I really hope the various bitcoin related incidents don't poison the well for online currencies in general. Yes, you need a greater level of security when dealing with transferrable, relatively anonymous or pseudonymous (and rapidly extractable) online assets that you don't need for book-entry accounting with an audit trail and reversible transactions (credit cards, ACH, etc.). Yes, this is beyond what even most banks currently use. No, it's not beyond current technological state of the art.
Gaming (i.e. casinos), at least some of them, do a reasonable job with some very similar security problems.
> I really hope the various bitcoin related incidents don't poison the well for online currencies in general.
It shouldn't do significantly. In the public's mind the well is some distance off, many not even knowing it exists, so there is plenty of time to get security better sorted before the average man on the street has his money invested.
Also, everyone knows that cash and other forms of investment are far from safe anyway. Hopefully people will eventually see online currency as being no less safe than other forms, and if the security is done right they'll see it as more safe (as it could be).
But this seems to me to be a general security issue with decentralised anything, not a bitcoin specific problem. If you remove central control, and take as full control yourself as possible, then you remove responsibility from other people and that is something you need to seriously think about. Providers like Linode will not be taking responsibility for financial loss in these cases and paying for hefty insurance policies to underwrite the possibility of said loss: they'll just add clauses to their contract disavowing themselves of responsibility if such clauses don't already exist.
One way to protect yourself is to spread the money around multiple places, then one hacked provider doesn't put all your resource at risk. Again this isn't bitcoin specific: if you have more then 50K to invest over here (in the UK) then you split it between multiple organisations as only 50K per registered organisation is guaranteed protected by national safety nets provided by government.
Back onto "poising the well" this could of course work the other way around: if the virtual currency is worth the effort of stealing then it might be seen as more valuable in the eyes of the public - much like a sign you have a good product is that knock-off copies start appearing.
Yeah, kinda. Although E-Gold's problem was force majeure, not technical (did they ever get hacked? people stole passwords all the time, but since it was double entry, it was pretty easy to reverse).
osGold, etc. were probably better parallels. But yes, this whole field has had a long series of technical, business model, governance, and government related failures.
e-gold was shut down by the government for running an unlicensed money service business. They were officially Nevis based, but actually run out of Melbourne, FL (where they started originally); criminal charges were involved. The main reason was a particularly motivated federal prosecutor and the specific uses e-Gold users found -- child porn, paying for stolen cc's, etc. It wasn't a general thing about PATRIOT/MSB laws.
osGold was just an internal fraud; digital currency, give me your (gold) and issue tokens -- then one day it disappeared, taking the original value with it.
There were hack attacks by third parties against some other gold currency systems at the time, but I don't remember the details.
Gaming (i.e. casinos), at least some of them, do a reasonable job with some very similar security problems.