The number of abbreviations we use in our everyday life, both professional and personal life keeps on increasing. Whether it is DIY (Do-it-Yourself) at home or AMA (Ask-me-Anything), TIL (Today-I-Learnt) on the internet (especially if you are adherent Reddit user), BYOD (Bring-Your-Own-Device) at work, the list goes on. If you are part of the Bitcoin community, then there is another abbreviation BYOW (Bring-Your-Own-Wallet) you will be quite familiar with. If not, the chances are you soon will be.
BYOW is a concept being followed by bitcoin exchanges around the world these days. These exchanges do not provide its customers will a wallet services like many do. BYOW works as an advantage for both the parties. By discouraging users from storing their bitcoins on their system, the bitcoin exchanges are mitigating the risk of being exposed to hacking attacks by cybercriminals. Whereas, the customers will have full control over their bitcoin wallet and they are free to choose whichever wallet service they wish to use for exchange’s services.
While using BYOW services, the user will provide the wallets public key to the bitcoin exchange, and whenever he or she buys bitcoin, it will be transferred to the wallet, irrespective of its type using the public key provided. People are free to use their online trusted wallet service or set up a desktop wallet for better safety and security.
Especially with the recent hacks on MtGox, BTER and other exchanges, where the hackers stole millions of dollors worth in bitcoin, BYOW reduces the number of bitcoin the exchange or a bitcoin trading platform handles. So even in case of an attack, there is a reduced exposure to loss.
Few exchanges like QuickBT, Harborly and Expresscoin are following the BYOW practice. Most of the American bitcoin exchanges that are complacent with the country’s banking and taxation laws, have control over the bitcoin exchanged over their platform until the customer transfers it out of their system. Few exchanges like Coinbase offers multi-sig vault features for advanced users to store and control their bitcoin.