EWallet

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Revision as of 18:45, 23 March 2011 by Sgornick (talk | contribs) (→‎See Also: Add entry for Selling bitcoins as a complement to the Buying bitcoins entry.)
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An eWallet is an online account with an external provider where bitcoins can be stored. Examples include accounts on currency exchange Markets, online Services and with ecommerce transaction processors such as MyBitcoin.

Benefits

  • Use of an eWallet provider may help improvide anonymity.
  • An account with an eWallet provider can generally be established in just minutes.
  • Some bitcoin users store some or all of their bitcoins in an eWallet to avoid having to worry about keeping a local wallet secure.

Risks

When bitcoins are stored online the ewallet provider retains full control of those amounts.

  • If a payment is made from an eWallet, the transaction's "from" address is an address for the eWallet provider and not an address reserved specifically for the sender. Thus if the recipient were to "return" any bitcoins to the same address they were sent from, the sender would not receive those bitcoins.
  • There is no guarantee that the amount of bitcoins showing for the account holder's balance are truly being held in reserve by the ewallet provider.
    • Some providers describe their reserve policy in their terms of service (TOS). For example, MyBitcoin's TOS states:
6. OBLIGATIONS OF MYBITCOIN LLC
6.1 MYBITCOIN LLC will ensure that for all Bitcoins in circulation in the MyBitcoin System there is at all times an identical quantity of unencumbered Bitcoins held in MYBITCOIN LLC's master Bitcoin wallet.
  • Transactions to a Bitcoin address from the same eWallet provider are completed internally and will not be processed on the Bitcoin P2P network. Auditing tools such as the Block Explorer will not show any activity for this transaction. Thus the sender cannot prove that an amount of Bitcoins was truly sent to that Bitcoin address.
    • Some eWallet providers allow amounts below 0.01 BTC to be sent if the transaction is to another account holder on the same service. This allows an inexpensive and immediate method to detect if the recipient is using the same eWallet provider. For example, MyBitcoin will report an error when attempting to send an amount smaller than 0.01 BTC to a Bitcoin address that is not for another MyBitcoin account:
Payment amount is too small for a Bitcoin P2P payment! Try a BC0.01 or higher!
  • The eWallet provider's security may be vulnerable to loss or theft as well.

See Also

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