If you don't have the private key, you don't own Bitcoin.
If you store the key on someone else's server, even if encrypted,
your key is not safe. Be you own bank.
Private key loss is catastrofic
The primary problem is that losing a key means that all
bitcoins stored with that key are lost forever.
The way to deal with this is:
Create keys frequently and destroy them as soon as
they are no longer needed
Mitigate risk by having more keys for shorter durations
A more secure mitigation against key loss is to generate new
addresses/keys
frequently, use them for specific operations, and then destroy them.
For example, when traveling, create a new
Travel Key and use that until you are back home. That
way if anyone compromises your travel laptop or phone they only breach
the compartment for the duration of your travel.
The impact of the compromise is contained by the limitation on the
utility of the key.
For storing bitcoins create a cold paper wallet. You can create your
address/key on a computer with no internet connection. Air gap computer
running the ba.net serverless wallet.
Do not trust servers with your keys
If you don't have the private key, you don't own Bitcoin.
If you store the key on someone else's server, even if encrypted,
your key is not safe. Be you own bank.
Backup your keys in different locations. You can keep them encrypted
with a password.
Serverless Wallet Simplicity Advantage
Spend Your Bitcoins using the Send Bitcoin Option.
Remaining change will be sent back to the sending bitcoin address
(source address).
This allows you to make the backup of your key at the creation time only.
As opposed to backing
up your wallet all the time on a downloaded wallet. Downloaded wallets
create a new change address for each transaction. This is the reason for
confusion and the need of constant backups.
The BA.net serverless Wallet needs only one backup when you create it!
Downloaded Wallets Limitations
You can download a
bitcoin client and import your private key. Note that on downloaded bitcoin clients, usually remaining change goes
to a new address. That is why Satoshi recommended never to delete a wallet!
These kind of wallets need to be backed up regularly. Our Serverless
Wallet does not have this limitation. It can be backed up upon creation only.
Bitcoin Address and Private Key Reuse
When you reuse your Bitcoin Address you reveal your balance and transaction history of that address to your counterparty.
Losing financial privacy.
Another un-desirable problem is that for each use there is a hash signature on the blockchain generated with the
private key. There is a theoretical attack exploting information from this signatures. This attack has not been seen yet,
but it could be possible.
So both for privacy and security, bitcoin addresses should not be reused. Especially for large amounts of coins.
For offline cold wallet storage the simplicity of having only one address/key to backup is important. As well as not
having any more change addresses to add complexity. Once the coins come out of cold storage it is best to not reuse
addresses though.
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