Client side browser wallets almost exactly resemble managed online wallets in terms of how they appear to the user, but the key difference is how they work behind the scenes. Encrypted backups of the wallet are stored securely by the provider, but the provider has no way of decrypting them – the encryption and decryption is done within your browser with Javascript using your password as a key, so your unencrypted wallet, and the password you use to encrypt it, never leaves your computer.
Advantages include:
- Very easy to use, no software installation required
- You can access your bitcoins from any computer
- No need to worry about accidentally deleting your wallet or losing it to a computer failure
- Less of a need to trust the provider; the only opportunity the provider has to act maliciously (eg. upload your unencrypted wallet and use it, send bitcoins to its own address) is when you are actually using the wallet. If, for any reason, you stop trusting a provider, if you keep your own backup of the wallet (which both major providers make it easy for you to fo) you can switch to another provider and transfer all your bitcoins to a new address.
The disadvantages are:
- You still need to trust the provider to some extent. If the provider gets hacked, the hacker can change the code that gets downloaded to your browser when you use the wallet, and potentially upload your unencrypted wallet or send a transaction to the hacker’s address.
- Potentially the worst possible option in terms of privacy. You don’t gain privacy from the large pool of bitcoins operated by a centralized server-side controlled wallet service, and the provider can still see your transactions. Although providers may have policies of not keeping track of or even remembering transactions, there is no way to verify this.
- Both major options charge small fees (0.01 BTC or 1%) on outgoing transactions
The major options are the blockchain.info wallet and Strongcoin.