Market Mad House

In individuals, insanity is rare; but in groups, parties, nations and epochs, it is the rule. Friedrich Nietzsche

Cryptocurrency

Why BitGo is the future of Blockchain without a Cryptocurrency  

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BitGo is the future of blockchains but it offers no cryptocurrency. Instead, BitGo pursues an old-fashioned business model of offering services and solutions and charging for them.

Specifically, offers an application programming interface (API) platform that offers all the services as its web wallet. Thus entrepreneurs can build the BitGo API into their platforms, games, and e-commerce solutions.

For instance, a gaming company can build a BitGo API into its platform and accept hundreds of cryptocurrencies. To explain, the API gives the gaming platform’s customers direct access to the BitGo API Platform.

Therefore, the gaming platform could accept cryptocurrency payments for play. In addition, the gaming company can use BitGo’s Co-Signing Engine to set rules, rate limits, address whitelists, webhooks, secondary approvals, and other parameters. For example, the gaming platform can decide what cryptocurrencies it will accept and which countries it will take payments from.

So what is BitGo anyway?

BitGo is a hard company to figure out because it combines a software development firm with a cryptocurrency processor. In addition, BitGo has some of the attributes of a bank.

However, BitGo is big, it claims to be the world’s largest processor of Bitcoin (BTC) payments. For instance, Bitgo claims it process 15% of all Bitcoin transactions.

Additionally, BitGo claims to process $15 billion in cryptocurrencies a month and hold $2 billion in cryptocurrency assets in its wallets. However, BitGo is not a cryptocurrency exchange. Instead, it provides services cryptocurrency exchanges.

Those services include BitGo Custody and the BitGo Trust Company. Notably, those entities provide the first custodian for storage of digital assets. For example, BitGo could store cryptocurrency or fiat currency developers peg to stablecoins.

Is BitGo a Bank?

BitGo is not a bank, but it is acting like one. For instance, BitGo Custody now offers up to $100 million in insurance for crypto assets.

Moreover, the legendary Lloyd’s of London is providing BitGo’s insurance, CoinDesk reports. To explain, Lloyd’s is a market in which they sell insurance contracts to underwriters. Most of BitGo’s underwriters are unnamed but CoinDesk claims AmTrust Financial Services is underwriting at least some BitGo Custody assets.

I think BitGo Custody is like a bank because it offers secure insurance. Interestingly, BitGo even offers 100% cold storage of cryptocurrencies in wallets in bank-grade Class III vaults.

Will BitGo Custody Become the first Blockchain Bank in America?

Other bank-like features at BitGo Custody include Institutional-Grade Policy Controls, Regulatory Compliance, Multi-User Accounts, and the ability to keep USD dollars balances in an FDIC-insured bank. Thus, BitGo Custody acts an interface between the blockchain and the traditional banking system.

To elaborate the Federal Deposit Insurance Corporation (FDIC) insures most of the private bank accounts in the United States. The FDIC is a federal agency that regulates banks.

Therefore, I think BitGo is laying the groundwork for becoming the first real cryptocurrency bank at least in the United States. Therefore BitGo is further blowing the lines between financial technology companies and banks.

Goldman Sachs is Behind BitGo

Importantly, BitGo’s backers include Goldman Sachs (NYSE: GS) America’s most famous and infamous investment bank. Other investors in BitGo include trading technology provider DRW, Valor Equity Partners, Craft Ventures, and Repoint Ventures.

Not surprisingly, they organized BitGo like a bank with a chief executive officer  (CEO), chief technology officer (CTO), chief financial officer (CFO), and a chief security officer (CSO). Thus, BitGo is a blockchain organization set up like a traditional company.

Finally, I think BitGo is the future of blockchain because blockchain is the service it sells. To explain, BitGo sells blockchain services; including private blockchains, APIs, and cryptocurrency custody to other organizations.

In fact, BitGo’s customers include some of the biggest names in cryptocurrency including Genesis Mining and Ripple (XRP). Interestingly, BitGo is providing Ripple’s multi-signature security, treasury management, and other services, BitGo’s Medium reveals.

BitGo helps Mint Royal Mint Gold (RMG)

High profile BitGo customers include The Royal Mint (Her Majesty’s Treasury) and commodities and future trading giant the CME Group (NYSE: CME). Specifically, the Royal Mint, CME, and BitGo are building Royal Mint Gold (RMG) a blockchain-trading platform for gold, Reuters reports.

Hence, the Royal Mint can offer a gold-based crypto asset; RMG, that CME will trade. To elaborate, speculators can trade bars of gold kept in the Royal Mint’s vault through RMG. Each RMG token will represent an amount of gold kept in the Royal Mint’s custody. Meanwhile BitGo Custody will provide the crypto custody.

Moreover, the Royal Mint plans to issue up to $1 billion worth of RMGs, Reuters claims. Thus, BitGo could be the future of cryptocurrency and blockchain because it is laying the groundwork for a massive blockchain trading infrastructure.

All speculators, traders, and blockchain fans need to watch BitGo closely. BitGo’s failure or success could show us whether blockchain can go mainstream and make money.