It is said that bitcoin users are considered to be easy targets for hackers. But what about companies that are storing bitcoins? Sites, such as gambling sites and stores where you can trade by using bitcoins? They are
keeping a vast amount of bitcoin virtual currency, thus being more tempting targeted. So what do they do to make sure that deposits will be kept safe at all time?
Some sites that use bitcoin storing, use their own personal wallet to be able to keep all of those bitcoins safe. Some of the companies use third-party wallets. It certainly raises some questions about which solution is the best, or at least which one is better.
There are several solutions that can make any customers feel safe, and some of them are listed and detail explained below.
With cold storage, private keys are stored on USB drives and encrypted. Then it is being held in safe deposit boxes all around the world. This is the obvious candidate number one. It makes hacker attacks very unlikely to happen.
Coinsetter, as well as Coinbase, uses this type of storage to keep their funds safe. Coinbase keeps over 90% of their revenues offline, so they are making sure that none of it will leak. The companies can manage their storages by themselves; or rather have someone else do it for them as Cold storage is actually physical storage. It seems like this type of protection works very well, as many successful bitcoin sites use it.
Brian Armstrong, Coinbase CEO and founder claims that you can also take a cyber insurance to make sure your bitcoins are safe and sound. He claims that Coinbase is the first company ever to be using virtual insurance. The insurance covers all the bitcoins that are stored online, covering internal theft, bitcoin losses due to software errors and bugs, as well as hacker attacks. It sounds perfect, right?
Rodolfo Novak, co-founder of CoinKite claims that cold storage might not be as efficient as it appears. In cold storage, you need to add a human interaction into the equation, and human interaction often means place for unplanned errors. Which way they prefer then?
CoinKite decided to launch an HSM, that allows you quick access to all of your bitcoin funds without being exposed to hacker attacks and security breaks. All the bitcoins are being held on a private proxy that reacts on demand without exposing private keys.
Multisignature bitcoin storage
Will O’Brien, BitGo’s CEO and co-founder claims that all the companies which are in business with bitcoin storage should focus on switching from cold storage to more advanced solutions. Development of an advanced system that will allow you to keep any key cold without having need for physical key storage.
So, what do they use? Multi-signature safety storage is a way of preventing a single person from being able to collect funds. The funds could be claimed only if another person co-signs the transaction, thus preventing potential hacker attacks. It explains the name “multi-signature.” Each transaction and bitcoin managing requires one more person in order to change the status of funds.