Epicenter - Learn about Crypto, Blockchain, Ethereum, Bitcoin and Distributed Technologies - Arianna Simpson: BitGo – Security and Usability with Multi-Signature HD Wallets

Episode Date: November 17, 2014

Keeping Bitcoins safe from theft is probably one of the things Bitcoin holders worry the most about. Historically, there have been a number of recommended best practices like paper wallets, BIP 38 wallet cards and cold storage. Although these remain relatively safe ways to store Bitcoins, implementing these solutions can be complicated and difficult to manage for day-to-day transactions. Recently, some companies have begun introducing multi-signature HD wallet services, where 2-out-of-3 signatures are required to sign transactions. These solutions offer security and usability, with the assurance that Bitcoins will remain safe, and the ability to transact with ease. In fact, the website P2SH.info tracks the adoption of multi-sig, and it has been growing exponentially in recent months. Which brings us to our guest: Arianna Simpson, an Account Specialist at BitGo, a company that provides a simple multi-signature HD wallet solution for individuals and businesses. We talked to Arianna about BitGo and the services they offer, discuss different use cases for multi-sig HD wallets and make projections about the evolution of the wallet space from different angles. Episode links: BitGo Arianna's blog Amount of Bitcoins held in multi-sig addresses This episode is hosted by Brian Fabian Crain and Sébastien Couture. Show notes and listening options: epicenter.tv/053

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My name is Sebastian Couture. And I'm Brian Varian Crane. We're here on episode 53 with Ayanna Simpson. Ariana is, works at Big Go. I was introduced to her when I was in a New York trip this summer. And wanted to meet up with her, although it didn't happen, but we kind of stayed in touch a bit. So now that she's at Big Go, well, that would be a great time to do a podcast and talk about some of the things they focus on, which particularly is a multi-sick.

So, Ariana, it's good to have you on. Hi, thanks for having me. Excited to be here. Thanks for coming on. Maybe we could start off by introducing yourself. Sure. So my name's Ariana Simpson. As you mentioned, I grew up in Italy, moved to the U.S. afterwards.

And I actually studied nothing to do with computer science or cryptography or Bitcoin. Like most of us, I think. studied international politics in Spanish, but decided to, I kind of fell into Bitcoin about, oh, let's see, a year and a half ago now. And as soon as I read the white paper, I was hooked. So I really started to delve into it and started writing about it a lot. And this was while I was still working at Facebook. I was basically working with some of the big managed accounts on the advertising side.

but Bitcoin became my sort of real interest, and so I decided that ultimately I wanted to move into the industry full-time, which is how I ended up at BitGo. Cool. And so you've been working at Bitcoin since August, I believe, so it's been a few months. How have you enjoying it so far? Yep, that's right. Yeah, it's been a great few months. Really exciting. Obviously, we're still young, and it's an industry that's changing at the speed of light. So, you know, never a dull moment, but I think it's a really exciting time to be working in Bitcoin, particularly with a really great team. And I think even within an industry that's fast-moving,

our focus on security really makes it all the more exciting in the sense that security might not always seem like the most thrilling field to work in in the sense that a lot of what's happening is really happening behind the scenes. And so you're not. not necessarily always adding a cool new feature, but you are building infrastructure and architecture that's really, really important. And you can never kind of let the security become legacy. You're constantly having to update and make changes

because the minute you start to say, okay, I'm done. That's when you start to run into problems. So it's constantly evolving and that makes it really exciting. Yeah, and I guess we've seen a lot of things evolve in terms of usability of security. I mean, I'd just like to pull out a few examples here. I mean, before we start talking about BitGo,

just under a year ago, we were having a discussion about how to safely secure your Bitcoins. And at the time, you know, this was one of the solutions. And these, I believe, Bit38 cards were another solution. For those listening, I'm holding up a Raspberry Pi computer on which I installed Armory and printed out paper wallets in order to store my Bitcoins. And then I think I gave one of those backups to a friend on a USB stick. And I gave another backup to another friend.

And then these little BIP 38 cards came out. I got a couple of those. And same thing. I got three or four. And I gave to a few of my friends and thinking, you know, at the time that this was the way to secure your Bitcoins. and now a lot of companies, I mean a few companies like Coinbase and Bitcoin are coming out with these really awesome and easy-to-use solution for securing your Bitcoins with multisig. And so I guess it just goes to show that in such a short amount of time, we've gone leaps and bounds

in terms of usability for securing your Bitcoins. Yeah, I think that's really important in the sense that you know, in this kind of field, you're constantly working to, you're working against a trade-off in the sense that the most secure storage is not necessarily the most usable. Actually, I would say that they're in some sense inversely proportional to one another. So what we're really working on is making the security, you know, as robust as possible, but also allowing companies, institutions, and individuals to transact. Because ultimately, if everybody is holding their Bitcoin in some sort of storage that's

not accessible, we'll end up with no liquidity, and it's ultimately not really a very viable system. So building out the ability to actually transact and use the money while still keeping it secure is really important. Yeah. I mean, I do think we will see it. And perhaps we have seen to some extent that segregation as well, right? But on the one hand, you have some people who are like advanced in their Bitcoin knowledge

and they're like extremely enthusiastic and they want to sort of do it on their own. And then they will use something like, you know, what you said, you know, Raspberry offline armory and those kind of things. And then at the same time, that obviously doesn't scale. And it doesn't, it doesn't, it's not going to work for the masses. And it's really nice that I think we have this powerful thing we can do, especially with multisig, where you can get both usability and you can get security. And that's, it's fantastic, no, because it's sort of like a built-in two-factor authentication,

or at least that's one way you can be used. And I think it's really powerful in that way. Yeah, and I mean, things like two-factor author all layers that we've added on to, actual like, you know, basic multi-sig wallets in the sense that, you know, we think that each of those pieces is very important, but it's not sufficient. And so layering on things like different levels of user permissions, corporate treasury policies, spending limits, again, two-factor off, all of those are key pieces that we've built on top of the technology. Because, you know, this is serious stuff.

If you're looking to hold or manage many millions of dollars, you want to take the appropriate precautions. And so that's what we're building. So if you look at BitGo, is it correct to say that the main focus of Bitcoin is to build enterprise tool and to build sort of the Bitcoin wallet that the companies will use in the future, whether that is maybe investment funds holding Bitcoin or perhaps also merchants that decide they don't want to convert all their income through payment processes to fiat currency directly

but they want to keep holding Bitcoins but you need to have some sort of due processes to make sure that happens in a secure way yeah I think that's exactly right um so we do have a free consumer wallet, but we're definitely focused on the enterprise side of things. You know, multi-sig is important for consumers as well, particularly if they're holding, you know, a sizable amount. But in terms of the additional policies and rules and structures that we've built, they're definitely enterprise focused. You know, if you have a company that needs to, for example, give its auditors access to, access to its wallets and access to its transactions, but without actually handing over the ability to spend, that's traditionally

something that's not been really possible or easy. So we've built in things like view-only access. So if you have auditors or accountants who need to be able to see into your balances and your transaction history, that's something that you can do using one of our wallets. We also have the ability to set spending limits. So essentially all of these permissions are set at the wallet level. So companies can decide to set up different wallets with different spending levels, different levels of admin, view only, and spend-only access.

And basically what this does is it enables companies to construct their storage and their financial systems in the way that makes the most sense for them, which is really, I think, making it a lot easier for companies and institutions to hold and transact, while still maintaining a really great security model. I'm also kind of curious because it seems to me what you guys are building is very much something for the future. And I think that's a good thing because if Bitcoin will be successful, I totally believe that it's going to be a huge demand for this. but it also seems that's like something where demand right now is probably really limited.

So I'm curious right now, is the demand that you are seeing primarily from financial institutions holding Bitcoin? Or are you also starting to see maybe some large emergence that are actually keeping some of the bitcoins that consumers spend with them? Sure. Well, I would say that this is definitely something. that will, you know, we obviously see it as a market that's expanding. But even right now, there's a lot of interest from, you know, hedge funds that are starting to hold a percentage of their total assets in Bitcoin,

who, you know, hedge funds may be buying and trading off of it. They may be buying and holding. Companies, you know, we have, for example, the Bitcoin shop that holds a percentage of their assets in Bitcoin. and they use Bitcoin to do so. And even institutions, for example, the Bitcoin Foundation uses BitGo, and they use it not just for holding,

but also for their operational needs. So, yes, it's definitely a market that we see as growing, which is, I would say, always what you want to look for when you're starting a company, because if the market's kind of capped out, then that's not necessarily the best market to go after. But even now, I think there's, you know, there's substantial interest, and we're constantly onboarding new companies and new financial institutions.

We just announced our partnership with Terra Exchange, and we have a really interesting model there because basically their clients are using BitGo to hold collateral for their swaps product. And so that's, you know, that's another whole channel of people who, who are interested in trading based off of Bitcoin using both Bitcoin and dollars. And that's another thing we're involved in. So it's, you know, the market isn't necessarily going to be composed of just companies holding Bitcoin or just institutions or any one of those. But we're really able to support a variety.

And so that, I think, expands the market substantially. Cool. That's very interesting. That's not a use case that I fall off, but of course makes total sense. Now, can you also talk a little bit before we move on to Multisic about BitCo as a company? I know how many people are you now. I know you also did raise a very large round of financing, which is something we can talk about briefly.

Sure. So right now we are 11 full-time. We're growing a lot. So I was the third employee in August and we're already at 11. So that's, you know, quite a jump. We're hiring a lot, particularly on the engineering side. Obviously, we're very technology focused. So that's kind of core to our business.

So it obviously makes sense that we're hiring a lot of engineers, us and everybody else in the Bay Area. But, yeah, so the company's definitely growing, which is really exciting as well. So in terms of investment, we just in the past couple months closed a $12 million series A, and that brought in a number of investors. It was led by Red Point. We have the former CEO of Verstein, Stratensclavos,

a number of Bitcoin-related angels and funds. So it's, yeah, I mean, it's definitely a group of investors that has a lot of Eric Khan, the former CTO of Netscape. It's a lot of investors who have a great deal of experience in the early internet days, as well as in the financial space, which I think is really core. in a lot of ways we see what we're doing as similar to what Veracine did for the internet, you know, when the internet was just kind of growing up, I would say. And so it makes a lot of sense for us to have those people on board. And I think it's really great validation for what we're building as well. Now, just very briefly before, maybe before we get a little bit more into its technique background,

I wanted to talk about one thing that we've sort of come back to again and again with pretty much every company we talk about, which is the regulation side. But I think in this case, it is particularly interesting because multisig itself is very interesting from a regulatory perspective, no, because if you, let's say, have a two out of three multi-sig and three different parties hold one key, then can you actually say anyone is holding the key? it is not so clear in what way you can sign ownership there. And then, of course, that may affect whether you will be considered a money transmitter or not,

whether you would have to get certain licenses or not. So what stage is maybe you're thinking at or where do you see this going? Yeah. So we do not see ourselves as, you know, anyone's money manager or anything like that. We are not holding your funds at any point. We are really a software provider in the sense that we're building the technology to allow individuals, companies, etc., to hold and transact with their coins, but we are never responsible for those coins. We're not holding them.

And that's, I think, most clearly evidenced by the fact that, you know, and this is available on GitHub if you want to check it out, we have basically released a tool that allows you to demonstrate that you can actually retrieve your funds completely independently of BitGo. So, you know, we don't have ownership or claim or the ability to transact with your funds. So really we are, we're really only providing the basically infrastructure in which to manage that. So if you go to GitHub right now, you can basically see that if you use your key and your backup key, so you're two of the three keys, you don't even need Bicko's key in order to remove your funds. And I think that gives our customers a lot of confidence too because, I mean, this is a highly, highly unlikely scenario, but let's say BitGo is frozen or we ever fell off the face of the earth for whatever reason, everyone could still retrieve their funds. And I think that's really important.

And that kind of also demonstrates the fact that we're not actually holding anyone's funds. So in that regard, because we're really more of a software platform, we don't, like the money transmitter licenses, that type of stuff that apply to companies. like Coinbase don't apply to us because we're not actually falling under the same sphere, if that makes sense. No, I agree that it makes sense. I think to the regulator, it might not make so much sense. However, it's difficult to consider.

I mean, I can definitely see how that's possible, but I think it's difficult to consider a website as a software provider because traditionally software is something that you install on your computer that runs as a standalone that doesn't run in a browser that you don't need to access the internet to to get access to so i mean and we'll get back to this in a minute but um i think that there might be some uh interesting questions that will arise in terms of bitcoin regulation with regards to companies like bitco that essentially offer a software that runs in your browser which decrypts that which signs transactions locally and that doesn't and those companies don't have access to your keys and so I think there might be some some interesting questions to to be raised

with regards to like what are these companies are they software providers or they with regards to regulation like the bit license or other regulation that may come where did they fall into that so maybe this is a good time to get into like multi-sig in a general sense can you just sort just briefly introduce multi-signature architecture and perhaps just talk about the history of multi-sig? Sure. So I think the best way to think about multi-sig is that it's really solving a fundamental problem by eliminating a single point of failure in kind of the storage and the management of Bitcoin. So a traditional Bitcoin address has one point. private key. And if that private key is lost or compromised, the funds are basically lost. And

there's no, you know, if you accidentally throw away your hard drive, oops, unfortunately, nothing we can do about it. So that's kind of obviously problematic, especially if you're holding large sums of Bitcoin. And what Maltisig does is it eliminates that problem by basically allowing for the creation of multiple keys. So the protocol itself allows for the creation of up to 15 keys. And you can basically create up to 15 keys and then require a smaller subset of those keys in order to sign transactions and move your funds around. So our enterprise product uses a two of three multi-sig scheme.

So essentially there's a total of three. three keys and two of those are needed in order to transact. So we, multi-sig has been around since 2012, and we have been working on R&D in this field led by Mike Belchie, who's our CTO, since early 2013. And we've actually had to do a lot of work on not just Bickgo's client, but actually patching a lot of the core libraries and things like that that are, you know, necessary in order to have a robust infrastructure upon which to build. So that's kind of, I guess, the origin of multi-sig. Obviously, as I mentioned, on top of that, we've built things like

HD wallets, which we can go into in a little bit, and then the series of corporate treasury policies and rules that I mentioned earlier. So for those of you who might be interested, so the multi-sig was introduced in a Bitcoin Improving protocol a proposal which is BIP 16, which is titled the pay to script hash. You can find that on GitHub. It covers more than just multi-sig, right? I mean, it covers other things like being able to split keys. I believe and other things that were introduced.

There are some other things than just multi-sig that were introduced with this Bitcoin improvement proposal, right? Yeah, I think multi-sig is kind of the most, I would say it's the most important aspect in the sense that it's the one that has the most, I would say revolutionary impact on storage in the sense that

it has a tangible effect on reducing the probability of hacking or, you know, user error. And obviously, that's core to making Bitcoin more usable. And I think if we want to get mass adoption of Bitcoin, people need to be secure in the fact that their funds are not just going to evaporate. And multi-sig, I think, goes a long way in terms of doing that, which is why we've, you know, multiple times issued calls for the industry to adopt multi-sig. And the amount of Bitcoin that's being held in P2SH addresses is, I think, just under 1.5% at this point, which is still a very small, alarmingly small, frankly, percentage, but it is growing quite rapidly.

So there's a website actually, I believe it's called p2sh.info. Yeah, I was going to mention that. Yeah, it's really interesting to see how that's evolved over time and how it's really exploded in the last few weeks and months. Yeah, it's kind of nerdy. Yeah, right now, yeah, I just checked and it looks like it's just over 1.5%. Yeah, it is fascinating. I think at the beginning of the year, it was like a thousand Bitcoins or something like that. And even a month ago, I mean, I presume also the Coinbase Multisig vault has contributed to a lot of the explosion over the last month.

But it's gone up like crazy. It's like more than doubled in the last four weeks. I wanted to ask another brief question regarding BitGo and especially the use of multisic there. So you mentioned you used two out of three multisig. do you also offer other possibilities, for example, you know, two out of four or two out of two? Or one thing that is perhaps particularly interesting, we talked about this with on the podcast we did on reality keys because he uses something like that, although apparently it is a non-standard at the moment, but that you'd have a multi-sig. address where it's not like two out of three but for example one address always has to be used and then it's any one of the other two or it's a two out of four address but specific

pairs can go together I don't know if that's something you use because that would of course be then one way for example to manage it if you had let's say you had one a treasurer of the company has to sign every transaction, but then anyone else can do it, but not to other people. Are there things like that that you're also building or perhaps thinking of building for the future? Yeah. So as of right now, we sport two of three. We will definitely be expanding the flexibility in terms of what that looks like. So more complex rules around number of keys, who needs to sign, et cetera, basically what you just described. That's not available yet, but there's a reason we're hiring all these engineers.

So stay tuned for a lot more developments coming. Now, I'd like to go into some of the, I mean, just the usability aspect of this. This is probably the topic that I'm most interested in. So just before the show, I mean, I had created a BitGo account a little while back, but I had never actually just tried to use it and see how it worked. So I opened up my account. I logged in. So there is two-factor authentication.

So I had to get an SMS or use Authi to actually log into the account. So that's like one, I guess, level of security, which protects you even further than just having a password. It's obviously like best practice. Everybody should use that. And then I, so I created a secure wallet. So a secure holding. So I guess you can create just as many as you want, right? Yeah, that's exactly right.

So you can create any number of wallets. And as I mentioned before, each rule that you set is specific to the wallet rather than the account. And that's intentional in the sense that it gives you greater flexibility. So let's say you have a wallet that you want to hold that has like 90% of your holdings and you really never want to transact out of it except on very rare occasions. For that one, let's say you were an enterprise user, you could set a spending limit of zero,

which means that any transaction would require an approval. If instead you decided to have a wallet that you used to transact more frequently and therefore you don't need security to be quite as tight, you could set the spending limit to say five bitcoins. So any transaction under that limit doesn't require any other approval. But if you do go over that threshold, then you would want an approval on it. Okay. And so when you create one of these secure wallets, essentially you're creating, it's not really a wallet, right?

You're creating an HD wallet. It's not just like one address. You're starting from a seed and you can create as many addresses as you want within that secure wallet. That's exactly right. So if you, I don't know if you want to go back to the screen share you were doing, but if you go ahead and click into the wallet, there's actually a tab called addresses, and that will show you basically all the addresses that you have generated. Yeah, so go ahead and click into the wallet.

Okay, so just for those of you listening, I'm actually showing the BitGo interface. So I created a wallet here. I called it safe. Well, I'll explain these transactions later. So I created a few addresses here. Yep. So I've got three at four addresses actually that I created. I actually moved some Bitcoin at this.

I went to try it out and I donated a few millibitcoins to Wikipedia because they've been mailing me about it for the last few weeks every time I'm going Wikipedia. So I said, oh, what the hell? Yeah. Yeah, so here are the addresses I've created. And I can create as many as I want, right? Exactly, yes. And those, as you can see, you'll see the balance of each.

of those. And for example, one use case in which that might be particularly helpful is, let's say you're expecting payment from five different people. You can generate a different address for each of those people. And that way you'll be able to clearly tell who has paid you and who hasn't just by keeping track of which address you sent to whom. Yeah, and I mean, that's best practice. I mean, recommend it to generate a new address every time you receive a payment from someone anyway. Right. Okay.

And so other things that we can do here, we can manage the wallet. So like you said, there are some spending limits that we can determine. So we can set a daily spending limit and a per transaction spending limits. That's kind of interesting. And like maybe I'll go into, we can go into some detail about how this works. And in second, there's also a user access tab. So this is, I think, an enterprise feature. Yep, that's an enterprise feature.

There's also an address whitelist. So if you're really restricting the addresses that you're sending your Bitcoins to, I guess you can create a white list of addresses that you can send your Bitcoins to. Oh, that's interesting. Yeah, that's not so much for restriction, so much is for safety and kind of peace of mind. And what I mean by that is obviously Bitcoin transactions are not reversible. so you want to make sure that you're actually sending your coins to the address that you intended to send them to. And so by adding, let's say you're a company who regularly pays out a certain amount to a specific vendor every two weeks,

you can add their address to that white list and therefore you won't need to spend a lot of time, double checking that you've got the right one every single time you need to transact. act. Okay. Now, one question that that I had before, and I think I have a pretty good idea of what the answer is, but it's not really obvious maybe to everyone. But these spending limits, these spending limits are enforced by BitGo. They're not enforced by the protocol. So, correct? So those, yeah, that's a layer that we've built on top, yes. That's a letter that you built on top. So what that means is, however, that all this is a really good idea to set these spending limits. If by some chance someone were to get a hold of your key and your backup, those spending limits would not be taken into account if they were trying to do a two out of three transaction with your backup and your personal private key.

So in order to bypass that limit, somebody would have to get a hold of, your, well, there's quite a lot they'd have to get hold of. They'd have to get a hold of your phone, your wallet passcode, your login credentials. So the probability of that happening is, I would say, rather slim, particularly if you're following what we recommend in terms of, you know, best practices for passwords and that kind of management. So if somebody was using, trying to basically spent the money not through Bitcoin, but through the backup tool that would be used. Let's also say if Bitcoin disappeared, then this wouldn't apply, right? Well, in that case, so basically the way our backup key card works is that it has an encrypted

copy of the keys. So, and all of those are encrypted with the passcode that you have set for that particular wallet. So what that means is that you can literally like take your, I wouldn't recommend it by any means, but if you were so inclined, you could take your key card and like, you know, wave it around for the public to see. And unless they could somehow, you know, get a hold of your pass code, they wouldn't actually be able to do anything with your coins. So it's, again, it's very challenging, even if somebody has your key card to even using the, recovery tool, actually spend those coins if you're not the rightful owner because whoever does

that also needs to know your pass codes. So which means, which means that every time you change, if you change your password on a wallet, you need to regenerate a backup key card. No, you don't. But you, what you can do is you can essentially just send the funds to a new wallet if that makes you feel more comfortable. Okay. So just to be clear, so the key card is is a document, a PDF document that BitGo sends you or allows you to download when you create your wallet and is essentially

your backup, I guess your backup key, if anything happens, that you lose your your password, it will allow that key card would allow a Bitco to retrieve your funds? Well, it would allow

us to retrieve your funds. I mean, it would allow you we don't ever retrieve your funds. So it would allow you to retrieve your funds. Right. Sorry. I mean, it would allow you. Yeah. Either.

So, for example, if you forget your wallet passcode, using your key card, you can retrieve your funds, basically move them into another wallet. Or if you lose your key card, you can still using the other two keys transact regardless. So essentially, the basic premise is any one piece can be lost without actually, you know, losing access to your funds. Okay.

And in terms of actually storing this backup, what are, in your opinion, the best practices with regards to keeping this key card? I mean, should you keep one in your house or should you have multiple backups, like maybe you had a friend's house or your parents or maybe in a bank vault? and your password also, I mean, a lot of people now are using services like last pass to store their passwords and things like that. Can you maybe talk about some of the best practices that you would recommend to keep all that as secure as possible?

Yeah, so in terms of storing your backup, you know, as I mentioned, it is encrypted, which is comforting in the fact that obviously that adds another layer of security. If somebody finds it, it's not just going to be like, oh, there we go, I can read it. but we would still definitely recommend keeping it somewhere, you know, like a bank fault, it's important to remember that this key is not something that's needed to transact on a regular basis. And so it's really only used in the event of some sort of disaster recovery or something like that. So again, it doesn't need to be the most accessible thing in the world. So if you have a safe deposit box, a bank fault, something like that,

that's definitely, you know, a great place to store it. But it also depends on the use case, right? So if you have a wallet in which you're holding, like, I don't know, 20 Bitcoin, it doesn't, you know, you don't need to go to the same lengths as you would, you know, if you're holding many millions of dollars. So I guess it really depends on, you know, kind of what you're holding in that wallet and what the use case is. In terms of your passcode, yeah, I mean, passcode managers are definitely something that has taken off in the past, I don't know, a couple of years.

Also something that you can use. The most important thing to remember is just to make sure not to store your pass code with your key card, which might seem evident. But I always pointed out anyways, because, you know, if somebody does have those. Security is never evident. Yes, exactly. So if somebody does have those two pieces, then that's not a scenario that we want. So obviously, just making sure to keep those both secure, preferably in your head. But if not, somewhere safe, but just not in the same safe place as the key card.

So I have two questions. There are different. So let's do one by one. First of all, I was moderating this panel on Bitcoin Security with Alan Reiner at the conference recently. And he said, in his view, he always argues that the backups, the paper backups should be unencrypted. Because I guess in his point of view, the risk of you being not able to retrieve the funds, because somehow you lose the password to decrypt that paper backup is higher than somebody is sort of physically stealing that thing.

Do you agree with that or do you think maybe that's something that's true for individuals but not for companies? No, I don't agree with that. The way our model is built is even if you forget your passcode, as long as you still have your key card, you can retrieve your passcode. So there's no reason to have it unencrypted, because so long as you have it, you can recover your passcode. So if you're storing it, I mean, I wouldn't really recommend storing anything unencrypted, because that just adds a layer of risk. Okay, then maybe my, so my second question is this, and that's something's been on my mind quite a lot,

also sort of thinking personally, right? So now I have a whole bunch of different wallets. There's like some in there, some in there, and you know, some are in this offline thing and some are maybe paper thing. And then I think that tends to be the case

with many people. And then, of course, it can get very complex. I mean, even if we talk about something as simple, quote unquote, as someone using the Bitcoin multi-sick, thinking through of like where do I store my passcode, where do I store the paper backup, like these shouldn't

be in the same place, et cetera. Just to have that clear, I think from an operational aspect is super important. So what I thought about, what one should do is one should write a document, right, exactly outlining different scenarios, like if this happens and that happens, if these things have to be considered. So I'm curious, is that something you do? with your clients is that you sort of walk them through every step and maybe have these kind of different scenarios that so they they know what exactly they consider and what they have to do if something goes wrong yeah i mean obviously we are always here to support them in the event something goes wrong um but when you know when we do set up i spend a lot of time kind of walking through

security best practices, how to set things up, etc. So, you know, for example, we allow you to import an XPub to basically create the backup. So one of the keys is generated on BigGo servers. The second is generated client side in the browser when you create the wallet. And then you have the ability to import a third one, which we recommend generating on a separate machine

because you obviously never want to have any two of the three keys unencrypted on the same machine because that opens you up to a level of vulnerability that obviously isn't good. So, you know, for example, I definitely walk through all of those best practices and that sort of thing. In terms of management, I mean, that really boils down to each individual customer's needs and use cases. So some of them will have multiple people managing multiple wallets. And so depending on whether it's a wallet that's used for day-to-day spending or for more long-term holdings, then my recommendation is obviously going to vary. So it kind of depends on the use case as well.

Now, I had an idea. So we were thinking about these sort of scenarios where, and I think perhaps we don't think about this enough, but you know, it, you know, we all have these bitcoins. And if something happens to us, we get injured or permanently disabled or maybe we die or something like that in an accident or something horrible like that. You know, and those bitcoins essentially will die with you unless you've done something to be able to pass them on to someone else. So how does, how would be able to implement some sort of third-party retrieval in the case? of someone dying? Well, I mean, fortunately this is in a scenario that we've encountered,

but I would suppose that if something like that happened, you know, let's say your father has a Bicco wallet and he passes away, he's left you with access to, say, the key card, then if you were to come to us and, you know, obviously we would take whatever legal proceedings are necessary beforehand, but once that's been settled in that regard, then, you know, with our key, we would be able to allow you to retrieve the funds. But, again, luckily not a scenario that we've really encountered. Obviously, the other option is to, you know, have multiple administrators on a wallet

So, for example, if, let's say your father had an account with substantial holdings, he could add you as an administrator, as well as your mother. And then in that event, you know, the two of you would be able to transact even without even without needing his approval or signature on the transaction. Okay. So one could leave his key card in his will, for example, right? Yes. Okay.

And when someone comes to you with having lost their password and wanting to retrieve the bitcoins with their key card, what sort of identity verification do you have to go through, if any, to unlock those funds? Is having the key card enough, or is there another layer of ID verification that goes into authorizing transactions? Yeah. So we still have two-factor off on that as well. So we have a recovery tool that basically walks through the process requiring regular login, two-factor off, as well as the key card.

Okay. And this is perhaps more of a technical question before we move on to other topics. And it kind of relates back to what we were talking about earlier and the question of who holds the funds and such. does Bitco with the with the keys that they possess with that third key that they possess do they have the ability to actually see the funds do they have access to that or do they just see a bunch of encrypted addresses in the sense like do we are we able to view wallet holdings yeah are you able to see client funds using simply that that that part of the three keys that you have we have visibility but we don't have the ability

to spend or transact or anything like that because we only have the key to cosine. Right. So essentially what you're saying is like in this safe, in these addresses that I've created, BitGo has the ability to see the balance, or I mean, actually see the addresses that are created in that HD wallet and the balances. Okay. That's something that wasn't clear with me. Yeah.

So one thing I would just add to what we've discussed, I think we've talked a lot about multi-sig, but another thing that's I think interesting and not particularly well known is the fact that all our wallets are also HD, which stands for hierarchical deterministic. And, you know,

as we mentioned when you were sharing the screen, that allows for the creation of basically infinite new addresses from the starting seed. And I think that's very important from not really, not so much a

security perspective, but from a financial privacy perspective. Because the blockchain is a public ledger, it's obviously available to anyone who cares to look at it. And what that translates to is the potential for sensitive information to be made relatively accessible. So, you know, for example, let's say I'm a company that pays its employees in Bitcoin. I send out, you know, there are 15 employees, I send out 15 transactions on the second Friday of every month. If I'm the recipient of one of those transactions, I can obviously see which address the funds came from. And I'll also be able to see the other transactions that it made that particular day. So, for example, that would allow me to infer without too much difficulty, for example,

how much my coworker's salaries were or any sort of thing like that. In the event that I'm a hedge fund that's holding assets in different wallets, somebody could identify me as the person who has control over those and then potentially threaten me or any other number of unfortunate scenarios. And so HD wallets prevent that by basically masking which one of these addresses the transaction was coming from by spending from a different one each time. And so what that does is it just kind of allows you to maintain that privacy, even though you're transacting on a public ledger.

That's really interesting. I like that idea. Thanks. Yes, so we're kind of coming up towards the end of our show. Is there something else you want to cover with regards to a big grow or multi-sick that we should have asked about and that we feel is important and we haven't come to yet? No, I mean, I'm just really excited to see the ecosystem taking the lead and kind of following the path that we've set in the sense that, you know, we as a company and our CEO Will O'Brien published a piece titled something like, it's time to end the cold storage ice age. We've really encouraged the ecosystem as a whole to adopt standards like multi-sig.

We see these as not nice to have, but as really core to making Bitcoin something that's a viable financial instrument across the board. And, you know, it's not technology that we want to hide away and be the only one's offering. We really want the industry to be using it and improving upon it, because ultimately it's in the entire ecosystem's best interest to have more people safely, securely, holding their money. And so I think that's that's really the direction that we're headed in. Obviously, we want to stay a step or five ahead of everybody else doing this, but, you know, we think it's important for the industry as a whole. Yeah, and I think it's important as well for industry leaders to, like you say, set those standards, which then get adopted by, by every other actor in the industry. So, you know, good job on Bicko for leading the way on security. And

And it's also, you know, like we talked about the beginning of the show, it's very, it's very interesting to see how that's evolved in the last, like it seems to be happening so fast. You know, just a few months ago, we were talking about insured wallets and cold storage and now looking at that as a solution for securing bitcoins. You know, I'd be interested in seeing where those, where the security is going to go in the next six months. I mean, I think in six months from now, we'll be looking back at this conversation and saying, even though today we're looking at this and saying this is quite secure, we'll be looking back on this and saying, wow, that was so insecure. We've got so many more layers of security now. Yeah, or I agree with that and also just making it more usable. That's something that we're constantly working on.

Absolutely. It's just like you can never really rest on your laurels in the security and usability space, particularly when you're basically. creating a new industry. So I totally agree. We'll have a very different conversation in six months' time. So yeah. Yeah. So perhaps moving on just before we end the show, so you are also a blogger. You write for coin, you've written for CoinDes for Business Insider, and you also write on your own blog, Aeron Simpson.com. And so I was reading through your blog earlier today and you mentioned this before the start that you were in Africa. Can you talk about your experience there and maybe relate that to Bitcoin? Yeah, absolutely. So I think one thing that a lot of

naysayers of Bitcoin repeat is that, oh, you know, we don't need it. The financial system works. And first of all, I would argue that that's not necessarily the case. It very much works or doesn't work depending on who you ask and what their financial status is. But more broadly, I think that, yes, on the whole, the United States, for example, and a certain part of Europe have financial systems that are largely functional. But when you start moving into other parts of the world, you see that that's not necessarily the case. So I spent a good amount of time last year traveling through Southern Africa

and a lot of what I saw was really, really eye-opening in terms of how different economies work and what those financial systems or lack thereof look like. So, you know, I think the most eye-opening part of my travel for me was the time I spend in Zimbabwe. And I met a lot of people who really gave me a great deal of insight into how the economy had been devastated by their president slash dictator Mugabe. And he had, through, you know, basically completely reckless fiscal policies, printed money,

used it to finance wars, excessive pay to his government and army officials. And by doing so, basically caused rampant hyperinflation to the point where I think it was the second worst case of hyperinflation in the history of money, which is quite astounding. But basically, what resulted was the fact that money was depreciating at such a rapid clip that people could not afford to buy anything. So stores were completely empty because the merchants couldn't afford to stock them. Hospitals had no medication. Doctors who were not paid, so they were not working.

People were dying for things that should have required a minimal dose of penicester. and it really, really destroyed the country's economy to the point where they eventually had to switch back to the dollar in order to stabilize things. And things are certainly improving now, but there's still the after effects of that kind of economic disaster are still being felt very strongly. And so for me, I guess the relation with Bitcoin is the fact that, because it's not controlled by any single government or single entity, there really is a substantial potential for avoiding this kind of thing.

In the sense that, you know, currency manipulation is a lot more difficult in an environment in which there's no single actor, be that the government or a president, controlling all of the money supply. And, you know, I don't think that it's probable that, you know, in the next 10 years we're to see everybody ditching their currencies and switching over to Bitcoin. However, even having Bitcoin as like a secondary or supplemental currency, for example, in a place like Zimbabwe, I think could have significantly alleviated the effects of this kind of hyperinflation. And so obviously, it's difficult to say how these things will play out in the long term from a geopolitical

perspective, but I think that Bitcoin has a whole lot of potential in markets outside the U.S., which is sometimes underestimated. Yeah, I mean, a lot of times people will use Africa and South America as examples of where Bitcoin can excel. And I think there's a lot of truth to that. However, a lot of these people, I think, maybe have never even set foot in Africa or South America and well I have exactly no but that that's what I mean and and and when I read this post it really shines through that not only do you talk about this with sort of this the the obvious

advantages that people can can take from using Bitcoin and cryptocurrency in those places but you have actually been there to see how people live and and how how we can benefit them in their daily lives. So I think that you're particularly well placed to talk about it. So that article that you wrote is called Why Bitcoin Matters in Africa. It's on, actually it was written about eight months ago, but it's on your site at Arianna Simpson.com and along with all the other articles that you've written,

and I encourage everybody to go to Ariana's blog to read those articles. Thank you. Yeah, well, so we're at the end of our shows. So thanks so much, Ariana, for joining us. It was really interesting to talk about this. I very much agree with your assessment and sort of Bitcoin stance. I think multisig is going to be absolutely integral to Bitcoin's future. There's not some sort of optional add-on, but I think we'll be totally embedded in how

wallets work in the future. So it's a really interesting topic, and it was super interesting talk to you. about. So thanks for coming on. Thanks for having me. Great to be here. So one last thing, if you want to try out BitGo, you can do so. And that's at biggo.com. You can try out just a regular multi-sig or they also have, if you are a company that wants to use some of their more advanced features. There's like a request form. I think it's still in beta, but you know, you can do that and I presume they will get back to you. Yep. Also, next week, we will have or hangout with Daniel Pellett.

He's the CEO of GEMS. So GEMS is a social networking tool that is going to have its own currency. So I think it's going to basically incentivize users by paying them and sort of giving them stock in the company. So it's really exciting. And they are also doing a crowd sale that's organized by Coinify.

So you may remember Coinify from our episode maybe a month ago or something when we had Tom Ding on. So that's going to be next Sunday, so November 23rd at 530 UTC, so that's 9.30 a.m. Pacific time or 1230 p.m. Eastern time. And yeah, please watch live with us. That would be fantastic. And to do that, you may want to subscribe to our YouTube channel. you've got the notification there. And you can of course also find a show

on iTunes, SoundCloud, Stitcher, or wherever else you get the podcast. Please also subscribe your newsletter at episodeobicoin.com slash newsletter. And leave us a tip. So, you know, if you listen every week and love the show, consider giving us

$5 a month subscription. I think you can do that at Coinbase now. So that's just 125 an episode. So thanks so much. And we look forward to being back next week. You know, You know,