Just because it’s digital doesn’t mean it doesn’t need a vault, and Silicon Valley millionaires and billionaires now have a way to keep their cryptocurrency safe from the criminals: Underground bunkers packed with encrypted computer servers storing cryptographic keys for billions in bitcoin.
This is cold storage, with a major security twist. It’s a new kind of vault for a new age and one Argentine pioneer has finally convinced the wealthy that this is where their digital currency will be safe.
The brainchild of entrepreneur Wences Casares, a startup called Xapo has built crypto bunkers on five continents—including one in a decommissioned Swiss military bunker, and now he’s housing some $10 billion in bitcoin for the wealthy—though the price volatility of digital tokens makes it impossible to estimate real-time value.
The bunkers house encrypted computer servers that are not connected to the internet or networked with any other external computers.
The bunkers’ systems store the cryptographic keys that make bitcoin real and determine ownership.
In Xapo’s words, they “developed a new standard in bitcoin security that protects your assets by using man, machine and even a mountain…”
And there’s a good reason the bunkers are spread out across five continents: Never keep all your eggs in one basket.
Right now, it is said that Xapo is storing almost 7 percent of all bitcoin in circulation in its underground bunkers, and it’s a highly lucrative prospect for criminals. But this isn’t a job for hackers because it’s entirely disconnected. The only way in is physical, and Xapo has taken pains to ensure that the usual criminal tactics, such as (as Bloomberg points out) using an amputated arm or finger to gain admittance, wont’ work. Gaining access means getting through fingerprint scanners with pulse readers. Related: Google's Controversial New A.I. Assistant
Backed by billionaire visionaries like Linked-In co-founder Reid Hoffman and former Wall Street trader Mike Novogratz, Xapo has a major vote of confidence that Bitcoin whales like to see. According to the start-up, it’s raised $40 million from Benchmark, Greylock Partners, Index Ventures, Fortress Investment Group, Ribbit Capital and Emergence Capital Partners.
“Everyone who isn’t keeping keys themselves is keeping them with Xapo,” Ryan Radloff of CoinShares, which has more than $500 million of Bitcoin stored at Xapo, told Bloomberg. “You couldn’t pay me to keep it with a bank.”
It beats cold storage, which is just putting your codes on a hardware device that can easily be stolen. And it beats online wallets, which hackers love. For crypto whales who have too much at stake, it beats what Bloomberg says has gotten as bad as hiding identities, fortifying homes and studying self-defense.
For bitcoin holders of any significant amount, it’s like being “under attack 24/7”, Xapo head of security Carlos Rienzi told Quartz: “This is not a race. It is a chess game. You have to think about the opponent’s next movement. You can never relax.”
That’s especially true for cryptocurrency because there’s no protection. Once you’ve been hacked, it’s gone forever. But for now, these are bitcoin bunkers only—and anyone holding a lot of Ethereum or the like will have to wing it with self-defense.
By Michael Kern for Safehaven.com
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