How the First Bitcoin Hedge Fund Approaches Security 124
An anonymous reader writes with a link to a story at Forbes about what's said to the first Bitcoin hedge fund; the article goes into some of the details of how the (literally) valuable data is kept. A selection: "The private key itself is AES-256 encrypted. After exporting Bitcoin private keys from wallet.dat file, data is stored in a TrueCrypt container on three separate flash drives. Using Shamir's Secret Sharing algorithm, the container password is then split into three parts utilizing a 2-of-3 secret sharing model. Incorporating physical security with electronic security, each flash drive from various manufacturers is duplicated several times and, together with a CD-ROM, those items are vaulted in a bank safety deposit box in three different legal jurisdictions. To leverage geographic distribution as well, each bank stores only part of a key, so if a single deposit box is compromised, no funds are lost."
This makes no sense... (Score:3, Interesting)
Such procedures only work for cold storage of Bitcoin: wallets where you have no access to them. Basically, the equivalent of a bank vault for gold: its there, its sitting, but you can't actually do anything with it. Worse, unlike a bank vault, you can't transfer the bitcoins while they are in this vault.
Therefore, the hedge fund's only strategy for these wallets is to buy BitCoins and sit on them. And do nothing. Which, if you believe in BitCoin, makes sense (the design is hyper-deflationary, so the only rational thing to do with BitCoins is to hold BitCoins), but thats hardly what you'd call a hedge-fund strategy.
So how can you call it a hedge fund when all it can do is buy & hold?