Bitcoin and Insurance – Covering Your Virtual Wallet On June the 2nd, that changed. The Great American Insurance Group an A rated US insurer with a $5 billion valuation – announced that it would be offering virtual currency insurance. The company will make the policies available through its Fidelity/Crime division. BitSecure™, our proprietary bitcoin theft Insurance policy, is a bespoke insurance product customized for each customer. The policy provides a robust cyber and professional liability policy that goes well beyond narrow crime policies previously adopted by some bitcoin vault providers. Aug 07, · Bitcoin insurance policies are costly and typically don’t cover all funds lost during hacks. Are Feasible Individual Policies Available for Investors? As mentioned above, insurance might be a necessary expense for cryptocurrency exchanges. There are a number of companies that offer bitcoin insurance for individual investors as well.
Bitcoin insurance coverageBitcoin Insurance: 5 Things You Need To Know | UseTheBitcoin
Even though there a number of technical solutions that exchanges can implement, cryptocurrency users are also looking towards bitcoin insurance as a potential backup plan. In this article, we examine the various options available for cryptocurrency insurance and how this will shape the future of the market. The recent history of hacks shows that cryptocurrency exchanges are vulnerable to hacks and third-party interference.
From to , there have been a number of large-scale hacks. Even if the amount of tokens being stolen these days is lower, the value of funds stolen from hacks seems to be increasing as token prices have increased over the years. Technology is likely the most effective way to stop these hacks.
This centralization has led to many security issues , though. Even hardware wallets have been hacked and stolen from in the past.
Since even the most secure options can lead to the loss of cryptocurrency funds, many users and exchanges are considering bitcoin insurance options. First, any insurance provider must consider the risks of providing coverage. Calculating risk for other, more traditional forms of insurance is thought to be much more simple.
For example, for flood insurance, it can be straightforward to predict the likelihood that an event will occur based on weather patterns, geography, climate, and other factors. This makes it easier for insurance companies to make profits from coverage. In contrast, the security of cryptocurrency exchanges or even hardware wallets is much more dynamic. An exchange that once had a stellar reputation of being unhackable could one day suffer from a hack, resulting in losses totaling hundreds of millions of dollars.
Even if a user is covered, it might be difficult to determine how to best recover lost funds. For example, does the insurance provider cover the loss in fiat currency, the same cryptocurrency that was stolen, or in another cryptocurrency altogether? All of these question marks mean that many potential insurers have been rather skeptical in how to provide proper bitcoin insurance coverage options.
Assessing the risk of cryptocurrency insurance has been difficult for insurers. In , the availability of cryptocurrency insurance presents a Catch for exchanges. Insurance firms have serious questions regarding the security of exchanges. Because risk is hard to calculate, the feasibility of decent coverage for exchanges is quite poor.
This issue is far from theoretical and has played out in a few different real-world scenarios. The good news for those investors who lost funds was that they were easily able to receive what was lost. While the hack itself was bad, this was probably an ideal situation for investors.
This hack was around 17x larger than the Bithumb hack. The question many investors have is how will an even smaller exchange react to a large hack? A cryptocurrency exchange that does have insurance could possibly mitigate fears of existing users and potential new users as well. Then, the criminals feel emboldened to continue their illegal deeds. Doing that could make the company realize the demand exists. Also, be aware that the number of companies offering Bitcoin insurance will likely grow if the early adopters discover the move pays off for them.
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