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Blockchain Capital - BitGo Case Study

Secured by BitGo, Blockchain Capital Invests in the Future of Crypto Assets

For Co-Founder and Managing Partner Brad Stephens, life before a secure custody solution was more than stressful.

Blockchain Capital, a venture capital fund focused solely on blockchain-based projects and digital currencies, was managing a significant cryptocurrency portfolio without a dedicated custody solution.

“Keeping our cryptocurrency secure was my largest source of anxiety in the past five years. Personal security, being kidnapped, that was a genuine concern, not to mention fear of simply losing the digital keys,” Stephens explained. “I was walking to and from work with millions of dollars worth of cryptocurrencies stored on a physical ledger in my pocket.”

After a lengthy process reviewing custody options, Blockchain Capital determined that BitGo, the market leader in cryptocurrency financial services, was the right choice for them. BitGo Custody provides advanced cold storage technology and is backed by BitGo Trust, the first qualified custodian purposebuilt for holding digital assets.

The benefits of BitGo include:
• Regulatory compliance: qualified custody
• Insurance covering both theft and data breaches
• Robust security controls: SOC 2, CryptoCurrency Security Standard (CCSS), and Committee Sponsoring Organizations of the Treadway Commission (COSO) alignment
• Security thought leadership: Instructors at Carnegie Mellon University CISO and CRO executive programs and FS-ISAC membership
• 100% multi-signature technology
• Bank grade vaults
• Broad support for coins and tokens, forks, and airdrops

“We wanted to ensure that the solution we chose would be completely secure, but also easy to manage,” said Stephens. “We chose BitGo because when we compared custody offerings, BitGo’s solution was clearly far ahead of the other options in both design and security.”

Specifically, Stephens pointed out the user-friendly interface, the ability to easily move between hot and cold wallets, to clearly see token and coin holdings, and to have auditors be able to sign in and review the fund’s assets as important benefits of the BitGo Custody experience. Offering a comprehensive security model, the broadest support for digital currencies, and easy customization of organizational user roles, BitGo Custody is focused exclusively on meeting the needs of the institutional market.

“Finally implementing a custody solution has taken an enormous weight off of my shoulders. Having custody fully solved and entirely out of my control has been one of the greatest things to happen this year,” Stephens said.

Blockchain Capital looks for projects that are shaking up the status quo by decentralizing power structures and supporting self-sovereignty. Providing financial inclusion for the unbanked is a priority for the fund.

“Our objective is to identify what the effect of blockchain technology is going to be in two to five years; how the technology will allow for the creation of decentralized power structures and new political structures,” Stephens explained. “The technological shift we’re seeing and going to continue to see from cryptocurrencies and blockchain technology is game-changing on a global scale.”

Introduced to Bitcoin in 2012, Stephens and his brother, Bart Stephens, fellow Co-Founder and Managing Partner, began mining the cryptocurrency, eventually blowing out power for an entire Tiburon, California neighborhood.

“We were accumulating Bitcoin, but didn’t know what to do with it, how to store it, or where to sell it,” said Stephens. “At that point we started looking for infrastructure and writing seed checks to companies building in the space - that was the catalyst for our first fund at Blockchain Capital in 2013.”

In May of 2016, Stephens watched what transpired with crowdfunding of the Ethereum blockchain-based Decentralized Autonomous Organization (DAO). More than 11,000 investors took part in the crowdfunding efforts, pouring over $150 million worth of Ether into the DAO. By mid-June an error in the DAO’s code had been exploited, sinking the DAO’s efforts, but the significance of the crowdfund had already been established. Blockchain Capital was keen to beta test the power of the mechanism for themselves.

Seeking to broaden investment participation in their third round, Blockchain Capital planned to issue tokenized fund ownership via a smart contract on the Ethereum blockchain. In April 2017, after much regulatory consideration, a crowdsale for the fund launched the BCAP security token.

“Security tokens are likely to be the biggest trend in global finance in the next decade; they bring liquidity to illiquid asset classes and allow for a more diversified approach to investing,” said Stephens. “Custody of these new tokenized assets will be key to supporting this ecosystem.”

Stephens believes that for the greater good of the ecosystem, a maturity of infrastructure has been, and continues to be, needed.

“Custody was a critical component that was lacking. BitGo has built an elegant solution that just keeps getting better. Solving that has helped our entire ecosystem, which in turn helps all of our portfolio companies at Blockchain Capital,” Stephens said. “We’ve seen this industry come a long way, but more growth is needed. We’re here to support that expansion.”

Blockchain Capital - BitGo Case Study

Blockchain Capital was founded in 2013 with a mission of helping entrepreneurs build world-class companies and projects based on blockchain technology.

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