BitGo, which in April rolled out the first enterprise-grade “multi-sig” digital wallet to tackle widespread concerns about bitcoin theft, has attracted $12 million in fresh funding and signed to its board a pioneer in e-commerce security.
In a press release, the bitcoin security startup said the new Series A round investor was led by venture capital firm Redpoint Ventures and included contributions from Radar Partners, Founders Fund, Barry Silbert’s Bitcoin Opportunity Corp. and Ashton Kutcher’s A-Grade Investments. Previous investors Bridgescale Partners, Jeff Skoll, Bill Lee, and Eric Hahn participated in the round.
Radar Partners’ Stratton Sclavos, a former CEO of Internet certificate authorityVerisign Inc.VRSN +0.26%, will join BitGo’s board along with Redpoint founding partner Jeff Brody. The involvement of Sclavos carries symbolic significance for BitGo, which in the words of its Chief Executive Will O’Brien, has “ambitions to secure the world’s bitcoins.” It’s also relevant to bitcoin more broadly, with the general public still wary of trusting a digital currency and payment technology that has been subject to massive losses and some troubling hacking attacks.
Early in Mr. Sclavos’s tenure at Verisign, the company used the Internet’s Secure Sockets Layer encryption tool, better known as SSL, to develop an authentication system for e-commerce web sites. This led Verisign to became the Internet’s leading certificate authority in the mid-1990s, its ubiquitous logo emerging as a de facto stamp of trust. Along with similar services by other firms, this encouraged people to start making payments over the Internet. Mr. Sclavos left the firm in 2007 and it was later sold to Symantec Corp.SYMC -0.32%
Mr. Sclavos says he was struck by the similarities between those early days of the Internet and bitcoin’s current development phase, as its backers try to build legitimacy and encourage mainstream adoption.
Back in mid-1990s, when Verisign was founded, “you had millions of browsers downloaded and tens of thousands of web sites but you really had no idea where you were going or who was behind the web sites,” Mr. Sclavos said in an interview.
“This seemed to us incredibly similar to bitcoin, which is still in the wild, wild west phase, still volatile, [people] not being sure exactly who to trust and what is happening with bitcoins in a wallet and where they are going if something goes wrong … to now having BitGo there to create a trusted infrastructure, using standard technology.”
In April, when the bitcoin community was still roiling from news that now defunct exchange Mt. Gox had lost 850,000 bitcoins, worth around $500 million at the time, BitGo rolled out BitGo Enterprise, the first digital wallet that uses “two-of-three” multi-signature technology as an added layer of protection.
Under this arrangement, digital coins cannot be released from a wallet unless two of three private keys — the unique alphanumeric codes used to digitally “sign” encrypted transactions — are applied to it. For each wallet, BitGo generates three different keys, one that’s attached to the live, online wallet and controlled by the owner, one that’s held in an encrypted format by BitGo, and a third that’s held offline in so-called “cold storage” by the owner. That way, if owners want to take complete charge of their bitcoins without requiring the engagement of a third-party institution, they can do so. But under all other circumstances, the engagement of the firm’s second online key helps ensure the speed, efficiency and security of transactions.
In an interview, Mr. O’Brien said in addition to marketing its BitGo Enterprise wallet, his firm is now reaching out to businesses that use bitcoin and offering them a chance to use its multi-sig platform in their own wallets and internal protections.
He sees this specialized service in keeping with where the bitcoin economy will head “in parallel to the way the Internet developed.”
“Now that the Internet has matured you don’t have everyone operating web servers, or operating systems or operating languages. There’s specialization that takes place along the way,” Mr. O’Brien said. “That way the entrepreneurial system can move faster, build on top of what other companies have developed and build on top of standards.”
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