Didi Taihuttu, along with his wife and three children, liquidated all of their assets and bought Bitcoin in 2017 when it was still trading at around $ 900. Now the Dutch family of five is securing most of their crypto assets in secret vaults on four different continents.
“I hid the hardware wallets across several countries so that I never have to fly far if I have to access my cold wallet to jump out of the market,” explains Taihuttu, patriarch of the so-called Bitcoin family.
Taihuttu has two hiding places in Europe, two more in Asia, one in South America and a sixth in Australia.
We’re not talking about buried treasure here – none of the sites are underground or on a remote island – but the family told CNBC that the crypto hiding spots are hidden in different ways and locations, from rental apartments and friends’ homes to towards self-storage sites.
“I prefer to live in a decentralized world where I have a responsibility to protect my capital,” said Taihuttu.
Warm vs. cold storage
There are many ways to store crypto coins. Online exchanges like Coinbase and PayPal will hold tokens for users, while the more tech-savvy can choose to turn off the middleman and keep their crypto cash in personal hardware wallets.
Thumb-drive-sized devices such as a Trezor or Ledger offer a way to secure crypto tokens. Square is also building a hardware wallet and service “to make Bitcoin custody more mainstream”.
Individuals who choose to hold their own cryptocurrency can store it “hot”, “cold”, or a combination of both. A hot wallet is connected to the internet and gives owners relatively easy access to their coins so that they can access and spend their cryptos. The compromise of convenience is the potential exposure to bad actors.
“Cold storage often refers to crypto that has been moved to wallets whose private keys – the passwords that allow the crypto to be removed from the wallet – are not stored on internet-connected computers so that hackers cannot get inside Can hack computers and steal their private keys, “said Philip Gradwell, chief economist at Chainalysis, a blockchain data company.
Gradwell says exchanges also often use cold wallets to secure the cryptos their customers have on deposit.
A recent Chainalysis report examining bitcoin wallets shows that 11.8 million bitcoins are in the hands of long-term investors, 3.7 million are lost, another 3.2 million are floating among traders, and the remaining 2 , 4 million still have to be reduced.
“We can guess which wallets are cold storage – since they have certain behaviors, such as receiving large amounts of crypto from a single source and not sending them for a long time until they are all emptied at once – but you can doesn’t definitely say a wallet is used as a cold store, “explained Gradwell.
In the case of the Taihuttu family, 26% of Didi’s crypto holdings are “hot”. He calls this crypto supply his “risk capital”. He uses these crypto coins for day trading and potentially precarious bets, such as when he sold his Dogecoin for a profit and then bought it back when DOGE’s price bottomed out.
The other 74% of Taihuttu’s total crypto portfolio is in the cold store. These cold hardware wallets that are common around the world include Bitcoin, Ethereum, and some Litecoin. The family declined to say how much crypto it contains.
Bitcoin, Ethereum and Litecoin are all in the midst of another surge, 57%, 83% and 61%, respectively, in the past three weeks.
Moving Bitcoin to cold stores is not a new idea. As long as Bitcoin is around, there is a way to store it cold. But it requires more maintenance.
“Cold storage requires a lot more permissions to access, be it in a bank vault or in the Andes,” said Van Phu, software engineer at the crypto fintech startup Floating Point Group.
And while Taihuttu says it’s easy to top up the addresses of these cold storage wallets with fresh crypto-coins, the fetch is a different story. To lean on your cold crypto, you have to physically fly to your many hiding spots.
Taihuttu is trying to set up a crypto cold wallet on every continent to make it easier to access its holdings.
In the Swiss Alps, a vault is buried in a disused military bunker that is cut off from the Internet, guarded by a security team on site and, according to the website of the digital bank Xapo, is apparently “monitored by satellite in the sky”. The precious commodity under lock and key is Bitcoin.
Coinbase bought Xapo in 2019, an unsurprising move for a company that stores 98% of customer funds offline to provide “an essential security measure against theft or loss”.
While centralized safes like this one offer some security protection, Taihuttu feels too centralized for him.
“If you really want to keep your coins out of reach of the state, you can just store these private keys right out of the box. It’s like burying a gold bar in your yard, ”said Castle Island Ventures General Partner and Coin Metrics Co-Founder Nic Carter.
Therefore, Taihuttu does not use banks or post offices. “I just think it’s too risky,” he said. “What if one of these companies goes bankrupt? Where are my bitcoins? Will I have access? You are putting the trust of your capital back in the hands of a centralized organization.”
But Taihuttu says that some centralized cold storage companies offer a huge advantage.
“You have nice setups for inheritance,” he said. “If you die, these companies will take care of it, too, and I really believe they are doing a great job.”
According to Phu, multi-party computing or MPC is also proving helpful in the area of digital assets. This custody agreement requires multiple parties to agree in order for a transaction to take place.
This avoids the risk of storing private keys and authentication information in a single location, known as the “single point of compromise”. Instead, MPC breaks the private key down into shares, encrypts it, and then divides it among multiple parties, according to Fireblocks, a provider of digital asset infrastructure.
“I think development is currently going to MPC,” said Phu.