Tech
Jack Dorsey’s Block is building a sci-fi-style crypto wallet to keep Bitcoin safe. Here’s how it works
Block, the technology company formerly known as Square and led by Twitter co-founder Jack Dorsey, is developing Bitkey, a cutting-edge cryptographic key product. The company is expected to launch the new hardware later this year.
Bitkey is a hardware-based physical cryptographic key product that serves as a self-custodial wallet. It’s not your typical mobile app, but an actual piece of hardware that you can hold in your hand and is designed to put the keys to your digital assets squarely under your control.
Bitkey business head Lindsey Grossman says in an exclusive interaction with Business Today that a team of engineers, designers and product managers have been working on the product for many months. “The Bitkey Beta program is the result of months of hard work and dedication from our team and the thoughtful feedback we have received from others in the industry and potential customers,” said Grossman.
“Our goal is to create a product that allows customers to take control of their bitcoin in a secure and easy-to-use way,” he adds. Grossman noted that Block CEO Jack Dorsey is also deeply supportive of the Bitkey project. His enthusiasm stems from the product’s potential to give customers control of their money, as well as the program’s open-minded approach to development.
Grossman also demonstrated the product to this writer during a video call. With its elegant and futuristic design, Bitkey looks like a gadget straight out of a science fiction film. However, it is designed to be more than just a novelty. It has the potential to serve a critical purpose in the world of cryptocurrencies by bringing transparency of ownership and self-custody amid increasing regulatory scrutiny worldwide.
Users can purchase Bitcoin on a cryptocurrency exchange and then transfer it to their Bitkey wallet. Any transaction or transfer from Bitkey beyond a limit set by the customer must be approved by the Bitkey device.
The user can transfer any amount to Bitkey and for money sent from the wallet, he can create a rule that any transaction above any chosen amount (say $20) cannot be transferred from the wallet unless the user also you approve by signing with the hardware and then connecting to the mobile phone. In this example, let’s say the user’s phone is stolen and someone gains access to their mobile app.
With this spending limit in place, only $20 is at risk; all the rest of the money the customer has protected behind the obligation of additional hardware signature which is recommended to be kept regularly hidden and separate from your mobile phone. It’s a bit like the two-factor authentication that banks use in the case of mobile banking, whereby transactions take place only after entering the code that account holders receive via email or SMS.
Grossman says self-custody wallets like Bitkey put the keys in the user’s hands and provide self-custody of their money. He explains that Exchange-hosted wallets hold the keys on behalf of the users, so the user never actually owns the keys. Citing the collapse of US cryptocurrency exchange FTX last year that led to many investors losing their money, Grossman argues that a tool like Bitkey can protect investors in similar scenarios.
“As we saw with the FTX disaster, when things go wrong, you realize you don’t really own your money. That’s why we wanted to build something that puts the keys in customers’ hands and gives them personal custody,” Grossman explains.
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The Block team released the product details publicly on their development blog. Bitkey’s minimalist design belies its functionality. With no screen interface on the hardware itself, the Bitkey’s exterior is sleek and uncluttered. The only interactive element on the device is a fingerprint sensor. To perform a transaction when the amount exceeds user-determined spending limits, the user simply initiates a command on the mobile app and then confirms the transaction by tapping the fingerprint sensor on the device and connecting the device to the mobile phone via NFC.
NFC, which stands for Near Field Communication, allows two devices to communicate with each other when they are close together. The product is what the Block team calls a “two-out-of-three multi-signature Bitcoin wallet.”
Grossman explains: “We call it a two-out-of-three multi-signature Bitcoin wallet, where there are three keys. One key is on your mobile phone, which you access via the mobile app. The second key is on the hardware device (Bitkey) And the third and final key is on Block’s server this multi-signature design, you always need two keys to transfer money (mobile app and Bitkey) and Block has one on the back. end.”
Grossman points out that by having Block in possession of only one key, it will never be able to independently facilitate the circulation of money, further strengthening the product’s commitment to the principle of self-custody.
While Grossman declined to share the possible pricing of the product, Block has made great strides in ensuring there are buyers for the device when it launches later this year. In addition to making it available to interested users of Cash App (Block’s subsidiary), Block has also signed an agreement with Coinbase, one of the largest cryptocurrency exchanges in the world.
According to the company, the “transfer” and “buy+transfer” features with both partners will see a staggered rollout as the product is in beta phase. But, once live, the company says customers will be able to purchase bitcoin with the exchange partners of their choice and immediately transfer their bitcoin into personal custody with Bitkey.