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BitGo Launches Custody for Blockchain Capital’s Security Token BCAP

BitGo clients will be able to hold their BCAP assets using qualified and regulated custody service BitGo Trust Company.

Blockchain security firm and wallet service BitGo has announced support for Blockchain Capital’s ERC-20 token, according to a press release shared with Cointelegraph on March 19.

Blockchain Capital’s BCAP token is a security token based on the Ethereum (ETH) blockchain that was launched in a $10 million initial coin offering (ICO) back in April 2017. BCAP represents an indirect economic interest to the limited partnership interest in the tokenized investment fund, and is the world’s first security token that was sold in an ICO.

According to the recent BitGo announcement, BitGo users will now be able to hold their BCAP assets using BitGo Trust Company, a qualified and regulated custodian that provides compliant custody for security tokens. As a part of the announcement, BitGo has also introduced its multi-signature wallet security.

Ben Chan, BitGo’s chief technology officer, said that qualified custodial services that are compliant with securities regulations are critical for users of the platform.

Recently, Estonian Nasdaq-powered digital trading platform DX.Exchange announced the launch of its own security token trading and security token offering (STOs) listings. The platform reportedly allows investors to buy security tokens using both fiat and crypto such as Bitcoin (BTC), Ethereum, Tether (USDT) and Ripple (XRP).

Previously, insurance giant AXA XL launched an insurance product that covers equity crowdfunding and STOs, and purportedly protects new online capital formation techniques, aiming to increase trust, confidence and security to potential investors guaranteeing that the issuer is insured.

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Bitcoin's Cutting-Edge 'Coin Selection' Tech Gets First Major Integration

Crypto security startup BitGo’s latest technology – “predictive UTXO management” – sounds technical, but it’s got an end goal that everyone will understand: cutting crypto fees.

Revealed exclusively to CoinDesk, BitGo is the first mainstream crypto company adopting a spin on “coin selection,” a scaling technology that’s been one of many touted as a way to ease the industry’s obsession with lowering fees since they spiked to over $20 a transaction in December.

Though fees have since fallen to less than $1, the incident had a huge psychological impact. As such, the industry jolted into action, looking into technologies that could help chip away at these fees.

As long-promised, coin selection more efficiently selects what coins go toward a particular transaction, and thus could have a big impact on users the next time fees go up (due to rising prices or increased use of the network). The idea has been around for a couple years but is just now starting to gain more widespread attention.

And with the news today, BitGo is opening up the technology to a large swath of the industry.

Indeed, all BitGo clients who have upgraded to their latest software version will have access to this new tool, seeing fee reductions of up to 30 percent, according to the company.

“What we’re doing here is addressing high-traffic wallets. Some of our clients get lots of lots of deposits into exchanges. And these enterprises need to sweep up these on-chain transactions,” BitGo engineer Mark Ehardt, the main brain behind the technology, told CoinDesk.

He added:

“If fees fluctuate again in the future, customers will save a lot on fees.”

While Ehardt couldn’t reveal which of its customers have upgraded to the newest version of its software – and as such, have access to the technology – he said, it’s most of them.

And with some of BitGo’s clients including the likes of Bitstamp, one of the oldest and largest bitcoin exchanges, and blockchain-based identity platform Civic, the technology is likely to reach a significant number of bitcoin enthusiasts.

A tweak on the tech

The proprietary technology Erhardt came up with, which includes coin selection, hasn’t been used anywhere else before.

It’s a bit complicated, but it takes on a very old problem in bitcoin.

Each transaction fee depends on how much data is put into a transaction, rather than its value, as in traditional payment systems. It sounds funny, but the reason it’s this way is that bitcoin’s transaction space is so limited. Charging extra for more data incentivizes users to take up as little space as possible.

Because of this, it’s conceivable a small transaction of $0.10 could cost more in fees than a $1,000 transaction.

So, what causes there to be more data in some transactions than others? This largely depends on the number of so-called “inputs,” which are the pieces of bitcoin that go into a transaction – the more inputs, the more data, the more expensive.

A couple years back for his master’s thesis, Erhardt invented a better algorithm for choosing which coins should go into a transaction (this is coin selection), trying to avoid creating, or unnecessarily using, so-called dust, or tiny amounts of bitcoin. It was such a useful improvement, the largest bitcoin software client, Bitcoin Core, moved to adopt it.

When adding the technology to BitGo’s services, though, Erhardt realized something else.

Spending transactions with a large number of inputs when fees are lower, like today, is not as expensive. And so this is a good time to look through a wallet’s coins and see if it’s possible to “consolidate” the coins – a process you can think of as like trading in a hundred pennies for $1.

“We really would like to partially automate this,” Erhardt thought.

And that prompting him to build something even more complex, the predictive UTXO management product, which reacts to the level of fees at the current time, using a threshold of 10 satoshis per byte. If fees are higher than this number, it uses as few inputs as possible. But, if fees are lower than this number, it automatically decides instead to consolidate the tiny transactions.

Low fees, still saving

As mentioned, Erhardt thinks this algorithm will be particularly useful for high-traffic wallets who are sucking in tons of UTXOs (or unspent transaction outputs).

Erhardt said his company is “operating under the assumption” bitcoin fees will continue to fluctuate over time, which is why the actively reacting algorithm is so necessary.

Yet, Erhardt admits it’s hard to say what will happen in the future.

Last time, fees spiked when the cryptocurrency world saw a flood of new users correlating with an increase in the price per bitcoin (it topped at over $20,000 per coin). The industry has definitely cooled since then, with the price per bitcoin now hovering around $8,000 per coin, and it’s unclear if and when that exuberance will happen again.

“It’s a little hard to predict right now. We’ve had small fees lately,” Erhardt said, adding:

Spending patterns are hard to predict and fees can go crazy overnight.”

Even with today’s lower fees, though, Erhardt expect the algorithm to have a big impact. “With small fees, we see huge savings,” he told CoinDesk.

And this will be especially true once the few lagging BitGo clients who haven’t yet transitioned to the new technology finally do.

Transparent piggy bank image via Shutterstock

The leader in blockchain news, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups.

This article is intended as a news item to inform our readers of various events and developments that affect, or that might in the future affect, the value of the cryptocurrency described above. The information contained herein is not intended to provide, and it does not provide, sufficient information to form the basis for an investment decision, and you should not rely on this information for that purpose. The information presented herein is accurate only as of its date, and it was not prepared by a research analyst or other investment professional. You should seek additional information regarding the merits and risks of investing in any cryptocurrency before deciding to purchase or sell any such instruments.

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Crypto Security Startup BitGo to Custody Zcash

Crypto security and storage startup BitGo is adding zcash to its platform, the firm announced Wednesday.

The privacy-focused cryptocurrency joins a number of major crypto assets on the startup’s platform, which offers a multi-signature wallet and custodial products and services for users that include institutional clients. Just last week, the company also added support for 57 ethereum-based tokens, as reported by CoinDesk.

Clients will be able to store zcash in both BitGo’s multi-signature wallets and its cold-storage custody solutions, according to the firm.

BitGo chief technical officer Ben Chan told CoinDesk that “zcash is a natural fit for BitGo as both are focused on privacy protection, security and cutting-edge technology.” The cryptocurrency also comes to the platform following expressions of interest from institutional clients, he added.

Zcash engineer Brad Miller said in a statement that BitGo support will enable investors to “seamlessly send and receive zcash in a safe and secure way,” in particular due the institutional-grade security standards the firm employs.

“The Zcash Company ecosystem team and BitGo worked collaboratively to ensure Zcash is well integrated and supported,” he said.

Chan also indicated that the firm’s addition of new cryptos will continue apace, with BitGo planning to list more than 100 tokens by the end of 2018.

As previously reported, BitGo filed for a charter to build its own regulated asset custody service. It is unclear yet when the BitGo Trust may open for business, but marketing vice president Clarissa Horowitz told CoinDesk in May that the startup is working with regulators on the process.

Chan said, BitGo is “on its way to be the first purpose-built digital qualified custodian.”

Zcash and wallet image via Shutterstock

The leader in blockchain news, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups.

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Bitcoin's Biggest Startups Are Backing a New Effort to Keep Fees Low

2017 was a wake-up call for bitcoin supporters to say the least.

With so many people using the software amid a price boom, the fees for sending transactions swelled higher than ever before, even rising to as much as an average of $26 for a single transaction. It was a road with too many cars, leading to a veritable traffic jam.

Sure, the situation wasn’t long to last, as fees fell back to manageable levels, but the worry is this spike could always happen again – if, or dare we say it, when, bitcoin “goes mainstream.”

But fees don’t have to be as high next time there’s a spike in the cryptocurrency’s use, at least that’s the argument being put forward by those launching a new effort called Bitcoin Optech.

Led by bitcoin developer and Bitcoin Core contributor John Newbery, the effort is an attempt to help the companies that rely on the bitcoin software figure out what scaling technologies they’re missing, including those that will push fees lower.

Newbery told CoinDesk:

“Businesses were caught unawares. At the same time, there was lots of scaling tech that could have helped and that was well-understood, but they weren’t adopted yet.”

That gave him the idea that developers with knowledge of bitcoin’s underlying tech could be more aggressive in helping companies through such upgrades. For instance, the bug fix Segregated Witness (SegWit) activated last August, but bitcoin businesses were slow to adopt the change, even though it can cut fees by half.

Since it can help to improve the experience for all bitcoin users, many notable entities are interested in the effort, with investors Xapo CEO Wences Casares, entrepreneur John Pfeffer and bitcoin development group Chaincode Labs giving them the money to get the project off the ground.

The non-profit effort also boasts six member companies so far, including Coinbase, Square and BitGo, all who’ve expressed what they believe is a need for an effort like Bitcoin OpTech.

“By collaborating with leading engineers in this space, we’ll be able to achieve more than we could have by tackling these problems alone,” Coinbase lead bitcoin engineer Brock Miller said in a statement. Square strategic development lead Mike Brock said the company is “proud” to be working with OpTech.

Coming together

So far, Bitcoin OpTech has made contact with 15 to 20 bitcoin companies, saying they’re surprised by how excited they are to adopt various scaling technologies. “They’re saying something like Optech has been missing. and could be beneficial. It’s even bringing people together,” Newbery said.

In this way, it’s also helping heal relations between the various groups that have sprung up to support the decentralized bitcoin software. In the worst parts of bitcoin’s history, a rift has emerged between developers of the Bitcoin Core protocol and the industry’s companies, with the two different groups advocating for very different technical upgrades.

“The more engagement there is between industry and open source, the better,” OpTech’s announcement blog post explains.

To that end, they’ve identified a few key technologies that they can help business with right now.

Coin selection is a complicated problem dealing with the most efficient way of choosing which “coins” to send when a bitcoin users sends a transaction. Adding to the complexity, Bitcoin OpTech project manager Steve Lee stressed that the best selection technique often varies from wallet to wallet.

While “fee estimation” is another technical problem that’s hard to get right. Fee estimation tools in bitcoin wallets today often tell users they should pay fees much higher than they actually need to be paying.

Speaking about these very strategies, the Bitcoin Optech team, joined by Bitcoin Core contributor Andrew Chow, held their first workshop in San Francisco. Sponsored by Square, the event saw the developers go over some of these scaling technologies and what’s in it for the companies that adopt them.

Lee called this workshop a “good proof point” for what they’re doing in that more companies showed up than they could have hoped for. Six of the eight San Francisco companies they broached the topic to showed up at the workshop, demonstrating, in his mind, how hungry engineers at these companies are to learn about how to solve these types of problems.

“It’s hard to get their attention,” he said.

Catalyzing change

The Bitcoin OpTech team stressed, though, that they don’t want to be any sort of “central authority” telling bitcoin companies what they should and shouldn’t do.

Lee said they’re looking to be more of a “catalyst” for change.

By hosting more workshops similar to the above around the world, hopefully to give engineers the tools they need to make these scaling technologies on their own.

Meanwhile, they’ve been sending out weekly newsletters describing the most recent additions to Bitcoin Core, the most popular bitcoin client. And they have other ideas too, like creating a Slack group where member companies can keep in touch.

Another example of this is they’re looking to start what Lee calls an open-source “cookbook,” detailing various scaling changes bitcoin companies can adopt.

This documentation would be available to anyone, not just dues-paying members.

All that said, there’s a focus to Bitcoin Optech’s mission: technologies that businesses can add today

Maybe someday they’ll help companies other much-hyped technologies, such as lightning or Schnorr, since many bitcoin companies need to update their software in order to support these improvements.

But Newbery said that might be a while. They’re waiting until “they’re more advanced in their proposals.” Until then, they’ll be focused on well-understood strategies that bitcoin companies have yet to adopt.

Bitcoins and calculator image via Shutterstock

The leader in blockchain news, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups.

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BitGo Adds 57 Ethereum Tokens In Largest-Ever Custody Service Expansion

The wider world of crypto tokens is becoming a bit more accessible to institutional investors.

The security startup BitGo exclusively told CoinDesk on Tuesday, July 10, it will expand its suite of custody products and services to support 57 new ethereum assets, a move driven by demand for services that safeguard private keys – the alphanumeric strings that act as passwords for crypto assets – and that, once lost, are gone forever.

As such, the move is a telling one for the blockchain security sector, one that showcases how it’s in the midst of a changing competitive landscape.

Founded in 2013, BitGo has become an industry leader managing wallets at crypto exchanges, but to date, its service has been limited to larger protocols like bitcoin and ethereum. (Indeed, the overall lack of options has even led traditional custodians like BNY Mellon, JPMorgan and Northern Trust to consider the business, sources told Bloomberg in June.)

The startup is hardly the only industry upstart rushing to debut institutional custody services – U.S. exchange provider Coinbase, the Swiss startup Smart Valor and Japanese bank Nomura are just three of the companies rolling out licensed crypto storage solutions.

Yet the addition of ethereum tokens could be a key first-move advantage. According to BitGo CTO Benedict Chan, there has been a surge in demand for custody solutions for alternative crypto assets such as the kind it’s now adding.

Benedict Chan, CTO of BitGo, told CoinDesk:

“These institutions, they generally don’t want to self-manage their coins. They are looking for someone that can support multiple coins.”

Timothy Furey, CFA and head of banking at Satis Group, a firm focused on advising institutions on ICO investments, described this blockchain industry trend as an “arms race” to offer institutional-grade custody solutions for a spectrum of assets.

That’s why VP of product marketing, Robin Verderosa, said BitGo is now looking to obtain a BitLicense in New York and a qualified custodian license in South Dakota. BitGo aims to offer even more custodial services, adding more than 100 cryptocurrencies by the end of 2018.

Verderosa said courting institutional investors has become BitGo’s priority, adding:

“What we’ve learned is that they’re interested in investing in a basket of coins and tokens that kind of help hedge the market and give better returns.”

Token roulette

Equally notable to the potential industry impact, though, is how BitGo is taking steps to ensure the quality of its service given the risks inherent in dealing with smaller cryptocurrencies.

When BitGo debuts support for dozens of cryptos today, it will include those offered by Kin by the chat messaging app Kik, several native tokens for decentralized crypto exchanges and the blockchain identity crypto Civic, a startup BitGo began experimenting with in 2017.

It’s a reality that’s had an impact operationally, as product manager Isaac Eleftheriadis now heads an 11-person BitGo team focused on rising cryptocurrencies and tokens.

According to Eleftheriadis, every token added in this first batch was explicitly requested by BitGo’s institutional clients. Once there’s an obvious demand for custody options, the team researches this token to make sure its issuers and founding team are reputable.

Long after adding basic storage features, support for crypto tokens requires ongoing vigilance.

“An added challenge for custodians who are coming to market is figuring out how they will handle issues like airdrops, hard forks, etc, and which ones they will support. This presents real technical challenges in addition to regulatory and tax-related ones,” said Arianna Simpson, former BitGo employee and current founder of the crypto investment fund Autonomous Partners.

Speaking to this point, Eleftheriadis told CoinDesk his team actively monitors whether token issuers are planning code changes, in addition to quarterly security evaluations.

Some token issuers themselves have also become BitGo clients.

“There’s been cases were customers asked us to support their ERC-20 token,” Eleftheriadis said. “They don’t want to do the ICO yet until all their tokens can be held by BitGo.”

Other security efforts

Aside from BitGo, there are several startups in the race to serve institutional crypto investors.

Smart Valor CEO Olga Feldmeier spearheads one such provider, a licensed investment platform which also offers custody and management services. She agreed with Chan that many high net-worth individuals and institutions would prefer a licensed expert handle storage and security.

That’s why Smart Valor is partnering with the hardware wallet maker Ledger to offer on-site storage of private keys and other services comparable with deposits at a bank. This Swiss platform for managing and trading tokenized assets is scheduled to launch in September, around the same time as Smart Valor’s ICO.

“A lot of family offices are starting to think about investing directly in ICOs and protocol tokens,” Feldmeier said. “The custody solution is extremely important because all the hacks so far, everything that happened until now, it was all hacks of exchanges.”

Chan said ethereum tokens, in particular, are prone to issues caused by bugs in smart contracts. Regardless of Feldmeier’s point that most breaches involve exchanges, hackers exploited such a smart contract bug in 2017 to steal $30 million worth of ethereum tokens from Parity wallet users.

A seasoned investor, Simpson referred to security practices for crypto tokens as “a moving target.” Especially in this space, the devil hides in those details.

Luckily for institutional investors, startups like BitGo and Smart Valor are prioritizing secure custody for tokens, not just bitcoin.

Chan concluded:

“There’s a lot of different events that have happened because of smart contract bugs. So, we try to be on the safer side there.”

BitGo team image via BitGo

The leader in blockchain news, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups.