- The only way to actually own BTC - as opposed to trusting others to manage them for you - is by installing wallet software on your desktop PC or tablet.
- The only way to purchase things conveniently online is with a credit card, or an equivalent. Online credit card transactions can be charged back for months afterwards, which makes them useless to buy BTC.
- Therefore, the only way to acquire BTC on a moment's notice is by going out and paying someone cash, or some other payment method that's final.
So, where you can buy BTC conveniently and on a moment's notice, you can't use it (unless you bring a laptop or tablet with connectivity in that particular location). And where you can use BTC, you can't easily buy it (at home at your PC).
If it was just that, this would be resolved in time as more people start to go around with Bitcoin-capable smartphones, and/or 3G tablets.
But there are more problems:
- If BTC is widely adopted, most people running Bitcoin wallets on their computers, smartphones and tablets will be hacked. Regardless of the platform. There will be no safety. If there are millions of iPads out there with BTCs on them, they will be hacked.
Let's not kid ourselves, 95% of the population aren't savvy enough to dodge an elementary exploit, or patch the applications they're using. No one can defend against a zero-day attack.
Software security will not improve, because 95% of developers can't write secure code in the first place, and even the 5% who can, make mistakes.
- Because of Bitcoin's irreversibility, even people who trust others to store Bitcoins for them, will have their accounts hacked. This will be done much more relentlessly than with people's bank accounts. The law can chase after fraudulent bank transfers, but they can't chase after stolen BTC.
What would solve these problems is a practical, secure hardware wallet. A rock-solid, mobile-phone-like device - think rugged like a Nokia - dedicated to Bitcoin.
Why not just a regular smartphone?
A mobile phone that has other functionality on it, let alone an open platform for applications, is at least as hackable as an unpatched Windows PC. Put Bitcoins on millions of smartphones like that, and watch them get jacked while you're out shopping. A device with a narrow focus can be made secure. An open platform can't; not with today's platforms.
A secure hardware wallet would be a brilliant way to get Bitcoins into people's pockets. The wallet can come preloaded with Bitcoins! You could preload it at the point of purchase, with whatever amount the customer wants.
The wallets would have 3G connectivity, so they would work anywhere where there's a mobile phone signal. They would be able to discover other nearby wallets, and make it easy to make payments to them.
To keep cost reasonable, the wallet would have to be a "light" Bitcoin client. It wouldn't store the entire Bitcoin transaction history, but would rely on super-nodes to handle that. However, it would store the private keys that control access to your Bitcoins, and would be the only device capable of spending them.
If someone does that, Bitcoins are bound to take off.