What is BitGo?
When you download and install Bitcoin wallet software on any device and start it up for the first time, a “private-key” is generated for the user. This “private-key” is needed to sign a transaction in order to send coins from one Bitcoin address to another. If another party acquires your private key through malicious activity, your Bitcoin wallet can be emptied out in a heartbeat. This is one of the most delicate parts of the Bitcoin software architecture and this precise security issue is where BitGo comes into the picture. BitGo aims to solve this security risk with a multi-signature (multi-key) approach. When you use BitGo to generate your wallet, instead of one private key being generated, the BitGo system will generate a total of three private keys.
How it works
The first key will belong to the user, the second key will be kept by BitGo and the third key will be backed up offline in case there is a system failure on the part of BitGo or the user. In the BitGo system in order for the user to transfer Bitcoins from their wallet, the transaction will require two keys, the user’s private key and the second key that was stored on BitGo’s infrastructure. This system provides much better security to the user not only from hackers, but also from possible system failure on the part of the user because of the backed up third key! Considering how often hard drive failures occur – bitcointalk forum being a perfect example – it is a no brainer to use BitGo’s system to keep your Bitcoin safely tucked away. It is also important to note that BitGo does not have control over the user’s Bitcoin because they only hold one key, BitGo only acts as a secondary verification entity with their own key, remember, two keys are needed for a transfer to take place. So from a user’s perspective a failure/hacking on either BitGo or the user will not compromise the Bitcoin that is held in a multi-sig wallet!
BitGo will play an essential part in the Bitcoin ecosystem as it provides the security necessary for Bitcoin and Cryptocurrencies in general to adopted en masse by consumers and businesses alike. In the wake of several prominent Bitcoin heists such as the Bitstamp exchange hack where several million dollars worth of bitcoin were stolen by hackers, digital currency exchanges and many other Bitcoin related businesses have come to realize how indispensable multi-signature wallet systems like BitGo really are. BitGo also provides merchants and businesses the ability integrate their multi-signature wallet system via API (application programming interface). BitGo’s API allows merchants to adopt Bitcoin without the tedious programming work necessary to secure their Bitcoin wallets. All it takes is a few lines of code and Presto, your business which was limited to regular currencies has now opened it’s doors to the entire digital currency marketplace, how simple and innovative! BitGo’s system will prove to be a major milestone for the worldwide embrace of Bitcoin as both a store of value and medium of exchange unrivaled at any time in the history of financial systems.
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