Ah, bitcoin. The digital currency that conjures images of illicit Internet activity, the once-huge Silk Road somehow operating through the interwebs to anonymously sell black market goods and drugs. While bitcoin hit a public relations low point in 2014, and mostly stayed out of the headlines in 2015, the digital currency is poised to make a comeback in 2016.
Darin Stanchfield is counting on it.
Stanchfield, CEO of bitcoin wallet developer KeepKey, said it’s been tricky to navigate bitcoin’s negative reputation, but it’s only a matter of time.
“There will be a tipping point,” Stanchfield said. “There will be one day where we’re using it and it’ll feel like we’ve always been using it. The number of transactions is going up exponentially, and as long as it becomes more secure, more convenient, and more usable, it’ll happen.”
KeepKey is one of just a few bitcoin wallets available. Stanchfield launched the Bothell-based company in February of 2014, and spend a year and a half developing the wallet. KeepKey hit the marketplace in August 2015. Stanchfield would not disclose revenue figures, but said, “We’ve done better than anticipated. It’s multiple percent (better than) what we were expecting.”
A bitcoin wallet isn’t something an owner carries around in their pocket. It’s more like a small external hard drive that plugs into a computer, and provides a secure transaction.
A bitcoin user has two keys, a public key and a private key. The private key is known only to the user and works as a sort of PIN. The public key is how each person is identified within the bitcoin system. The public key must be known to receive a payment of bitcoin. To spend bitcoin, the user must enter their private key to authorize the transaction. Bitcoin is stolen when the private key is hacked.
One of the downsides of bitcoin is that there is no recourse when bitcoin is stolen. A user simply watches their bitcoins move through the system and payment chain, with no one to report the theft to and no way to get it back. That’s why bitcoin’s security is such a big deal.
“Bitcoin requires perfect security and perfect digital security is really hard. We know how to hide physical things, we’ve been doing that for thousands of years. But digital security has been around only since the 1970s. We just aren’t very good at it,” Stanchfield said. “People end up trusting other people with their bitcoins, and those people get hacked.”
Stanchfield said that when he became interested in bitcoin, he went through great lengths to ensure his currency’s security, including purchasing a laptop, stripping it of networking components, and installing a clean operating system — all things a normal person, and KeepKey customer, probably would not do.
“We focus on simplicity for people who are not engineers. I wanted to build something that just anybody could pick up and use,” Stanchfield said. “It’s paranoia-level security for bitcoin, but it’s what’s required. It means you can do perfect security on your own without having to trust a third-party.”
Trusting a third-party to manage and watch our personal security is something the developed world is used to and comfortable with — few fret about the security of their checking account at the local bank. Nobody is burying coffee cans of cash in the yard, as folks did during the Great Depression. But Stanchfield said third-party bitcoin management, and even an external bitcoin wallet, is not what the future looks like.
“Eventually this kind of thing will be integrated into your computer or phone and you won’t have to worry about having a hacker get on the computer and getting your private keys, which means stealing your bitcoin,” he said.