What happens when the flash inside the arduino hits 10,000 writes and dies ?
Nothing is backed up, unless you have at least 3 copies of it. One physically at a different location (fire,flood,volcano,earthquake,...)
I wouldn't store any data on the arduino. All data would be stored on multiple usb drives. With programs like ssss, you can even design the system so you only need any 3 out 5, for instance.
Another thing is what happens when the owner of the wallet.dat file ultimately dies (through accident or natural causes) and brings the security pass phrase with them to the grave ?
Yes the value of bitcoins increases for everyone else as there are fewer coins, but that is of no help to the remaining living family who are broke.
This is a separate, but important, question. One solution is the Dead Man's Switch:
http://forum.bitcoin.org/index.php?topic=5194.msg147032#msg147032http://forum.bitcoin.org/index.php?topic=6439.msg96146#msg96146Are there any ECDSA smart cards out there? It'd be pretty cool to use a smart card for Bitcoin crypto.
This is pretty much what smart cards were made for. Even if there are no native ECDSA cards, you can do it on a Javacard.
I would suggest going in this direction with this project. A smartcard is like $5, and smartcard readers are much more ubiquitous than Arduinos. You can get SIM versions that will work in your cellphone, for instance.
Very interesting. From some googling it seems it might not be trivial to implement ECDSA on a java card, but pulling that off would be awesome. Also, for serious savings accounts it's not enough to have one physical backup. You need some kind of protocol of say, 3 out of 5 physical keys and a long pass phrase. If you implement the Dead Man's Switch, the consequences for forgetting the password or losing the keys is lessened so you can put more of the tradeoff on the security half and less on the loss half.
The arduino still might have advantages. You don't need any card readers, and it might be easier or more secure to generate multiple keys. Also, if the device has a keyboard, or some form of input, you can better protect against keyloggers. I'm sure if Bitcoin continues to thrive, these will be lucrative industries.