The Winklevoss twins, who became bitcoin's first billionaires, have devised a novel solution to store their crypto fortune. (See more: Winklevoss Twins Are Bitcoin's First Billionaires.)
In a New York Times interview last year, they detailed how their approach to secure private keys, which control access to bitcoin, provided a blueprint for their exchange platform Gemini’s security architecture. Gemini platform is one of the few first certified and regulated cryptocurrency exchanges in the world and is obliged to protect customer assets.
There were not many online wallets and exchanges back when the Winklevoss brothers began investing in cryptocurrencies. Those that did exist were prone to hacks.
To protect their bitcoin holdings, the brothers distributed snippets of a printout of their private keys across multiple safe deposits around the United States. This ensured that even if thieves got their hands on a fragment of the private key, the others would still be outside their reach. (See also: What Are The Safest Ways To Store Your Bitcoin?)
According to the Times article, the Winklevoss twins have used a similar approach in Gemini. “Getting into the company’s wallets requires multiple signatures from cryptographically sealed devices that were never linked to the internet," they explained. This approach has attracted investors to their exchange. The Times article quotes a managing partner at a virtual currency hedge fund as saying that Gemini is one of the few exchanges he trusts as a platform.
To be sure, the exchange’s approach does not absolve bitcoin owners from their responsibility of ensuring safety for their keys. However, it significantly lessens the chances of Gemini being hacked. In addition to volatile price swings for cryptocurrencies and outages, security has emerged as another significant problem for exchanges.
Over the years, numerous incidents of hacking and compromises in security have had a detrimental effect on the cryptocurrency ecosystem's reputation. As bitcoin and the general cryptocurrency ecosystem moves towards mainstream awareness and adoption, this could prove to be a strong selling proposition for Gemini in a landscape littered with hacked cryptocurrency exchanges.
Investing in cryptocurrencies and other Initial Coin Offerings (“ICOs”) is highly risky and speculative, and this article is not a recommendation by Investopedia or the writer to invest in cryptocurrencies or other ICOs. Since each individual's situation is unique, a qualified professional should always be consulted before making any financial decisions. Investopedia makes no representations or warranties as to the accuracy or timeliness of the information contained herein. As of the date this article was written, the author owns 0.001 bitcoin.