[naterator]

I came late to the Bitcoin party, so when I started mining other coins mid-last year the first thing I did was download the wallet client and encrypt, and backed it up. And I still didn't fully trust that my coins were safe, and that there wasn't some other bug in the protocol that could result in my coins getting stolen somehow (or at least confusion arising as to who owns them). I don't understand how people put so much trust in these exchanges as to have millions of dollars equivalent of coins there.

[tempestn]

I think people (perhaps rationally) believe that the people running the exchanges know more about keeping bitcoins secure than they themselves do. The analogy would be that you're a lot safer putting your money in a bank than trying to keep it safe in your house. And certainly a company whose entire business is trading in bitcoin should know how to keep them safe. Unfortunately the reality is obviously sometimes different.

Certainly you can keep your own coins essentially 100% safe relatively easily with encryption and backups, but most people wouldn't even think to try, let alone have the necessary knowledge to do so.

[eropple]

> I think people (perhaps rationally) believe that the people running the exchanges know more about keeping bitcoins secure than they themselves do.

There was nothing rational about this assumption. Banks are bonded and insured with teams of very, very good security professionals auditing their stuff. Mt fricking Gox? Not so much.

[tempestn]

Absolutely, but MtGox probably still knew more about keeping bitcoins secure than most individual owners. The decision to leave it at that and entrust them with large amounts of money wasn't rational, but the belief by many people that they were out of their depth managing the coins themselves was probably correct. (How many coins have been lost in hard drive crashes without backups for instance?) Yes, most people could educate themselves on these things, but most people won't. Nor should everyone have to be educated on everything; that's what civilization is all about. But if you aren't willing to do so, you probably shouldn't be an early adopter, before safeguards are in place.

[talmand]

I see this as more of how local banks were before government guarantees started being implemented. If someone robbed the bank it was your money they were taking and not the bank's. Heck, if the bank burned to the ground your money was gone. Made for a tighter community in some cases; you rob the bank the whole town hunts you down.

What was a bank? Any person off the street with a safe in a building who claimed they could keep your money safe for you until you needed it. Sound familiar?

Personally, I would have put about as much trust into these exchanges as I would have of those old banks.

[eropple]

> Sound familiar?

Yes, and equally stupid, which was my point in the first place. Why did you post?

[abruzzi]

I think people who aren't necessarily technically savvy mistakenly treat the exchanges as their local bank. Your local bank follows a huge number of regulations, many of which are designed to keep your money safe. And in the rare event that your bank fails, your accounts are FDIC insured up to $50k (in the US, don't know if other countries have depositors insurance.)

I also think that most (though apparently not all) of the people with millions of USD worth of bitcoins acquired them at low cost so in real terms their loss was mostly on paper. The started at $10k, it ballooned to $10m, and now it is zero. Did they lose $10m or $10k?

[pc86]

FDIC insures $250,000 per depositor.[0]

[0] http://www.fdic.gov/deposit/deposits/dis/