A Xapo startup headed by an Argentine entrepreneur Wences Casares has built a network of underground vaults on five continents which stores Bitcoin assets allegedly worth $10 billion, reports Bloomberg.
Bloomberg underscores that these assets amount “to about 7 percent of the global Bitcoin supply” and that “Xapo, just 4 years old, has more “deposits” than 98 percent of the roughly 5,670 banks in the U.S.”. It also adds that Xapo’s clients include LinkedIn Corp. co-founder Reid Hoffman and former Wall Street trader Mike Novogratz. The latter is about to set up his own cryptocurrency merchant bank.
The rationale behind storing bitcoin in bunkers comes down to the need to store private keys (which give you access to bitcoins) safely: “Putting keys on a device connected to the Internet is both convenient and perilous: Hackers have proven adept at obtaining them from afar”. Hackers have also managed to gain access to thumb drives which is an offline device used for storing keys.
Xapo uses a sophisticated, two-day long technology to retrieve Bitcoin from its vaults: “The company verifies a client’s identity and authenticates the request before manually signing the transactions with private keys from multiple vault locations. Approval from three separate vaults is required for any transactions to be authorized”.
Despite the fact there are other rival currencies present on the market, Xapo solely deals with Bitcoins, because Mr. Cesares believes that solely it will succeed. However, critics within Xapo argue that Bitcoin will fail to flourish, if such complex security measures are pertained.
“It’s a pretty high hurdle technically to be your own bank with lots of security,” says Xapo’s President Ted Rogers.