Under protection of armored doors and reinforced concrete corridors, there are encrypted servers disconnected from any networks, which hold the keys to great wealth.
The entrepreneur from Argentina, Vences Casares, for the past few years has been convincing millionaires and billionaires in Silicon Valley that Bitcoin is the world currency of the future that needs to be bought and that he is the person who can ensure its complete safety. His startup, Xapo, has built a network of underground storage facilities on five continents, including a decommissioned military bunker in Switzerland.
In the aristocratic world of private equity management, Xapo is known for its client list, which provides family trust management services, and occasionally allows journalists to get an idea and write about the unprecedented security measures being taken by the company. But one secret is never revealed: how much digital money is in storage at Xapo?
Two clients of the company Xapo claimed that this amount is about $ 10 billion in Bitcoins. A source close to the company called this figure fairly accurate. In the end, the cost of Bitcoin can hardly be called stable.
Even for the extremely bright world of cryptocurrencies, this amount is very significant and makes up about 7% of the total amount of Bitcoins issued. It also means that Xapo, established 4 years ago, has more “deposits” than 98% of approximately 5,670 US banks. But since Xapo is a depositary organization, its activities are regulated differently. For example, the activities of a Swiss subsidiary fall under the control of a self-regulating Financial Services Standards Association, which monitors the implementation of laws against money laundering. Xapo serves US customers through a corporation registered with the Treasury Department under the Ministry of Finance and licensed in several states.
Large amounts of savings speak of trust, which Casares is a serial entrepreneur, who was nicknamed “zero patient” (aka “source of infection”) for infecting Silicon Valley with an interest in Bitcoin — he gained from his followers and large crypto-investment companies such as Grayscale and CoinShares.
Xapo has a network of repositories on five continents.
“Anyone who doesn’t keep the keys himself, keeps them in Xapo,” says Ryan Radloff of CoinShares, who stores Bitcoins in Xapo for more than $500 million. “Even for money, you will not force me to keep these funds in a bank.”
Xapo customers are the co-founder of LinkedIn Corp. Reed Hoffman and former Wall Street trader Mike Novogratz, who is now busy creating his own cryptocurrency trading bank. They believe that Bitcoin came seriously and for a long time, which means that it is worth protecting it from theft.
The first rule of owning Bitcoins is to keep the private key secret, which allows you to spend your money. If thieves take possession of a private key, they will be able to get your savings in a matter of seconds, without hope of returning them back. Keeping keys on devices connected to the Internet is convenient, but dangerous: hackers have repeatedly demonstrated their art to seize them at a distance.
The most common alternative is the so-called cold storage – on a device that is not connected to the Internet, for example, on a flash drive. But the risks remain: hackers skillfully install traps on computers, awaiting the moment when cold storage devices are connected to the network. Ordinary thieves can simply climb into the house or kidnap a child and demand ransom. Some Bitcoin ringleaders diligently hide their personal data, strengthen homes and learn ways of self-defense.
Trade Management
The solution proposed by Xapo is to place cold storage devices in underground storage in the mountains and provide electronic means of protection.
“They were the first to realize that custodial storage and security would be key functions,” said Hoffman, whose venture capital firm Greylock Partners invested more than $ 20 million in Xapo in 2014, a couple of years after Casares convinced him to buy Bitcoin. “In the morning he presented a business plan, and after dinner I called him with a proposal.”
Withdrawing Bitcoins from the Xapo repository takes two days. Before manually signing a transaction with a private key from different storage locations, the company confirms the customer’s identity and checks the authenticity of the request. In order for the transactions to be carried out, it is necessary to obtain confirmation from three different repositories. The company also provides customers with the opportunity to buy and sell Bitcoins and created the first debit card, with which you can conveniently pay for purchases from your account in Bitcoins.
Casares, 44, declined to comment on this story. After a surge in public activity during the launch of Xapo, he invariably attracted a lot of attention with his speeches at conferences on cryptocurrencies, but, as a rule, he avoided giving press interviews.
Nevertheless, there are legends about his gift of persuasion. His efforts to promote Bitcoin in Silicon Valley had such a large effect that when Hoffman asked his trustee to purchase some Bitcoins, the banker asked when he had time to talk to Casares. Xapo’s advisors inсlude Larry Summers, former secretary of the US Treasury, former director of Citigroup Inc. John Reed and the founder of Visa International Di Hoke.
The ability of Casares to sell his idea became decisive in the success of Xapo. First Block Capital, the first Canadian cryptographic firm registered by all the rules in force in the country, after months of scrutiny, including a personal visit to the Vault in Switzerland, chose Xapo as custodian.
“Each section of their DNA is focused on security,” said Sean Clark, founder of First Block. He noted that the fingerprint scanners used in the vault are equipped with pulse sensors to eliminate the possibility of using an amputated hand. “When we make large money transfers, they call FaceTime with us to make sure that we are not acting under pressure.” If we are talking about a really huge amount, they arrive so that we confirm the transaction personally.”
Xapo makes special efforts to attract institutional clients. President Ted Rogers enlisted the support of Peter Najarian, an emerging market veteran from UBS Group AG and Royal Bank of Scotland Group Plc. to control the process of attracting new investors, including pension funds, private banks, family asset managers and hedge funds.
“Tidal wave”
The perceptible lack of a Bitcoin custodial solution that could satisfy institutional clients was one of the limiting factors for many investment managers looking to invest in this asset class. Xapo says it already offers its customers such a solution. If a company manages to convince them of its merits, this can be an event of enormous significance for Bitcoin.
“The share of this type of institutional investment will be like a tidal wave,” says Najaryan.
Cazares made Bitcoin promotion a goal of his life. Born in a family of farmers in the hard-to-reach area of Patagonia, he felt the impact of inflation on his life as a youth.
This encouraged him to create several Fintech startups that brought him millions even before he learned about Bitcoin. In 2000, he sold 75 percent of Patagon (Latin American financial services site) for $ 529 million, and after 13 years – a startup Lemon (digital wallet) for $ 43 million to fully concentrate on cryptocurrency. By that time, he was already a major Bitcoin holder.
Nathaniel Popper’s “Digital Gold” contains the words of Casares, who he told Ericon O’Brien, a member of the board of Lemon: “I allocated a share of my own earned income to this. “. Two years ago, he joined the board of PayPal Holdings Inc.
High obstacle
The explosive growth of Bitcoin in the past few years has contributed to the rapid rise of competing cryptocurrencies, such as Ethereum and Ripple, which now have a multi-billion dollar market value. However, Xapo provides secure storage only for Bitcoins, because Casares believes in the success of this particular currency. However, such dogmatism pushes customers away from Xapo who might be interested in storing alternative cryptocurrencies.
Other purists claim that adventurous companies like Xapo have no place in the Bitcoin ecosystem because they slow down what should have been a seamless transfer.
Xapo’s top management is waging a stubborn struggle with this paradox.
Rogers noted: “We have repeatedly discussed this topic and believe that Bitcoin will not become mainstream until people are forced to protect their private keys themselves. From a technical point of view, this is really a rather high obstacle – being a bank to yourself and providing all the necessary security measures”.
Source: chby.io
