Billions of Bitcoin Stashed Away in Bunkers
Most investors agree – when it comes to securely storing bitcoin holdings, cold storage is the safest way to go. But even offline storage has its limitations. Physical wallets can get lost or stolen; even private keys stored on offline devices are fodder for sophisticated hackers, who can set traps to steal information as soon as it appears online (for example, when you plug a flash drive containing a key into an online computer).
That’s why Argentinian multimillionaire and cryptocurrency advocate Wences Casares founded Xapo, a startup that is taking cryptocurrency security to the next level. His company now has secure underground vaults containing encrypted, offline computer servers on five continents – in total, they store approximately $10 billion in Bitcoin.
Casares, a serial entrepreneur who made his fortune as founder of multiple fintech startups, has been instrumental in cryptocurrency’s rise in Silicon Valley, persuading the likes of Reid Hoffman, the LinkedIn co-founder, to invest in Bitcoin – Hoffman became such a believer that his venture capital firm, Greylock Partners, invested $20 million in Xapo in 2014. “They’re the first folks who recognized custodial and security functions would be key,” said Hoffman.
Those functions are especially vital now that Xapo’s cache contains roughly 7 percent of the world’s existing Bitcoin supply – their total deposits amount to more than what is held in 98 percent of the United States’ 5,670 banks. Sean Clark, the founder of Canadian crypto firm First Block Capital, chose Xapo to store his company’s holdings because of their especially impressive security system. “Every part of their DNA is geared to security,” said Clark, who cited pulse readers on fingerprint scanners to ensure amputated hands could not be used to access the vaults. Ryan Radloff of CoinShares, who store in excess of $500 million in Bitcoin with Xapo, echoed the sentiment: “Everyone who isn’t keeping keys themselves is keeping them with Xapo,” he said. “You couldn’t pay me to keep it with a bank.”
Money managers have long struggled with the lack of verifiably secure storage options for cryptocurrency – Xapo believes they have the solution that would allow a “tidal wave” of institutional money to enter the space. They are aggressively pursuing clients from traditional financial institutions, confident their offerings are the future of crypto storage. “We believe Bitcoin won’t reach the mainstream if people have to hold their own private keys,” explained Ted Rogers, Xapo’s president. “It’s a pretty high hurdle technically to be your own bank with lots of security.” If Xapo has its way, no one will have to again.
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