Trusting the Right Wallet

A major concern surrounding Bitcoin is the potential vulnerability of the virtual currency to hackers, especially as it continues to lack government backing. For this reason, it is important for users to carefully consider where they keep their Bitcoin. Coins used to be stored offline in a download, meaning their assets where kept away from the Internet and through a platform directly related to Bitcoin itself. However, as Bitcoin becomes more and more used, hosted wallets hosted by third parties through online services. Many remain concerned about the abilities of these third party hosts to protect their finances, especially following the Mt. Gox collapse in February, 2014.

While some users may identify Bitcoin wallets with banks, those involved in wallet technology urge consumers to make educated decisions before committing to a wallet. As put by Will O’Brien, CEO of BitGO,

Ultimately, as bitcoin gains adoption, consumers will trust a wallet provider to be a custodian of their funds. But that trust should not be blind faith.”

This concept was further explained by Keny Liu, co-founder of Purse.io-

If a user chooses a hosted wallet, he [or she] essentially transfers the security liability to the service provider,” he said. “The two major vulnerabilities are hacking – since centralized wallets are more desirable to hack ­– and theft/negligence of the wallet service.”

Luckily, as Bitcoin grows so does the number of wallet options, many of which Bitcoin.org recommends on their website. For consumers, the deciding factor is often whether or not the holder wants to maintain control of their bitcoin’s address’s private keys. Moving forward, it is suggested a mix of public and private protection is ideal for Bitcoin users. A proposed model is offered by 37Coins wallet company,

We provide a service that secures wallet transactions through multi-signature and second-factor verification. One key is kept with the partner, one key with 37coins and a third one with a legal entity for backup.”

 

Read more here- “Should Bitcoin Users Trust Hosted Wallets?” (Daniel Cawrey, CoinDesk)

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Olivia is a graduate of Villanova University where she studied Economics and History, minoring in Gender and Women's Studies. She also has experience working with federal legislatures on health care policy, women's issues, and Internet safety.

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