Bitcoin, The Cryptography-based Currency Continues To Rely On Banks For Security

Reddits r/bitcoin is a popular forum where BTC enthusiasts shared news links and anti-establishment jokes. The site was so influential among the community that a recent book about Bitcoin calledThe Anatomy of a Money-like Informational Commodity discussed the viability of using the number of registered members of the forum as a way to gauge the market sentiment.

One of the most upvoted post on the channel yesterday is one entitled Worst Night of My Life, in which a Bitociner recounted how his family responded after they discovered that his parents house broken into with the safe stolen by the burglars.

The thieves simply threw a rock through his (the authors fathers) back sliding glass window, rummaged around in the house until they found the safe and dom hemingwayd it right off of the foundation it was bolted onto. Inside of his safe was an uncommonly large number of bitcoins (he is an early adopter) on a non password protected paper wallet.

For the uninitiated, a paper wallet is an offline mechanism for storing bitcoins. Unlike online wallets, sometimes referred to hot wallets, paper wallet is a form of cold storage, which is deemed immune to hacking, the cause of most of Bitcoin heists so far. However, despite being considered one of the safest ways to store bitcoins, paper wallet is far from foolproof.

Although the family had backed up the paper wallets and safe-kept them in the local bank, because the burglary took place at night, they had to wait until the next day before they could retrieve their backups and transfer the coins away. The author didnt reveal the specific amount, but he suggested that the amount was significant enough, saying that his father was an early adopter. They were so anxious that they stayed up the entire night.

The robbers had 9 hours to crack into it, figure out what the hell they were looking at (assuming he wasnt explicitly targeted) and then transfer the bitcoins off into their own address. We were both sweating bullets and did not sleep at all.

Fortunately, the thieves were neither aware of or tech-savvy enough to figure out what they laid their hands on. In the end, crisis averted and life back to normal. Am I then only one that saw the irony?

With Bitcoin, you can be your own bank this is many Bitcoiners belief as well as one of the central value propositions of Bitcoin as a currency. It carries two layers of meanings. First, Bitcoin allows people to transmit value among each other without involving a centralized authority and from any places in the world irrespective of jurisdictions and geographies; second, Bitcoin is supposed to allow people to store it secure enough so they never needed to go to a bank. This gives rise to the rather fanatic-sounding prediction of death of traditional banks. Now, it appears that banks offered Bitcoin a measure of security that they cannot get from anywhere else.

It is not only individual users, Coinbase, one of the most reputed Bitcoin companies, also used banks for the same purpose. According to the company: we can safely move about 90% of those funds offline. We do this by taking the sensitive data that would normally reside on our servers (the private keys which represent the actual bitcoins) and moving it to USB sticks and paper backups. We then take these to a safe deposit box at an actual bank.

Despite the cryptography that Bitcoin is based on, there are more ways than you can imagine to breach its security. It is vulnerable to hacking, as indicated by many heists indicated; more importantly, it is vulnerable to human foibles if you are the kind of people who often feel the need to reset your passwords, then you are most likely to find Bitcoin security challenging. In the world of Bitcoin, private key is the only link between you and your money. Unlike losing your bankcard, there is no authority to go to after you lose it Bitcoin is made for the most individualistic and fastidious with a determination of self-reliance. Failing that, you will have to settle with online wallet service, which are centralized and necessitates a certain degree of trust from you. But dont think that is the only risk. Lack of legal recognition means loss of bitcoin doesnt receive the same level of legal protection as other properties do. A thief can kidnap and torture for the private keys. Even in a world there were no such hideous crime, an almost insurmountable obstacle that would prevent Bitcoin from being adopted by the majority is that most of us are just not organized enough.

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Bitcoin, The Cryptography-based Currency Continues To Rely On Banks For Security