3 reasons bitcoins aren't in your wallet yet

Security and flexibility are among several big challenges, experts said

By , IDG News Service |  Internet

There are different ways of storing this private key. Coinbase and others offer digital wallets. Other companies have "offline" or paper-based wallets to put key ownership back into the user's hands, literally: The Bitcoin addresses and private keys are printed on a piece of paper. And the Winklevoss twins of Facebook fame have even offered up a solution with so-called vaults.

But none of those strategies gets around the fact that someone still has to store the key somewhere, experts said Monday during the conference.

"If you store it wrong or leave it lying around, it's just like cash," said Jared Kenna, CEO at TradeHill, a Bitcoin exchange that suspended trading in August due to banking and regulatory issues.

One wallet system, called Armory, allows users to maintain multiple encrypted wallets.

Having too much encryption, however, might also be a bad thing. "I have friends who are encryption experts," Kenna said. Some of those friends applied so much encryption to their keys that they couldn't get them back, he said.

3. Banks aren't fully on board

Bitcoin recently garnered support from federal officials in Washington, D.C., but many commercial banks still don't really know what to think about it.

For Bitcoin users thinking about a more traditional route to keeping their monies safe, that could be a problem. The currency is designed to be without any financial or legislative authority, but maybe some regulation is needed after all, panelists said.

"The lack of regulations might do more harm than any regulation could," said TradeHill's Kenna. "When there's no clear regulations, banks don't want to touch it," he said.

Bitcoin's newfound support from Washington, and from popular figures such as entrepreneur Richard Branson, could help clear the roadblocks, others said. "There are big forces going on inside the U.S. government," said Brewster Kahle, chairman of the Internet Credit Union, a Bitcoin-friendly bank that dumped some of its Bitcoin clients this past summer, citing regulatory issues.

"I'm hoping things get a bit better," he said.

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