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February 29, 2012
Privacy & security

Instawallets

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After the failure of MyBitcoin in August, managed online wallets have become much less popular unless there is some compelling feature that makes them more convenient (eg. also being a currency exchange), although the one that remains is Instawallet.  

Its advantages include:

  • Very easy to use – you don’t even need an account, going to the website automatically redirects you to a new wallet and you can just revisit the same URL to go back to it
  • Instawallet also has the green address feature
  • You can access your bitcoins from any computer
  • No need to worry about accidentally deleting your wallet or losing it to a computer or hard drive failure

Disadvantages are:

  • Because of Instawallet’s “URL as password” mechanism it’s the least secure of all the options. Instawallet themselves recommend that users “please do not store more than some spare change here” for casual use.
  • You have to trust the provider not to be careless or malicious to a much greater extent than any other solution, since no one can audit any code and the provider (or someone hacking the provider) can potentially decide to run away with everyone’s funds at a moment’s notice

Aside from Instawallet itself, there is also the Android frontend for Instawallet, Bitpay (not to be confused with the Bitcoin payment processor), which is arguably more secure than Instawallet itself as the URL is stored behind the scenes (although it is accessible to the user) by the application.