Anti-Bitcoin "Bitcoin Apps" Part 2: How far can a Wallet be Abstracted

At its simplest having bitcoin means that at some address a balance is recorded in the blockchain (often comprised of several smaller input balances) and you have control over the private key necessary to sign a transaction which can assign the balance at this address to one or more other addresses. Everything construction beyond this that contributes to the idea of having a bitcoin wallet is an abstraction, typically the end goal of these constructions is making this bitcoin deal a bit easier to understand and use.

The simplest wallet construction and the one implemented bitcoin clients like Bitcoin-Qt/bitcoind, MultiBit, Armory, and Electrum stores your keys and addresses, somehow gathers information from the blockchain on the balances assigned to you addresses so that it can present you number of bitcoins you have, and it can broadcast a transaction to the network including input balances from one, some, or all of your addresses in the "wallet" it manages for you. You can back up your keys elsewhere on storage mediums and methods ranging from saved on USB thumb drives to paper hand written on a napkin to laser etched on a tablet of saphire, but having software that can manage and use these private keys is awfully, useful? A safe full of saphires bearing private keys might constitute a form of bitcoin wallet as well since it collects information necessary to spend balances attached to bitcoin addresses, but generally the idea of complete wallet is going to include some provision for monitoring and spending balances. Paranoid/Prudent security precautions might mean spreading one's wallet functions between online and offline things.

Now other things that might hold Bitcoin balances for a person and let them send bitcoins to an address, but they control the private keys. Some of these things are Sports Books, Some of these things are exchanges, and still other things are off-chain payment networks (this last one is what I'd consider a service like Inputs.io). Generally they need the private keys to do whatever it is they do, but it is best not to think of these things as your wallet. If you are new to bitcoin, plan to read more, and aren't comfortable keeping your own private keys yet maybe use of of these things that advertises itself as a wallet as one until you can trust to keep your private keys safe. If you are the sort who insists on keeping an NSA office in your pocket consider one of these things as a potential way to keep a small sum of bitcoin you can spend on your mobile device. Understand though that as understood by the bitcoin network balances held by these services are ultimately their balances, it is simply the case that reliable operators will give you the courtesy of spending balances they credit to you out of their services.

Note: This post can probably stand on its own as a statement on the idea of a bitcoin wallet as I view it, but I wrote it to follow Anti-Bitcoin “Bitcoin Apps” and will follow it with a further post or two on how Gliph needs to suck dicks (though smartphone apps can not indeed suck dicks, despite VC wet dreams to the contrary).

16 thoughts on “Anti-Bitcoin "Bitcoin Apps" Part 2: How far can a Wallet be Abstracted

  1. Thanks for this. I think you are doing a great job of covering recent issues while covering all of the basics to give context to new or uneducated users.

    What do you think of Elon Musk's statement that Bitcoin is not as much a currency as an "API for microtransactions?"

    Additionally, my view has been that while certain business models for BTC don't match the current user base, they are generally opy-in enough that they can be ignored if they don't match our needs/goals. Thoughts on this?

  2. I sit somewhere in the middle on this issue. On the one hand, I think that certain companies, especially Gliph, are basically just whoring for attention by implementing bitcoin; transferring money from person to person is the biggest thing that bitcoin does really well, and three year olds know how to copy and paste an alphanumeric string. On the other hand, I think that if blockchain.info didn't exist I probably wouldn't be involved; well, maybe I would, but it certainly makes it a lot easier. I don't have any keys stored on my computer, and honestly don't really want them. If I were dealing with bigger numbers I would probably put some in cold storage, but for now it's really just not worth the hassle.

    The movement toward "anti-wallets" as you call them will drive user adoption. It is truly a shitty experience to download the blockchain in setting up a wallet, as is having to update the blockchain if you've been offline for any meaningful amount of time. Then there are hardware failures to take into account; any effort to back the wallet up using a cloud service represents the same type of issues as just storing the wallet on a cloud service in the first place; and any kind of cold storage introduces physical vulnerabilities that we'd all rather not deal with.

    • I haven't called anything an anti-wallet yet, and I haven't put my thoughts out about blockchain.info yet as I have a lot of them. Blockchain.info would probably take a post of its own. Blockchain.info's wallet is definitely a wallet though as it stores keys (encrypted on the server and encrypted in the browser), monitors the blockchain and lets you know a balance, and is capable of spending coins you have to an address outside their service. The blockchain.info situation is not a simple one though.

      As to downloading the blockchain, there are clients like Multibit and Electrum that don't require you to download the blockchain to operate. If there were a client that did a search on blockchain.info to find the balances of the addresses it had keys to sign transactions for I'd consider it a wallet though one that would have a greater potential to inaccurately report your balances (MultiBit and Electrum aren't perfect in this area either).

      Storing private keys anywhere is always problematic though and and amount of risk is always going to be unavoidable. I'd advise against storing even encrypted public keys in the cloud though, especially if you are trusting the cloud to provide the encryption (Something Blockchain.info does).

      The point of this post is that a wallet does certain things, the most important of which is ensure you are the person with sole access to the private keys. If you aren't ready for the responsibility of holding your own private keys, go a head and let a Blockchain.info or Inputs.io hold you hand as you read more. I often keep a small balance in Input.io because I find it useful as a payment network. The risks need to be known so that they may be adequately measured and compensated for.

      • Oh it looks like I sort of confused your anti-bitcoin label with an "anti-wallet" label somehow, my b.

        I'd be very interested in your take on blockchain.info, because there's a lot about it that I have yet to investigate and I'm sure you know more.

        I guess the question I'd pose to you is do you agree that wallet user experience on all levels is currently a major barrier to adoption of bitcoin? I think it is, and while I think that we're still a long way away from saturating the early adopter tech space, I do think that long term, things will need to be much sexier to get my sister who barely has an email address ("what do I need email for when I have text and facebook?) to use it.

        • I don't think much about barriers to user adoption. People use bitcoin or they don't. I imagine neither your sister nor bitcoin have much need for each other.

          This winter/spring I got a lot of friends up and running with MultiBit. Doing so was little trouble. Most of them weren't extra-normal in their tech savvy.

          What bitcoin doesn't need at the moment are idiots who overestimate themselves and by their actions feed scammers and operators who through their incompetence have inevitably become scammers even if they lack the intention of doing so.

          Eventually I'll probably write more about adoption, but people will probably adopt it as they find it necessary. People who adopt bitcoin because it is sexy probably endanger themselves and bitcoin.

          • I imagine a world only a couple of years in the future where bitcoin is as widely accepted as AMEX because of the obvious benefits to sellers. Many companies offer affilliate level discounts for paying in bitcoin because of the lack of chargeback potential and the inflation rate of the (no longer world reserve currency) dollar. My car repair has a "cash or bitcoin" price cheaper than credit card price. My sister has bitcoin because no street vendor or bar accepts credit cards for individual drink purchases without a minimum order size.

    • I think a lot of this is based on the thinking that users of bitcoin have to be "good" for bitcoin. I think we need to allow users to have freedom in the market if we are to allow it to grow. Members of the "bitcoin community," in this sense, can be considered a different, non-exclusive group that should be held to higher standards.

      • Sure. I think it's safe to say though that someone spending bitcoins on booze is probably good for bitcoin though, while someone who invested in Pirateat40's ponzi is dangerous in the sense that they attract more scammers to bitcoin.

        The best way to fight scammers is making scamming an activity with a poor ROI.

      • Bitcoin will reach its potential either by achieving the network effect making it impossible for merchants to ignore or by catastrophic financial event that will leave those of us not in bitcoin in a post WWI Germany situation.

          • I don't want to say that it's self evident, but certainly massive deflation of the USD leading to the rise of bitcoin is self evident in the absence of any other viable options that can work as an efficient payment system.

            As far as the network effect, most people won't bother with bitcoin until they have to, i.e. something that they need is only sold in bitcoin. Merchants will jump on board before that, when the increase in profits outweighs the cost of implementation<– already happening.

    • Well yes but talking about a future where everyone can't help but find it useful because it's everywhere, right alongside credit cards in most places and in lieu of credit cards in some. Getting there requires 1) more people who own coins, 2) more merchants that accept coins, mostly as a discount over the other payment systems.

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