Coinbase IRS Situation - People will quickly find out that they don't own any Bitcoins
I think many people will find out soon that they didn't even had any Bitcoins in their posession, ever. People who trade on Coinbase are naive to think they owned Bitcoins. What they did own, was just a claim to Bitcoin, called a Bitcoin IOU, which may or may not be honored.
Your entire account at Coinbase is a Bitcoin IOU, which is Coinbase's debt towards you, which normally could be repaid, however we see now that this may not always be the case.
If you have noticed the recent news, the US IRS agency, which is the tax enforcement arm of the government, wants information about every person that traded there back to 2013, and I'm sure many people didn't paid their taxes, which means that a lot of accounts will be frozen, or even funds will be confiscated (well taxes are that too).
Naive people keeping all their money in a centralized exchange, what could go wrong? Why do you think Bitcoin was invented in the first place? If centralized institutions were so great then Bitcoin would not exist now.
Repeat after me:
IF YOU DON'T CONTROL THE PRIVATE KEYS SOLELY, YOU DON'T HAVE BITCOINS!
IF YOU DON'T CONTROL THE PRIVATE KEYS SOLELY, YOU DON'T HAVE BITCOINS!
IF YOU DON'T CONTROL THE PRIVATE KEYS SOLELY, YOU DON'T HAVE BITCOINS!
IF YOU DON'T CONTROL THE PRIVATE KEYS SOLELY, YOU DON'T HAVE BITCOINS!
IF YOU DON'T CONTROL THE PRIVATE KEYS SOLELY, YOU DON'T HAVE BITCOINS!
IF YOU DON'T CONTROL THE PRIVATE KEYS SOLELY, YOU DON'T HAVE BITCOINS!
IF YOU DON'T CONTROL THE PRIVATE KEYS SOLELY, YOU DON'T HAVE BITCOINS!
IF YOU DON'T CONTROL THE PRIVATE KEYS SOLELY, YOU DON'T HAVE BITCOINS!
IF YOU DON'T CONTROL THE PRIVATE KEYS SOLELY, YOU DON'T HAVE BITCOINS!
IF YOU DON'T CONTROL THE PRIVATE KEYS SOLELY, YOU DON'T HAVE BITCOINS!
....
Now write this down 1000 times and memorize it! People should not be comfortable in their ignorance, the danger is real!
Theft is real, and it can happen, it will happen, and if you are not in control of your money, it can be frozen, confiscated, etc. Even if you are innocent, you can still be harassed by the authorities just to keep you in line. The only thing you need to do with your wealth is to protect it, and grow it, and for that you need to analyze the risks properly.
Keeping your money in a centralized way is never safe, no matter what the threat is. I bet most innocent people's funds will be frozen too, because it's almost impossible to single out targets in bitcoin. If they start an investigation into bitcoin transactions, then even if you are linked to a "criminal" (in quotes) by transaction, you can also face harassment. So it's guilt by association, since bitcoins are not fungible.
LACK OF FUNGIBILITY IS A HUGE ISSUE OF BITCOIN IN SITUATIONS LIKE THIS!
So privacy/anonymity is crucial, especially for innocent people, because they are harassed most of the time. You have to protect your individual right to privacy, there is no other way.
The big criminals are in the big banks probably rigging some interest rates right now cashing in billions of $, while the "authorities" are busy, chasing your for your undeclared 100 satoshi faucet profit!
The situations is really grave now, but remember it's always the low hanging fruits they pick, the people at the top are untouchable!
SOLUTION: BITSQUARE
It is really sad that we have to go out of our way to protect our privacy when transacting with fellow human beings, but nontheless our privacy should be sacred. Bitsquare both gives us privacy, confidential transactions, and also makes the fungibility problem go away.
It doesn't require any identification, and it respects all your financial rights, especially the right to private property, which should not be subject to arbitrary account freezing/confiscation. Although the volume is small now, if people would stop using centralized exchanges and switch to there, it could out-compete the centralized ones, and people could reclaim their liberties.
In the meantime we have Shapeshift, although they have dropped STEEM recently, which is bad, and they don't do fiat transfers, only crypto-crypto, but nontheless better than other ones. It should be a combinations between Shapeshift and Bitsquare in the future.
Source: https://memegenerator.net
Upvote, ReSteem & 
This is so true. Great post! Thank you
You are welcome!
I learned this the hard way long ago when MtGox ripped me off... :(
Maybe some day I'll write that story on Steemit... :)
Sorry for your loss, it is realy bad that so many people lose money this way.
I think centralized exchanges will be replaced in the future with transparent decentralized ones.
Thanks for the condolences! ;) I tell myself I'm mostly over it...
This is how I handle private keys these days...
Looks good, but dices are not good random number generators, because they are not identical in size and they might corrode which can be modeled mathematically.
The numbers should still be unknown, except if the attacker finds some correlations between the dice's shape and the numbers it gives.
I think even a tainted hardware RNG is better than a dice, but I will write my next article about this, because it's an interesting subject, that is not well discussed.
Casinos use dice all the time, and they are quite serious about money. I understand that there is no "perfect" source of entropy, but as sources go, high-quality casino dice are very good...
Yeah but nobody will spend time and effort to send a bad dice to a casino, because the casino can easily detect if their dices are not good.
But if the dice is used to generate electronic entropy, then someone might boot up a supercomputer and search for autocorrelation in your BTC public key that had bad entropy. it makes your public key less secure, and why would you want that? It could be vulnerable against quantum computers when the come out.
I just finished that article you might want to read it: https://steemit.com/bitcoin/@profitgenerator/tutorial-generate-bitcoin-private-keys-securely
Thank you for the "shout out" link to my dice article from your article on private keys.
I guess we'll just have to agree to disagree on this one. I will continue to believe that computers are far worse as random number generators than a good pair of casino dice.
Here's a good source of information on randomness that you might find interesting:
Introduction to Randomness and Random Numbers
What about Open ledger wallet? Is it safe to keep crypto there?
I have heard about that in the past, but i didnt have time to research it, so i dont know the answer to that.
Open ledger has a decentralized exchange. Although I still prefer to keep my crypto in my own wallets and only "transfer" what I intend to trade. I am a bit paranoid in that regard.
To answer your question...yes it's safe.
Of course, most of the coins should always be kept offline in your wallet, regardless of platform. What you use for trading should only be the amount you are willing to risk on it, and not your entire wealth.
An ELI5 article about Bitshares Decentralized Exchange would also be welcome for this topic. And seeing how popular Bitshares is here on Steemit, it would surely bring the attention of some whales.
Well yes, @dantheman is the founder Bitshares I believe, of course it's popular here. I will have to look into it, it looks promising.
This is true for wallets where you can't export the keys also. There are lot of people with phone apps where you don't really have access to the key.
I already wrote about that, but maybe I will write a new article reminding people.
Phone wallets are even worse because a phone is much easier to hack.
Thank you for posting @profitgenerator. Maybe it is just the nudge Steemians needed.
Principle: Freedom and privacy stand or fall together.
Thank you for the opportunity to express thought.
Yes, freedom is the most important.
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This is a problem for SBD because the keys are in the browser. Although there is a block chain underneath a failure of this site would leave my steem backed money inaccessible. Perhaps some will use cli_wallet but that is a minority!
Well yes indeed it is, I hope some more offline system comes to steemit where we can change our password offline, and broadcast the signed password to the network to signal it that it's changed. Just like with bitcoin, it would be more safe.