In the long run, I think this is good for Bitcoin. It's supposed to be a decentralized currency. Centralizing Bitcoin in an exchange makes the exchange a big target. This disincentivizes centralization and limits how much centralization can actually happen when people are foolish enough to try.
For individuals who lose Bitcoin because of exchanges getting hacked, it's because they leave Bitcoin in the exchange. This is antithetical to how Bitcoin is intended to be used. The answer is, don't do that. Make cold storage paper wallets and keep your Bitcoin there.
> this is good for Bitcoin ... The answer is, don't do that ... Make cold storage paper wallets and keep your Bitcoin there.
Only in bitcoin land is theft considered good for the ecosystem.
Only in bitcoin land does it make sense to blame laypeople for storing their money with financial institutions.
Only in bitcoin land is it a best practice to secure your money using a password written on a piece of paper.
Only in bitcoin land is it reasonable to expect consumers to do a better job of keeping their money secure than corporations with on staff security experts.
> Only in bitcoin land does it make sense to blame laypeople for storing their money with financial institutions.
Uh, yeah. That's the entire point of Bitcoin.
> Only in bitcoin land is it a best practice to secure your money using a password written on a piece of paper.
God no, at least not a password intended for human consumption. That's not what a cold wallet should be. It should be a key.
> Only in bitcoin land is it reasonable to expect consumers to do a better job of keeping their money secure than corporations with on staff security experts.
No, non-expert consumers should be using off-the-shelf security solutions made by a staff of security experts that they can use locally (i.e. physical Bitcoin wallets). It's just that not many people are working on that stuff, because most of the companies making Bitcoin stuff are catering to speculators trying to get rich quick.
There are a lot of really smart people working on creating centralized Bitcoin solutions, but frankly, that's just a bad idea, as evidenced by almost every centralized Bitcoin solution having been hacked at least once. A centralized system has too wide an attack surface and too high an incentive for attackers, and defeats most of the benefits of Bitcoin anyway.
Sure, it makes Bitcoin a poor choice for speculators looking to get rich quick, but I don't care in the least. They're outsiders who don't understand the tool and aren't on board with the philosophy of why Bitcoin is important.
If you don't understand decentralization and you try to be in Bitcoin, you're going to have a bad time.
The entire point of bitcoin is to avoid financial institutions? That sounds like a pretty big disadvantage compared to other forms of money that work well with financial institutions.
> That's not what a cold wallet should be. It should be a key.
A distinction without a difference as far as it relates to having all your money stolen.
> Sure, it makes Bitcoin a poor choice for speculators looking to get rich quick
It makes bitcoin a poor choice for the general population since most people fall into the category of "outsiders who don't understand the tool and aren't on board with the philosophy of why Bitcoin is important"
> The entire point of bitcoin is to avoid financial institutions? That sounds like a pretty big disadvantage compared to other forms of money that work well with financial institutions.
It is a huge disadvantage for some purposes, but there are plenty of advantages to avoiding financial institutions.
If you want to work with financial institutions, there are plenty of ways to do that already. Go get a savings account or a mutual fund; it's not complicated.
If you want to transfer money at low fees across national boundaries, or make your money harder for governments to seize, or make your money anonymous, Bitcoin can do those things better than other financial vehicles. And that's because it's not tied in with financial institutions.
> A distinction without a difference as far as it relates to having all your money stolen.
It's a huge difference. Humans are notoriously bad at creating secure passwords. A SPRNG-generated key is far more secure.
> It makes bitcoin a poor choice for the general population since most people fall into the category of "outsiders who don't understand the tool and aren't on board with the philosophy of why Bitcoin is important"
True. The same can be said of almost any investment vehicle--most people have very little understanding of most investment vehicles. I'd also say that for example futures and options are much harder to leverage well than Bitcoin. That doesn't mean they aren't useful, it means you have to know what you're doing to use them.
As Warren Buffet said, "Don't invest in things you don't understand."
I have no problem with people investing in Bitcoin purely for speculation to make money, but I'm also not going to cry if they make a bad investment because they can't be arsed to understand what they're investing in. I wouldn't invest in mining futures because I don't know how to leverage mining futures, and they shouldn't invest in decentralized currencies if they don't understand the implications of decentralization.
If you keep your money in an exchange, you're gonna have a bad time. Lots of people (myself included) were saying this before even the Mt. Gox stuff happened, so it's not like this isn't predictable.
For individuals who lose Bitcoin because of exchanges getting hacked, it's because they leave Bitcoin in the exchange. This is antithetical to how Bitcoin is intended to be used. The answer is, don't do that. Make cold storage paper wallets and keep your Bitcoin there.