bitcoin trading.

Aegis wrote: »

Wans't aware of this. Doesn't it mean that the coins aren't perfectly safe from hacking though, as if you can recover your data someone else presumably can as well?


Might be me just being naive!

Can't be hacked, apparently. You are supposed to keep the recovery words written down, not online. And the exchange doesn't have the words. Only you do. If you lose the device, and can't remember the recovery words, you have lost the coins.

Type_45 wrote: »

Can't be hacked, apparently. You are supposed to keep the recovery words written down, not online. And the exchange doesn't have the words. Only you do. If you lose the device, and can't remember the recovery words, you have lost the coins.

i don't know the details of how these specific devices are set up. however, from the general principles of how cryptography works, it is possible to have a "secret" which is effectively available to either whoever is in possession of some physical device or somebody who knows some recovery words.

but there are still practical difficulties ...

first, the "recovery words" need to be cryptographically very strong, or somebody may be able to guess them. which is why you may want to write them down, rather than rely on memory. but then the paper can be lost / stolen.

secondly, somebody who's stolen the device could use it to steal your crypto coins, if they take action before you notice your loss and use the recovery words to shift your coins to a new address.

now, you could protect against that by requiring some further secret words to be used. in combination with the device, before it can be used to shift / steal coins. but then that secret needs to be cryptographically strong. and you may want to write it down. and that piece of paper could also be stolen. and so on.

basically, you can, in theory, easily use cryptography to make access to a secret (and hence: control of some crypto coins) be determined be any logical combination of access to physical devices and knowledge of (not easily guessable) words. so e.g. access might require either possessing device D1 or knowing words W1, and in any case also also knowing words W2. or it might require any 3 out of 4 of: possessing D1, possessing D2, knowing W1, and knowing W2. etc.

it's all very elegant in theory. but not especially practical, for real people to use. secret words tend to be so difficult to remember that people need to write them down (or they mess it up by using words that are guessable, compromizing security). and then it comes down to possession of some of out of a number of physical items, even if some of them are fancy devices and other are just bits of paper.

yes, you can probably think of several different places to store those items, considering the risks of theft, fire, and so on. but that doesn't mean you'd have any chance of keeping possession of your "coins" against a really determined and well-resourced adversary. it also doesn't doesn't remove the risk of messing up, or being unlucky, so that you simply lose access to your coins by any available recovery method. basically, if you were frustrated by some aspects of traditional banking, a little knowledge of crypto banking should be enough to make you love traditional banking again