In the latest Epicenter Bitcoin episode, Brian Fabian Crain and Sebastien Couture were joined by Arianna Simpson, an Account Specialist at BitGo. A pioneer in multi-signature hierarchical deterministic wallets, BitGo develops enterprise-grade software, which it describes as "The World's Most Secure Wallet.” Their web-based multi-sig wallet is also available for free for individuals.
Arianna says she "fell into Bitcoin" about a year and a half ago and was hooked when she read Satoshi's white paper. While still working at Facebook as an account manager, she began writing about Bitcoin on her personal blog, for Business Insider and CoinDesk. In August of 2014, she moved into the industry full time and relocated to San Francisco to become BitGo's third employee.
The Usability/Security Trade-Off
Keeping bitcoins in cold storage has long been considered a best practice from a security perspective. Paper wallets, encrypted private keys and offline wallets like Armory have been used by individuals and companies to safely store bitcoins.
However, these security precautions come with important trade-offs. Holding bitcoins in cold storage makes day-to-day usage difficult and doesn't scale. Recently, a number of companies have started introducing multi-signature wallets as a promising new solution, which can provide both strong security and ease-of-use. BitGo is a pioneer in this field.
Enter Multi-Signature Wallets
By eliminating single points of failure multi-signature wallets solve an important problem. The protocol implementation of multi-sig wallets, introduced in BIP 16, allows for up to 15 keys to be created and for a subset of those keys to sign transactions.
BitGo leverages P2SH by requiring that 2-out-of-3 keys sign transactions. One key is held by BitGo and the two remaining keys are held by the user. One is their personal key, the other, an encrypted backup key, which BitGo recommends be printed and stored in one or several safe places.
“Multi-sig has a revolutionary impact on storage. It reduces the probability of hacks and user error. That's core to making Bitcoin more usable.”
With this key scheme, funds may be unlocked even if the user's personal key is lost, using both BitGo's key and the user's backup key. In the unlikely event that BitGo disappeared or went out of business, there is an open-source recovery tool that would allow the user to retrieve his funds with their personal and backup key.
- BitGo’s Multi-Sig Architechture
Arianna clarifies that BitGo does not hold customer funds, an important distinction from other wallet providers that could steal users funds and could also be considered financial institutions by regulators.
“We're really a software provider. We're building the technology to allow individuals and companies to hold and transact with their coins but we are never responsible for those coins. We're not holding them.”
Built For Enterprise
Enterprise users will also benefit from important corporate policy features. Read-only access could, for example, be provided for the company's accountants. Spending limits can be set at the wallet level, which would require the administrator to manually approve larger transactions.
BitGo wallets are hierarchically deterministic (HD). This means that an unlimited number of wallet addresses can be derived from a seed that only has to be backed up once. This can enhance privacy, since it encourages using a new address for every incoming transaction.
The ability to create multiple HD wallets within one BitGo account allows for an even higher level of control over fund management. One could store the majority of their holdings in one HD wallet and set strict permissions and spending limits, while another wallet with fewer restrictions would hold funds for day-to-day transactions.
As Bitcoin adoptions grows, Arianna predicts there will be an increasing need for secure, usable Bitcoin wallets. BitGo positions itself as a leader in the multi-signature wallet space and hopes to support a wide variety of clients, whether they are hedge funds, institutions, merchants, investors or even individual Bitcoin holders.
Coming up on Epicenter Bitcoin
Join Sebastien and Brian as they interview Daniel Peled, CEO and Founder of Gems, a social messaging app based on blockchain technology. You can watch the live Google Hangout on Sunday, November 23 at 18:00 UTC (10am PST/1pm EST).
About Epicenter Bitcoin
Epicenter Bitcoin is a show about the technologies, projects & startups driving decentralization and the global cryptocurrency revolution. Every week hosts Brian Fabian Crain and Sebastien Couture talk to some of the most influential people in the cryptocurrency space about their projects and get their perspectives on recent events.
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