Startup Raises $4 Million to Secure Crypto Transactions Without an Internet Connection
Thieves can frequently steal cryptocurrency because the underlying technology for digital currency requires the Internet for tracking transactions—and nearly anything online can be hacked. Even so-called cold storage wallets, which store currencies like Bitcoin on unconnected physical devices, are vulnerable because users must briefly use the web to access their digital money.
In response to this problem, an Israeli startup called GK8 promises to offer a way for crypto exchanges, hedge funds, and other institutions a record of digital currency transactions without an Internet connection. On Wednesday, the company said that it had raised $4 million from investors including the founder of the cybersecurity giant Checkpoint.
GK8 was launched in 2018 by two members of a special defense unit that guards Israel’s digital assets. The startup also counts Eran Trofer, a noted cryptography expert and the founder of the digital currency ZCash, as a board member.
In an interview with Fortune, CEO Lior Lamesh described GK8’s technology as “ledger agnostic,” meaning it can be used for Bitcoin and other cryptocurrencies. GK8’s customers include the stock buying app eToro, which offers trading a number of cryptocurrencies, as well as banks and exchanges, he added.
Lamesh says G8K can record transactions to a blockchain—public online ledgers used to memorialize transactions—while offline by using a “unidirectional connection.” That means data can be uploaded without exposing the crypto owner to the broader Internet.
The company has filed several patent applications for the security system, one of which describes “unidirectional communication hardware” and a digital wallet isolated from other devices.
“The product is unique in communicating with blockchain to manage large amounts of money,” said Lamesh. “The current cold wallet solutions try to decentralize the problem but don’t solve it.”
G8K’s formal launch comes at a time when crypto theft is as prevalent as ever. A recent U.N. report disclosed that North Korea made concerted attacks on crypto exchanges as part of a campaign in which its hackers stole over $2 billion to fund the country’s military activities.
Meanwhile, the business for “crypto custody”—storing Bitcoin and other digital assets for a fee—is booming. The U.S. crypto giant Coinbase has vastly expanded its custody business in the last year, while Gemini, the crypto service founded by the Winklevoss twins, this month launched a custody service of its own.