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In The Hobbit, Bilbo keeps the ring to himself because he knows it might give him an advantage. He understands that the Dwarves see him as a simple person, and that he is probably very naive by comparison. So he tries to be observant and use whatever he can to show himself to be useful and to honor his agreement with them. He sees the ring as an means to that end.

In hindsight, taking The Lord of the Rings into account, we know that the Ring had a will of its own, and knew that while the Dwarves might be corruptible, it would likely end up in a treasure hoard where it might never be found. None of the Dwarven Rings are ever mentioned in the book, aside from it telling us that there were seven of them. There are no Dwarven ring-wraiths, so it must be assumed that they simply hoarded the rings away. The One Ring wanted to get back to Sauron, and so thought that staying with Bilbo would facilitate that.

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Q: Why doesn't Bilbo show the dwarves the ring from the beginning. What does this say about his character?
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