Verification and transparency are important issues for bitcoin. While bitcoin is by-and-large a private and anonymous currency, and many users are drawn to it specifically for that, there are certain times when a bit of extra security and transparency is needed.
Enter BitGo, a company that has already made a name for itself by providing one of the most secure wallets on the web. Now, BitGo is going to provide a new financial transparency service called “Verified by BitGo” that will allow companies to demonstrate their bitcoin and financial solvency online.
Proving solvency is a big issue for many companies that operate using bitcoin. The collapse of exchanges, the occasional scam, and other issues have made bitcoin users wary of solvency issues. Proving to potential clients and customers that they are solvent is a great way for companies to draw in business.
In the past, companies would often make large transfers of bitcoins to prove that they in fact control the assets in question. Moving such large amounts, however, is itself fraught with security risks. BitGo’s new service will now allow companies to verify a company’s solvency without having to resort to such risky transactions and activities.
Besides providing proof of solvency in bitcoins, BitGo can also provide proof of solvency for other currencies and assets, such as U.S. dollars. For bitcoin traders who are afraid that they won’t be able to exchange their bitcoins for money, this can provide an extra level of reassurance.
ChangeTip, an online tipping platform that allows people to easily send money, will be the first company to use Verified by Bitcoin, having been part of the launch announcement. The service will display the company’s assets and liabilities in real time, thus allowing customers to verify that the company has the necessary assets to conduct transactions and is in fact solvent.
After the massive Mount Gox collapse, many bitcoin users have rightly been wary of potential solvency issues. Verified by BitGo could help bitcoin users rest easy, knowing that they are conducting transactions with legitimate and financially stable companies.
Mount Gox was taken offline after some 850,000 bitcoins turned up missing. At the time, the total value of those bitcoins approached a half billion dollars. It’s unclear exactly how so many bitcoins could go missing, but Mt. Gox was long plagued by technical issues and security weaknesses before its collapse.
Verified by BitGo will help add an additional layer of transparency to the bitcoin community, which should help bitcoin users avoid insolvency issues in the future. Since this is a business-side transparency verification, users will not have to sacrifice their own anonymity while conducting transactions, thus helping bitcoin preserve its unique and confidential nature.
As more security features like Verified by BitGo are added, bitcoin will become a more stable and established financial instrument. Over time, this should help bitcoin become more widely adopted. Those people sitting on the sideline due to perceived security issues will be reassured that bitcoin is, in fact, a stable, reliable currency, and one that is free from the often detrimental oversight of government regulation.
In the long run, BitGo aims to position its services as a foundational security feature for the bitcoin platform. At the moment, only a small number of companies have signed on to use Verified by BitGo, but the company’s management team claims that they are in talks with bitcoin exchanges and other companies.