Winklevoss Twins Protect Their $1B in Bitcoins Using Self-developed Sophisticated System

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by Darya Rudz · 3 min read
Winklevoss Twins Protect Their $1B in Bitcoins Using Self-developed Sophisticated System
Photo: Brook Ward / Flickr

Cameron and Tyler Winklevoss have become virtual currency millionaires. They try to save their bitcoin fortune cutting up their private key and keeping it in different bank vaults.

Cameron and Tyler Winklevoss, often referred to as Winklevoss twins, are American rowers and Internet entrepreneurs known for co-founding HarvardConnection (ConnectU) along with Divya Narendra, their Harvard University classmate.

In 2004, the Winklevoss brothers sued Facebook founder Mark Zuckerberg, claiming he stole their ConnectU idea to create the popular social networking site, and ultimately received $65 million.

The brothers were not understood bu the public when they started buying lots of bitcoins in 2012. Using the funds received from Zuckerberg, the Winklevosses purchased about 120,000 bitcoins which at that moment cost less than $10 each. This investment made the brothers first outstanding virtual currency millionaires in 2013, when Bitcoin was primarily known as a currency for online drug dealers.

In 2013, the twins led a $1.5 million in seed funding of BitInstant, a bitcoin payment processor. In 2014, they launched Winkdex, a financial index that tracks bitcoin’s price using data from seven fidderent exchanges. In March 2014, the twins purchased seats on Richard Branson’s Virgin Galactic shuttle using the profits they had made from bitcoin.

Now the Winklevosses’ bitcoin fortune is worth about $1.3 billion. According to the data from CoinMarketCap, the bitcoin price has raced up (it was worth about $17,800 on Tuesday afternoon), so nobody laughs at the them now.

“We’ve turned that laughter and ridicule into oxygen and wind at our back,” Tyler Winklevoss said. “We are very comfortable in very high-risk environments with absolutely no guarantee of success. I don’t mean existing in that environment for days, weeks or months. I mean year after year.”

As the bitcoin fortune is quite large, it  needs protection. primarily from hackers, who, according to one cryptocurrency-mining service, had taken $80 million in bitcoin earlier this month.

Every bitcoin has its own address that can be accessed only with the corresponding password, or private key. And unlike money taken from a bank account, stolen Bitcoin are essentially impossible to retrieve. The Winklevoss twins use a “cold wallet” system to make their fortune safe. They cut up printouts of their private keys into pieces and then distributed them in envelopes to safe deposit boxes around the country. In such a way, even if one envelope is stolen, the thief doesn’t get the entire key.

According to the Winklevosses, they use a similar system for Gemini, the bitcoin exchange they created. Gemini gots a license in New York, which allows them hold the cryptocurrency on behalf of banks and traders. The exchange is now one of the most trusted destinations for sophisticated investors.

“Gemini is an underappreciated exchange, one of the few exchanges I trust as a custodian,” Ari Paul, a managing partner at the virtual currency hedge fund BlockTower Capital, said.

Bitcoin News, Cryptocurrency News, News
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