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Comment by Bootvis | Hacker News Reader

My largest fear with cryptocurrency is that my luck will run out (nothing bad has ever happened to my holdings) and I will lose a significant chunk of money. Most of my holdings are in cold wallets but news like this makes me shiver and makes me realize cryptocurrency needs more grown ups fast.

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The problem is the gateways between fiat and crypto, where centralisation occurs and due to AML/KYC policies and banking regulations all of the worst aspects of banking can affect users

bitcoin itself as the protocol/platform has proven to be quite solid

the trick is to not keep coins in exchanges unless you are into trading, but then you know that you are taking a risk

It's disingenuous in the extreme to suggest that AML/KYC policies and banking regulations have anything to do with a significant proportion of all Bitcoins ever in circulation having disappeared from counterparties claiming they were hacked. Real, regulated banks do not simply lose significant fractions of dollars in circulation.

It has a lot more to do with bad code, bad storage policies or bad intentions on the part of the exchanges, and most of them point to transaction malleability - a design flaw in the original protocol - as their excuse.

The steep barriers to entry into becoming an exchange due to these laws/policies and the whole cloudy and non clear nature of what protocols to adhere in each country ensure that exchanges are not started by the most competent but by the most reckless and foolish, see magic the gathering.

There are several exchanges in the works but they are bogged down with regulation and not able to open.

So... you're saying its easy for the reckless and foolish to somehow overcome these steep barriers and understand what it takes to open while those who are competent are unable to do so?

He's saying that those who understand what it takes to build a secure service see the problem as so difficult that they prefer to use their talents for something else. As a consequence, the services that do exist have been built by reckless people who don't understand the issue.

I don't know whether that's true, but that's what s/he wrote. It's an easy enough to understand and plausible notion.

You obviously never had to deal with bureaucrats, right now the 2nd biggest exchange BTC-e is runny by some shady eastern europeans who are simply ignoring all laws. The biggest exchange Mtgox was run by an incompetent fool who lost half a billion in the cushion of his couch or something.

Bitstamp seem to be doing the right things but I doubt that they can legally operate in US or take transfers from/to US as they are doing.

You have considerable risk keeping the wallet locally, just of a different kind. The most common way people have lost money locally thus far is probably just losing the wallet file without having backups. A worm or trojan whose payload steals people's bitcoins is also plausible, though afaik there haven't been any yet.

>>A worm or trojan whose payload steals people's bitcoins is also plausible, though afaik there haven't been any yet.

There have been a couple of these actually:

http://www.pcworld.com/article/2109000/bitcoinstealing-malwa...

http://www.computerworld.com/s/article/9244772/Bitcoin_marke...

http://www.coindesk.com/cointhief-mac-malware-steals-bitcoin...

And the most famous probably, cryptolocker - http://en.wikipedia.org/wiki/CryptoLocker ...though this is more a ransom strategy than just out-right theft.

Which indeed is my #1 fear, something nasty can be one `pip install` away.

If you have enough money tied up in it to make you uneasy it would seem sensible to be using dedicated hardware for your coin management (with only the bare necessities of software installed on it).

Thanks for the tip, motivated me to dust off the old Pentium 4 I have here and install OpenBSD on it.

As long as you hold the private keys yourself and don't keep them on third party websites your holdings are safe. Safer than cash since you can encrypt and back up the keys.

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