Where should you store your Bitcoins?

By Sooraj Shah
22 Jan 2014 View Comments
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Now that Bitcoins are worth around 60 times more than they were at the beginning of 2013 – $800 (£485) compared with just $13 (£7) – companies are cashing in on phenomenon and lining up ways to store the virtual currency.

Further reading

Until now, it was thought that most users of Bitcoin would have the aptitude or IT nous to ensure that their currency was safely stored, but a recent news story highlighted that this may not be the case.

James Howells, an IT worker from South Wales lost £5m worth of the currency, after forgetting he had the collection on his damaged laptop and throwing the machine away.

In addition, digital currencies – be it Bitcoin or an alternative – may soon start to be used by casual end users more widely, making safe storage more of an issue.

For example, Cumbria University has said that it will allow some students to pay their tuition fees with Bitcoin, while eBay UK is reportedly allowing merchants to trade Bitcoin and other virtual currencies, albeit only in classified ads.

James Smith, co-founder at Elliptic, which claims to have launched the ‘first-ever' insured storage vault for Bitcoin, says that storage solutions can help non-technical or moderately technical users.

"There are a lot of areas which people can slip up on if they're trying to do the security themselves. So while it is possible for anyone to secure offline storage, you do have to make sure you get all of the steps correct," he told Computing.

But is it really worth the potential expense of storing your coins at the likes of Elliptic, or other providers?

Simon Hamblin, MD of Bitcoin storage provider Netagio, believes that it is a safer option for owners to not have to deal with securing their Bitcoins themselves.

"The fact that it is [offline and] disconnected is the safest way you can store them. We encrypt them several times over then store them in a different type of media in several locations in the UK, and they are secure locations in the UK as well – so to gain access to them we have to cross physical boundaries as well as certain levels of encryption," he said.

But while Netagio offers its "cold storage" solution for free with the hope of reeling customers in, and then charging them for other services such as withdrawals and transactions later, Elliptic can charge customers because it provides insurance cover.

Elliptic's service is insured by a Lloyd's of London underwriter, but Netagio's Hamblin claims that his firm's parent company GoldMoney Network, a metals trading business, has seen demand for Bitcoin storage, but not for insurance.

However, he doesn't rule out going down the route that Elliptic has in the future "if customers require it".

Elliptic's Smith believes that storage competitors like Netagio would have already looked at getting insured, but he believes that they would have failed to get the required backing.

"It's a logical step as far as we're concerned. There are plenty of other smart people out there that will be looking at how they can have that kind of reassurance. It's only a matter of time, and depends on whether they can demonstrate [that they are insurable] to their insurers," he said.

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