Argentine entrepreneur Wences Casares spent years trying to convince Silicon Valley millionaires and billionaires that Bitcoin was the global currency of the future, that they needed to buy some, and that he’s the man to safeguard it. His startup, Xapo, has built a network of underground vaults on five continents, including one in a decommissioned Swiss military bunker.
“Everyone who isn’t keeping keys themselves is keeping them with Xapo,” said Ryan Radloff of CoinShares, which has more than $500 million of Bitcoin stored at Xapo. “You couldn’t pay me to keep it with a bank.”
Xapo’s billionaire backers include LinkedIn Corp. co-founder Reid Hoffman and former Wall Street trader Mike Novogratz, who’s in the process of setting up his own cryptocurrency merchant bank. Their bet is that Bitcoin is here to stay, and so is its biggest scourge, theft.
The first and most important rule of owning Bitcoin is to securely keep your private key — the code that lets you spend your coins. If someone with bad intentions gets it, he or she can loot your holdings in an second, with no hope of recovery. The most popular alternative is called cold storage, keeping the key in an offline device such as a thumb drive.
Xapo’s solution was to bury a cold-storage device in a mountainside and layer on electronic safeguards. “They’re the first folks who recognized custodial and security functions would be key,” said Hoffman, whose venture capital firm Greylock Partners led a $20 million investment in Xapo in 2014, a couple of years after Casares persuaded him to buy his first Bitcoin. “He made the pitch in the morning and in the afternoon, I called him with an offer.”Trade here