$10 Billion: Bitcoin Storage Service Xapo Reportedly Holds 7% of BTC's Supply in Cold Storage Vaults

Francisco Memoria
  • Bitcoin wallet and cold storage service provider Xapo reportedly holds 7% of the cryptocurrency's supply in its vaults on behalf of wealthy clients.
  • Per reports, this amount equals roughly $10 billion. It's so security-focused it even has a pulse scanner in its vaults, to stop criminals from accessing them using amputated hands.

Bitcoin storage service provider Xapo, a cryptocurrency startup that’s been on the market since 2014, reportedly holds about 7 percent of Bitcoin’s total supply in its vaults. The amount is being held in cold storage on behalf of clients, and equals about $10 billion.

According to Bloomberg, Xapo’s chief executive officer Wences Casares has spent the past several years pitching bitcoin to Silicon Valley millionaires and billionaires. Xapo itself has built a network of underground vaults, which span across five continents, including one in a decommissioned military bunker, to keep the bought bitcoins in cold storage.

Citing two unnamed clients, Bloomberg reports that the wallet and cold storage provider has an estimated $10 billion worth of bitcoin in its vaults. If the figure is accurate, it means Xapo – a four-year-old startup – has more “deposits” than 98 percent of the over 5,600 banks in the United States.

The company is reportedly overseen by the self-regulating Financial Services Standards Association, which ensures its members comply with anti-money laundering (AML) rules. Cryptocurrency funds praise its storage concept, despite the arguably centralized setup it has.

CoinShares’ CEO Ryan Radloff, the CEO of cryptocurrency investment firm CoinShares, which reportedly has over $500 million worth of bitcoin stored at Xapo, was quoted as saying:

“Everyone who isn’t keeping keys themselves is keeping them with Xapo. You couldn’t pay me to keep it with a bank.”

Ryan Radloff

Xapo’s backers now include LinkedIn co-founder Reid Hoffman and billionaire investor Michael Novogratz, who recently defended bitcoin in the scaling debate, noting its market cap “dwarfs bitcoin cash.” Their bet, Bloomberg notes, is that bitcoin is here to stay.

The cryptocurrency storage service’s business model is a successful one. Bitcoin’s late 2017 surge saw various criminals attempt to enter the market, which led bitcoin tycoons to resort to drastic measures, including fortifying their homes, hiding their identities, and studying self-defense.

Per Bloomberg’s report, it takes Xapo two days to retrieve bitcoin from its vaults. Before making transactions, it verifies the client’s identity and authenticates the request before conducting it.

First Block Capital, the first fully registered cryptocurrency firm in Canada, picked Xapo as its custodian after months of due diligence, which included a tour to the startup’s Swiss vault. Sean Clark, the firm’s founder, noted that the vault’s fingerprint scanners were even equipped with a pulse reader that would prevent amputated hands from being used. He was quoted as saying:

“Every part of their DNA is geared to security. Whenever we make big transfers they FaceTime us, we have duress words, if it’s big enough they’ll fly out to see us.”

Sean Clark

Bitcoin Mining Difficulty Increases to Highest Level Since January 2018

Siamak Masnavi

According to data from Bitcoin mining pool BTC.com, yesterday (June 16), Bitcoin's mining difficulty took a 14.95% jump, as the result of which it reached its highest level since January 2018.

The Bitcoin network has been designed with the aim of a new block of transactions being generated on average every ten minutes. The time it takes to mine a new block is controlled by a parameter known as the "mining difficulty" and the algorithm responsible for adjusting it is called the "difficulty adjustment algorithm" (DAA). 

Bitcoin's DAA adjusts the mining difficulty parameter every 2016 blocks (roughly every two weeks). That's why since the beginning of the year, there have been 12 difficulty adjustments to Bitcoin's mining difficulty:

BTC difficulty changes - 17 June 2020.png

As you can see, since the Bitcoin halving on May 11 (when the block mining reward got reduced from 12.5 BTC per block to 6.25 BTC per block), there have been three adjustments to Bitcoin's mining difficulty:

  • May 20: Bitcoin's mining difficulty decreased to 15.14 trillion (a 6.00% change)
  • June 4: Bitcoin's mining difficulty decreased to 13.73 trillion (a 9.29% change)
  • June 16: Bitcoin's mining difficulty increased to 15.78 trillion (a 14.95% change)

This latest adjustment to Bitcoin's mining difficulty is the largest one this year, and it is the largest difficulty increase in almost 2.5 years. Back in January 2018, we had two difficulty increases of 15.36% and 16.84% on January 13 and January 25 respectively.

Currently, Bitcoin's mining difficulty and average hash rate are very close to the levels they were before the halving, but the daily block mining rewards are now 900 BTC per day instead of 1800 BTC per day.

Ethan Vera, Co-Founder and Head of Finance of the Luxor Technologies, which is the owner and operator of crypto mining pool Luxor Mining (launched in Janujary 2018), told Coindesk:

“With the value of hashrate set to decrease to $0.075 cents per TH/s, not many of the existing, old-gen equipment will turn back on. New hashrate coming onto the market will likely be driven by new-gen and high-efficiency machines.”

And Kevin Zhang, Chief Mining Officer at Greenidge Generation, told Coindesk:

“Despite limited price action, we expect the hash rate to continue rising in the near term as more older generation miners go offline and newer generation ones come online."

Featured Image by "SnapLaunch" via Pixabay.com