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Casascuius offers an attractive product, a physical coin storing a private key. From a CNET article and the website itself, we learn the company is run by

Mike Caldwell, 2901 Little Cottonwood Road, Sandy, Utah 84092,

who appears to be a trusted member of the Bitcoin community. They provide a digitally signed list of Bitcoin addresses and claim that this makes Mike legally accountable. (I'm not sure how the GPG key used can be connected to a real person.)

The only form of payment, they accept directly is Bitcoin.

Such a service allows for two types of fraud:

  1. At some point in time, they stop sending physical coins in exchange for BTC received and disappear. This is a very common risk when making payments in advance and it is particularly obvious if the form of payment is designed not to allow chargebacks. The risk here is not different from shopping at many other businesses online. However, the relatively simple website and the connection with Bitcoin, is likely to raise alarms with customers.

  2. Although they claim otherwise, they could easily keep a copy of the private keys. This would allow spending the balance on all coins that have not been spent yet at some point in the future.

What should the Bitcoin community expect Casascius to do to render the scheme trustworthy?

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4 Answers 4

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I can't speak for the community, but if I wanted additional measures of protection against fraud, I'd go for:

  1. Start a company and state its details, so it can be reached and sued if worse came to worse.
  2. Process of creating the coins should be audited to ensure no data is kept.
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  • I'm not sure whether I understand your third point "Provide public keys associated with the hidden private keys, so anyone can check if there are any coins in the key, or has someone stolen them.". The Bitcoin Address is sufficient to know the balance on this address.
    – Jan
    Dec 11, 2011 at 0:20
  • Hmm, guess I didn't notice the printed addresses on the coins. And Bitcoin Addresses are public keys.
    – ThePiachu
    Dec 11, 2011 at 1:01
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wrt the suggestion that I put up a website with the name and address of the founder, this information has consistently been displayed on the home page since I put up the site. Agreed, there exists a theoretical possibility that I could scam and there is little anybody can do about that, even if my processes were to be audited, it's still impossible to know I didn't keep a copy somewhere at some moment someone wasn't looking. On the other hand, I am known to care about the success of Bitcoin, and own a fairly successful payroll software business independent of Bitcoins, and (especially with my signed list of addresses) have the means to be held accountable and be ordered to pay restitution in the event of fraud. If this is unsatisfactory, then of course you should not buy the coins. I indeed hope I spur successful competition (my life career is not in making coins), this has been a neat project thus far.

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    Dear Mike, nice to see you here. The question I am asking here is not primarily whether I can trust you. In fact, I'm likely to place a smallish order very soon. The question is how we make sure that legitimate businesses stand apart from the scammers. Revisting your website, I realize that your personal information is indeed displayed onsite. May I suggest that if your product becomes popular and you can find the time, you try to improve the website to make the connection with your identity and reputation more obvious.
    – Jan
    Dec 11, 2011 at 16:20
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I think you can place a high amount of trust in Mike Caldwell and his coins in the short term. I've met Mike in person to discuss some possible joint ventures with my coins (CoinedBits.com). I judge him to be an honest smart person. He genuinely wants to move the Bitcoin movement forward. Scamming anyone would counter his true motives.

For the long run, there is a good chance you might not be able to put as much trust in the coins themselves. The more popular they get the higher the risk of counterfeiting.

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As I see it, Casascius coins are not supposed to be a top class product, tamper resistant and impossible to counterfeit. Like Casascius wrote:

Me doing physical bitcoins is just to say "hey world, guess what, tangible bitcoins are possible, they're not just imaginary". I will have simply pioneered the physical bitcoin (with all due respect to BitBills). Someone else will do a leaner, meaner, badder, cheaper, more secure physical bitcoin

These coins are assembled by hand by casascius himself and only a few thousand coins were made. You should look at them more as a symbolic token, rather than as an official physical bitcoin.
Obviously this does not invalidate the trust problem, but Casascius is a well known member in the community (if you want to look at him, here is a youtube video). If he decided to make the project disappear, he would be legally charged for his crime, like it is stated in the FAQ.

Ultimately, it is up to you to decide if you should trust him or not. Just remember that you are not supposed to buy thousands of these coins (besides, there aren't that many).

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  • I agree that at this time, those physical coins have a merely symbolic value. (You don't want to pay 85% markup plus shipping for any practical payment scheme.) However such a symbolic token is great way to spread the idea. Now, if Casascius coins look fraudulent, this makes the whole Bitcoin look like a major scam to the general public.
    – Jan
    Dec 11, 2011 at 14:15
  • I note that currently, you can buy physical coins worth 25 for 27.50 (if you buy at least five of them), which is a 10% markup, plus a flat rate for shipping.
    – Tanner Swett
    Jan 4, 2012 at 22:16

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