend like normal.

I diversify. I'm practically guaranteed to lose some. But there is no way in hell I'll lose them all.

Keeping it on your computer will prevent a third party from taking/seizing your coins(not including viruses). Keeping them on an online wallet will give you more options to spend bitcoins (anywhere with an internet connection) and give you an automatic backup in the cloud, but there is a more likely chance of fraud. Depends on your preference and how many coins you have.

such as mtgox or some poker site or is it better to keep it on the bitcoin software?

also, if mtgox goes down how likely is it that our btc's are lost?