Software engineer and Bitcoin investment angel Ben Davenport has left Facebook after three years to join BitGo, a company that helps users and organizations better protect their Bitcoin assets. Davenport, who invested in at least seven Bitcoin startups very early on, joins the company as head of product management and co-founder of BitGo. He says, “I think BitGo is a leading pinier in Bitcoin security.”
BitGo and Multisig
Davenport pointed out that BitGo was one of the first companies to launch Multi Signature (or “Multisig”) Bitcoin Wallets. Multisig Bitcoin Wallets are characterized by a higher level of security than traditional Bitcoin Wallets. Most Bitcoin wallets in use today are based on a private key – that’s all you need for a transaction. However, if you lose this key, you no longer have access to your credit and if the key is stolen, your entire credit can be stolen.
Multisig, on the other hand, uses several keys. In order to release a transaction, for example, at least two of three keys must be entered correctly. Additionally a redundancy is provided. This means that if you lose a key, you can still access your credit with the other keys.
For conventional wallets, BitGo currently uses three keys: One key for the user, one for BitGo, and one key is stored in an offline backup. To access the account, the user needs at least two of the three keys. Since at least two keys are required to gain access to a wallet, there are several sources instead of one source to which, for example, a hacker must gain access. For commercial use, however, the company is planning a much more complicated encryption technique. With this type of encryption, BitGo will make use of modern tools that are also used in corporate accounting software products.
Large organizations have complex systems by nature. Companies have different management levels from the CEO down. Somewhere in between is the accounting that moves the company’s funds. “All these people act with Bitcoin, but at the same time have to fulfil their function,” explains Davenport. “This includes transaction limits, speed limits and approval chains, among other things”.
And this is where BitGo comes into play: BitGo wants to offer companies the possibility to better control Bitcoin processes with several private keys. This option coupled with a cold storage (offline wallet) will provide companies with an enhanced level of security.
Multisig also offers a form of transaction sharing, Davenport said:
“This type of transaction sharing does not yet exist for the Bitcoin. BitGo will make it possible.”
BitGo will also not only focus on traditional companies, says Davenport, adding that the product will also be of interest to Bitcoin stock exchanges, mining pools or wallet providers.