Darin Stanchfield is in the currency security business in Bothell, but instead of riding shotgun in an armored car or investigating counterfeit money, he deals with Bitcoins.
Bitcoin is a cryptocurrency, meaning it exists solely online without any central regulation. Their value fluctuates based on demand, and produced at a predictable pace to avoid inflation.
People who want to use Bitcoins can buy into the currency at various websites, exchanging hard currency like the US dollar into an equivalent portion of coins. One Bitcoin is worth roughly $360 today. Prices peaked in 2014 when the price of a single Bitcoin reached nearly $1,200.
There is no ‘central bank’ or regulatory agency for Bitcoins, which means users are entirely responsible for their coins security, even with some virtual middlemen offering greater security.
“You have to practice good security, and it’s hard,” Stanchfield said.
Bitcoins are transferred directly from the buyer to seller, and once they’ve been sent, they can’t be recalled.
So if a hacker or virus gains access to a users unprotected digital ‘wallet,’ it can clear it out irreversibly. Over the course of the currency’s history, this has happened numerous times.
Concerned about security, Stanchfield said he wanted to develop a product which secures his customers Bitcoins, so he invented KeepKey.
In the physical world, a KeepKey is a sleek black rectangular box around three inches long. In the digital world, it’s a powerful virtual key, securing a Bitcoin storage cloud.
As Stanchfield describes it, coins are stored in a wallet which can only be opened with a key generated by the KeepKey. When the KeepKey is plugged into a computer via a USB cable, it generates a key that is required to access the wallet.
The authorization code itself never leaves the device or the cloud, rather the KeepKey sends an authorization signal to the computer, authorizing it to access the cloud, and the owner to transfer funds. The KeepKey never connects to the internet, creating greater security. In addition to the virtual key, the user also must push a physical button on the device to authorize a transaction.
While all this may sound a bit technically daunting, Stanchfield said they tried to make the process as simple as possible for the layman. Once purchased, the owner installs an app on their web browser which guides them through the process.
“We try and gear it towards people who aren’t engineers,” he said.
Stanchfield said he’s met many people who encrypt their Bitcoins on a thumb drive. He said this works well until they have to decrypt the coins to use them, at which point they become vulnerable to hackers and malware, which can steal the currency.
“(KeepKey) is the peace of mind, the confidence, that there’s no way [other people can] get to your Bitcoins on this device,” Stanchfield said.
A KeepKey sells for $239 currently, and Stanchfield said they’ve already had a good reception in the business world. He and Doug Miller, KeepKey’s business developer, said businesses from multi-national companies down to hair salons and wine retailers have contacted them.
Bitcoins were developed in the late 2000s, with it’s first actual transaction occurring after a programmer offered to purchase a $25 pizza on a Bitcoin forum with 10,000 Bitcoins.
Bitcoin also has a complicated history with illicit trades. Most notably the cryptocurrency came into the spotlight after the massive online drug market called Silk Road was shut down by the federal government, resulting in $3.6 million in Bitcoins seized, according to historyofbitcoin.org.
Various hacking incidents through the history of the currency have prompted third-party vendors and even digital banks to organize and set up shop, offering greater security.
Recently, China’s central bank banned Bitcoin transactions, and the US government has looked at regulating the currency in the past.
As Bitcoins increase in popularity and legitimacy, markets have adjusted to accommodate. There are Bitcoin ATMs in the Seattle area, with at least one located in the Westfield Southcenter Mall in Tukwila, Miller said.
Legal marketplaces have also sprung up recently, such as bitpremier.com, which lets users pay for luxury goods like high-end cars and real estate with Bitcoins.
Stanchfield said he anticipates Bitcoin use to increase in two key markets: businesses and developing economies.