At Redpoint, we are strong believers in the potential of bitcoin to change the way transactions are conducted, both online and offline. But this promising system of digital currency is still in its infancy, a reality that has been underscored by a spate of security troubles. In numerous cases, bitcoins have been lost or stolen when wallets have been compromised, when exchanges have been improperly secured, or even when individuals have been careless with their keys. Bitcoin has relied heavily on people and institutions protecting their own keys, and this has been a point of failure for the currency and technology as a whole.
In other payment and Internet commerce systems, third party security providers have helped resolve these issues. This includes Verisign for websites as well as the card issuers for credit cards and merchants. We believe that BitGo has the potential to be that provider for the bitcoin industry, which is why we are excited to announce our investment in the company.
BitGo has built the first-ever, simple to use and enterprise-grade multi-signature technology that works with the existing blockchain. BitGo requires each account to have three keys – any two of which are required to recreate the private key and participate in a transaction. Typically, one of these BitGo generated keys is maintained by the owner, one by BitGo, and the third is usually held by a trusted third party or in remote, or offline storage controlled by the owner. Any transaction requires that two of the three keys be used, just like a bank safety deposit box – no single key is enough to open it. Even if a single key is lost or compromised, the owner’s bitcoin cannot be stolen or accessed. Indeed, this could only occur if both the user (or his/her wallet) AND BitGo are compromised. This also allows BitGo to act as a fraud detection and prevention player, helping protect users who are themselves hacked, while still giving the user the ability to access and spend his or her bitcoin without BitGo participating in the transaction. BitGo is working with many major bitcoin players to implement this technology across the entire bitcoin ecosystem.
BitGo also has an exceptional team behind it. The team has a history of involvement in key technological innovations at some of the most dynamic technology companies, including Google, Facebook, and Big Fish Games. In addition, former VeriSign CEO Stratton Sclavos is a new BitGo investor and board member alongside Redpoint. The involvement of the man whose company made it safe to put credit card numbers on the Internet only adds to BitGo’s reach and credibility.
We are truly excited to join such a pioneering team and company and look forward to the great developments ahead.