One of the reason bitcoins get so much attention is because people keep stealing them. Every week it seems that another “secure” wallet service gets plundered by tech-savvy thieves.
That’s one of the appeals of Xapo, a startup that just received a $20 million investment to build out its secure, insured “vault” for bitcoins.
I signed up for Xapo on Thursday to check it out, and to see about its “free bitcoin” offer for new customers. Alas, it turns out the giveaway only amounts to 0.00005 of a bitcoin — or, if you prefer, 5,000 satoshis (the currency’s smallest unit) — which adds up to about 3 cents as of Thursday. But even though the free satoshis aren’t worth your time, the company’s “vault” claims are still pretty cool.
It works like this: when you transfer your bitcoins from a Xapo wallet to the vault, the company encrypts the data and copies “it onto external drives and paper.” It then scatters these data scraps to various locations — including a mountain (or so Xapo says). And if Xapo’s mountain is somehow overrun by bad guys, customers are still backstopped by Meridian Insurance.
The cost for all this security is a 0.12 percent annual fee for each deposit, which doesn’t seem all that outlandish given the ongoing spate of robberies, and the outrage at Mt. Gox, whose shady CEO claims someone mysteriously made off with over 700,000 bitcoins.
Xapo also deserves to be considered a serious Bitcoin player because its CEO is Wences Casares, a respected Silicon Valley executive who sold his previous company, Lemon Wallet, for $43 million to LifeLock. As Casares explained at Gigaom’s Bitcoin meet-up last year, his experience growing up in Argentina made him wary of unstable currencies.
The new vault-and-wallet venture also deserves attention because of its $20 million investment, which was led by Benchmark, with Fortress Investment Group and Ribbit Capital also participating. The big funding round means Xapo is poised to be a rival to Coinbase, which offers a consumer friendly wallet and exchange service, and is another grown-up player in the burgeoning Bitcoin space.