Topic: "Online wallet services" are an invitation to fraud and theft - page 2. (Read 3955 times)

Seriously? You expect bitcoins business to register in a country where the chance of being shut down in the future is that high?

Bitcoin business should be registering in tax havens where money printing is not a tradition.

*bump*

I'd just like to point out that MyBitcoin's disappearance was foreseeable, and foreseen. Anyone who kept a significant amount of money there, didn't do their due diligence.

Most of us using this forum are old enough and smart enough to be able to handle risk analysis on our own. We can determine what we consider a safe amount to put into online wallets, and can even point all this out when recommending them to others.

For the No.1:

1) Be a U.S. citizen
2) Register a company in U.S.
3) Tell people your exactly background information.
4) Post 1 of your pictures is good for building trust.

conclusion: transfer your personal creditability to your service.

Of course, you have to do a good job on 2. and 3.

Funny, just minutes after you wrote that is this:
  "I think some centralized service is good for the bitcoin community".
  - http://forum.bitcoin.org/index.php?topic=26264.0

Speaking as someone who is actively working on setting up an online wallet. I can understand your concerns. It's also our biggest challenge (to build trust)

As someone who is obviously against the idea. What would make you feel more comfortable with the idea?

Actions we are going to take:

1. Make it clear whose behind it.
2. Clarify how our system works and what safe guards are in place
3. How we plan on making money

There are a number of "online wallet services" for Bitcoin. The premise is that you send them your coins, and they provide a web-based interface with which to spend your coins. The problem is that these services are acting as banks, but without sufficient auditing, security, or credibility. There are three things that can go wrong with an online wallet service, and they add up to a major risk for anyone keeping money in one.

First, the wallet service might get hacked by a malicious third party. If you keep your bitcoins on your own computer, then they can be stolen if your computer is compromised; if you keep them in an online wallet service, then they can be stolen if *either* your computer is compromised *or* the online wallet service is compromised. And the wallet services are big, obvious targets for attackers.

Second, the wallet service might be doing "fractional reserve"; that is, they may not keep the actual balance on hand to back all their deposits. In this case, everything would seem to be fine until a bunch of people tried to make withdrawals at once, and then they'd discover that there wasn't actually any money there. Regular banks do this, and loan out the extra money; a wallet service could do fractional reserve, but take the extra money as profit. Regular banks have deposit insurance, which is essentially a guarantee by the US government that if everyone tries to withdraw at once and there isn't enough money there, the government will print more to cover the lost balances. In exchange, the bank is subject to a reserve requirement, which is a percentage of all deposits that they have to keep on hand, and audits.

Finally, the wallet service might just steal your money. They could just pack up and disappear one day. Alternatively, a wallet service that wanted to make money this way could keep up pretenses for awhile by disabling accounts a few at a time, or by losing a small fraction of transactions, and by blaming problems on outside attacks.

Seriously, keep your Bitcoins in your own possession. Don't recommend online wallet services to people. And don't expect online wallet services to cover for user-interface or other deficiencies the current Bitcoin client has - those need to be addressed in the client, not by a third-party service.