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Bitcoin Foundation Awards Q2 Grant To Coinpunk: An Open Source, Self-Hosted Wallet Service

In the world of bitcoin wallets, users have historically had to prioritize between ease of use, accessibility, and security. That decision may be easier now, thanks to the Bitcoin Foundation’s grant to Coinpunk, an open source, self-hosted wallet. Such a solution would allow users to access their bitcoin wallet via the web, without the counterparty risk of an external service to manage the process.

The grant to Coinpunk marks the Bitcoin Foundation’s third allocation since announcing the program in December 2012. This grant falls in line with the goals expressed by Executive Chairman emeritus Peter Vessenes – to support projects that strengthen the core infrastructure in a way that is broadly helpful but may not be commercially viable. Commitment to that mandate was similarly exemplified in the Q1 grant awards for a TestNet Faucet and DNS Seed for the TestNet.

The original bitcoin wallets required downloading the bitcoin client, bitcoin-qt, an option that requires storing the entire block chain on the local computer. Over time this option became less practical for most bitcoin users as the blockchain ballooned in size and the desire for mobile accessibility increased with ever-more merchants accepting bitcoin for payment.

More recently, hosted/web wallets have grown in popularity by eliminating the need for each individual to host the blockchain and making funds available from anywhere with a web connection. Blockchain.info, the most popular service of this type, does not store private keys, meaning the host does not have access to any user’s funds. Alternatively, services like Coinbase provide user-friendly options like resettable passwords to reduce the risk of inaccessible funds, though they will have full access to any bitcoins stored there.

blockchain wallet users

While these services have increased ease of use, they also present reliance on external parties. In the case of both blockchain.info and Coinbase, users will temporarily lose access to their bitcoins if the website experience any technical difficulties. In the case of fully managed wallets like Coinbase, since private keys are stored on the company’s servers, if their security is compromised all of their users’ funds are at risk.

Coinbase has taken significant measures to mitigate this risk, such as storing the majority of funds in cold storage, but many folks would prefer to eliminate counterparty risk altogether. Coinpunk’s open source software allows users to set up a hosted wallet on their own servers, but provies access to fund through a web portal.

The software also provides a number of features that increase usability of wallets over some existing clients, such as optimization for mobile accessibility, custom address names, and transaction report interfaces. Planned updates include notifications of incoming transactions and the ability to notify others of bitcoin payment via email.

coinpunk screenshot
Coinpunk screenshot via https://github.com/kyledrake/coinpunk

As a result of the technical requirements to set up Coinpunk, namely systems administration experience, the probability of widespread consumer adoption is low relative to more easily-accessible options. That said, by making this open source, the hosting of bitcoin wallets could become far more decentralized. Each individual who sets up such a server could act as host to their friends’ or company’s wallets much the way blockchain.info acts right now. This will reducing reliance on a few centralized parties and fill a gap on the spectrum of bitcoin usability and security.

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