So many hacks and people are just not getting it. Trust no one, stay safe.
My Mac wallet of choice: https://electrum.org
"But wait!" you say, "I shall use modern cryptography to protect my wealth from prying eyes!" Yes, and the thief in the night will use rubber hose cryptography on you.
There is a reason why the vast majority of people entrust their wealth to banks & not a safe buried under the floor of their house. I'm sure the BitCoin community will learn this truth about monetary systems at roughly the same rate as they've learnt all the others & probably the hard way given recent evidence.
Why is this? Well, if you choose to "use rubber hose cryptography" on someone to steal their Bitcoins, you've graduated from a faceless, online, white collar crime that many police departments won't even take a report for ("they've stolen your Bitwhats? Yeah, we'll get back to you.") to an extremely serious crime that will get you locked up in violent prisons for a very long amount of time in every country of the world.
So it's not surprising that the scenario you describe has not happened. It may happen yet, but it will be a rarity and not a statistically-meaningful threat.
Print 3 copies of paper wallet. Store in 3 different bank vaults.
Bank vaults are very rarely compromised. And as you said you can still use multisig.
> Or if your computer was compromised at the time of generating your paper wallets. Or the printer. Or if you somehow downloaded a malicious copy of wallet generating software.
If you factor malicious software into account, you're far more likely to have your credit card or bank account credentials stolen.
Cold storage surely isn't a panacea, but let's be honest in the criticism of BTC. With reasonable security standards your bitcoins are probably safer than your bank account money. (The only difference is that your BTC's probably aren't insured against theft)
Shouldn't that really be rubber hose cryptanalysis?
Yes, that's not absurd at all. These blockchain-monitoring, bitcoin-wallet correlating cyber-thieves with their rubberhoses are a real plague.
It's just so much easier than, say, robbing people near an ATM at gunpoint...
I believe in the potential of bitcoin, but if cloud wallet services cannot succeed, then bitcoin can't succeed.
At least Debian have had their repositories hacked in such a way that the hacker could have distributed tailor made exploits users would receive by running "apt-get upgrade". It's not so hard imagining someone inserting code in a bitcoin client to send all your coins to one specific address. If it's not a hacker, it could be an insider at Debian or the author of the bitcoin client themselves.
I haven't seen any bitcoin advocate solving that conundrum. If the supposed experts of securing software can't keep their free software safe, how on earth are regular users going to keep their life savings safe on their own?
I have the main Bitcoin app (which takes up almost 20GB on my SSD with it's blockchain) and I have a few others, like multibit. There doesn't appear to be any wallet management, each app creates its own wallet and can't open the wallet from another BTC app.