Bitcoin Forum

Do you think in the future there will be insurances covering theft?
How would you prove the insurer you were not the "thief" yourself?

No there won't be insurance for bitcoins. Plain and simple. If someone were to be offering insurance, I could almost guarantee you they will collect your payments and disappear the moment a large sum of bitcoins goes missing.

Yeah, it is kind of impossible business. Insurances for houses or health make more sense. With bitcoins, it doesn't make sense for the insurer or for the guy who takes the insurance. Because the stealer can be always the same person who owned the bitcoins before theft.

On the contrary, yes there could. It would have to be a real stand up operation, though and would require the use of a "bank" type operation that I've been thinking over for a while now. Think of it this way, a company creates their own client and adds extra layers of security to it. I believe this has already been done before, see bit coin armory.

So now you have a company with their own bit coin client that is extra secure, they are know willing to bet that nobody will crack their methods of securing wallets and transactions so they begin selling insurance. That's basically the end of this story, either they're right and everyone is happy, or they're very wrong and everyone loses everything and the company pays out every last satoshi they have (assuming this is a legitimate and reputable business).

In order to aid with the payouts and keeping the company afloat, they could also introduce a feature on their client that sets aside bit coins and allows the company to take short term loans against it in return for interest. (Read: basically a savings account, but at any time you are in full control and only earn interest based on the needs of the company in terms of payouts)

Its not a perfectly thought out idea, but I think it could be possible with the right people and the right minds behind it

I guess the closest analogy would be insuring your cash holdings.  A difficult proposition, for many reasons.

But even better than insurance, is outright theft prevention, which is the model Bitcoin will be providing once all its functionality is implemented.  Insurers/banks will offer joint custody services for your wallet through multisig transactions, so that both yourself and a reputable entity must authorize in order to spend your funds.  Thus, if wallet is stolen, the thief can't do anything.  This also removes the problem of the insurer itself running away with your money: they couldn't do anything with it because they don't have your signature.  And just to be on the safe side in case you don't completely trust the insurance entity, the joint custody could be set up as something requiring periodic explicit renewal by yourself, by setting up a delayed transaction (via nLockTime) on initiation which would automatically return the funds to you after, say, a 6-month period.

Bottom line is that, in the long term, the goal for Bitcoin is to make traditional FDIC-style banking/wallet insurance obsolete and unnecessary.

See here:
https://bitcointalk.org/index.php?topic=34152.0
https://bitcointalk.org/index.php?topic=34152.0

There's no way this would work.  I could send all my BTC to wallet #2 and say they were stolen and they'd never know the difference.

I cant see that happening, anytime soon. Theres no way to prove they were actually stolen and insurance fraud would be rampant.

Unless the wallet client required a one-time code to be input which requires a user-specific physical offline component to generate. MMOs have been experimenting with this kind of security for a while now and I believe it's been working out relatively well.

See: WoW authenticator
https://us.battle.net/support/en/article/battle-net-authenticator-faq

Any transaction made with the proper code would have to have been made by the person with the authentication device. I don't believe the odds of these offline authenticators getting cracked are very high, but I could be wrong.

That is really interesting. Perhaps once hardware wallets are developed and for sale insurance on bitcoins might become viable.

I could see it totally working if it were done in a way where the funds were encumbered by more than one private key, and no individual had the ability to defect.  This way, theft would be totally controllable.

Look at the cryptographic escrow scheme I'm doing right now between mrb and Micon for their 10 BTC bet.

I came up with a keypair scheme that involves 3 parties, but I could have done it with any number.  Any funds they send to their escrowed address requires 2 of 3 to agree on who gets the funds (I'm the third party).

I'm actually really interested in learning more about this, I did a quick read of your post on mrb and Micon's thread, but will have to come back to it later when I have more time. So far it seems really cool.

Even if one figures out a safe way to implement such insurance, aren't there more efficient ways to protect your coins? Insurance is never for free!

For example, suppose you have a multisig scheme with a "bank". You configure your account not to let you withdraw more than a certain limit per day. Trying to change this config to anything larger would generate notification alerts and would only be valid, say, 48h after.

Under this config, all that an eventual thief could steal from you is your maximum daily amount, which shouldn't be much larger than an insurance's deductible anyway.

Add to this a hardware wallet as the sole means of accessing your keys, and the thief would only be able to steal from you by physically stealing the hardware wallet and by forcing you to give him its encryption password.

The only way you could potentially "lose everything" is if the thief actually holds you hostage for the time necessary to change your configuration and transfer all the money out of your account. Perhaps to counter this, you could list a number of trusted people who would be authorized to freeze your account in case you "disappear". Or make just this particular risk (kidnapping) insurable - don't they exist already, insurances against kidnappings?

I was wondering too, why no one put this into action!

IMO what scares most people is the difficulty of keeping your coins safe (I guess 95% of all potential users wouldnt even bother to read the "secure your wallet page" on bitcoin.it/wiki).

The easiest way would be to have an easy to use, no sweat interface, like the one on blockchain.info or even simpler, with a 100% funds insurance for a small fee.

I bet some online wallet provider is already working on it. IMO thats gonna be the next BIG thing in Bitcoin.

People would simply steal their own coins and claim they were hacked, or ripped off. It would never work.

Like people do with the regular insurance industry now? Because that whole industry just doesn't work, right?

insurance for coins.. i see alot of fraudulent claims happening

EG set up 2 addresses, send funds to yourself and claim the receiving address is a scammer (show a shady website you designed and the 2nd address listed on it and u want to claim a loss of income.)
EG put a load of coins in the address and then claim that you lost the private key due to a computer wipe/virus. (showing the windows directory time stamp (after using properties plus to change the info) to show its a recent install and u want to claim a loss of income.)
EG u set up 2 aliases on BTCJAM the second alias requests a loan. you then loan yourself the money and claim they did not repay. (showing stats, blah blah as proof. and you want to claim a theft)

followed by a scam thread where the insurer does not always pay out due to obvious false claims.
EG "Insurer A wont pay me, he thinks i falsified evidence to get free coins, what a scam"
EG "Insurer A asked for evidence which i dont have and wont pay out, what a scam"
EG "Insurer A wont pay me" (never subscribed to the service just want to call them a scam)

if you want to be a hoarder. dont trust second parties to look after your stash
here is a big secret to insurance. LOOK AFTER YOUR OWN MONEY and you never have to worry about insurance.

now instead of thinking up idea's how to stir the community pot of cash amungst itself. how about thinking up idea's to expand outside the community and get new legit businesses onboard. instead of new ways to sway money between peter and paul within the community.

These are all subject to what the terms of the insurance are. If the insurance is strictly "insured against malicious attack and seizure of funds" then the first two are null and void, if you go buy what I suggested earlier with an offline private key item. I.E a physical stick that doesn't connect to the internet that you need in order to generate a temporary key. That way, if the algorithms were to ever be compromised the insurer would know. The insurance agreement would have to be that only funds which are NOT sent out using your private key (and therefore unauthorized, also not including if you lost your keygen and somebody found it and used it). Investment insurance against lending is an entirely different thing, and I don't see THAT happening unless the lending goes through the insurer who approves the lendee.


Yeah, there's really no way around this unless the insurer is genuinely a stand up person and has enough business behind them that HAVE had their loses reimbursed for legitimate claims.


You don't seem to understand the implications of having a bona-fide insurance program behind insuring your coins. Because no matter what, people WILL get to your wallet, I firmly believe that. People are pretty smart when they have malicious intent.

Instead, think of the implications having a safety net for your wallet would have in terms of people adopting bitcoin. I'm sure one of the main reasons people are opposed to bitcoin is because of the security implications, and the hoops you have to jump through to "secure" your wallet. By calming people's fears in this part of the game, it would knock down a major barrier to entry in the form of people's own security concerns/hesitations.

well creating fear by telling new people their stash is not safe in their own hands and they require an insurance is not good for bitcoin either. people know they cant hold bitcoins in their hand and have to rely on computers. but telling them they cant rely on their own computer or paper wallet... thats just silly.

the whole point of bitcoin is that no other entity owns or controls your funds. by using the insurance company idea's you have suggested you are saying for people to input their stash into a insurer controlled 'bank' and if anything goes missing they will repay it. plus ontop you have to pay them a monthly premium to keep your coins safe.

i have a mega load of coins now.. i have no fear of funds being stolen. and i wouldnt pay a third party to look after them for me. but good luck.

teach people about paper wallets and data backup

We aren't creating fear, the fear is already there. People are free to do as they'd like, but I know people that would willingly pay in order to ensure they won't be worth nothing tomorrow. Also, it wouldn't be putting their coins into a "bank" it would be using a client developed by someone else, which people already willingly do without the added benefit of having the insurance. And you're right, paper wallets and data backup are a great, pretty secure way to keep your funds.

However, they are no different than shoving your dollars under the mattress and hoping nobody gets ahold of them there. Not everybody likes that notion.

Cue an ad for BIP38 (Password-Protected Paper Wallets).

If I were to create password-protected paper wallets, and put copies in two separate safety deposit boxes at two different banks, and then memorize the passphrase as well as share it with one or two trusted individuals, that's a whole lot better than shoving cash under the mattress.

Point conceded, good sir. But that's quite a bit of extra work and you're still putting trust in other individuals. Not to mention the cost of the safety deposit boxes which, on an annual basis could (I'm not saying they would, but they could) exceed the cost of the insurance itself.

Would it not be beneficial in some people's eyes to have the easier access, with less hassle, of the insurance based model than the paper wallet model? As I'm sure there are plenty of people that would not divorce themselves from their paper wallets, and others who would never bring themselves to adopt them.

You could argue that the extra risk associated with trusting a third party insurer creates an extra "risk cost" as opposed to your trusted individuals, but the different costs and risks associated may very well balance each other out to be rather equal in the end, assuming that an extremely trustworthy insurance entity came to be.

Then my argument would shift to the idea that having the client-insurance based model would lead to more opportunities for extra utility as opposed to the paper wallet.

It will (https://ripple.com/forum/viewtopic.php?f=1&t=2382) work.

lol is this insurance thread still trrying to promote its money making scheme with promises to protect you but having so many clauses to protect itself that it never has to pay out.

everyone with half a brain knows that the cost of 'contents' insurance for homes is not worth the paper it is printed on. most smart people know that a $20 lock on the door is better insurance to protect their $500 TV then an insurance premium of $10 a month would ever be.. and here is why

chances of your house being broken into is less 1 chance in 5 years. so the $10 premium is not a cost saving compared to just buying a new TV.

if you did infact get a theif in your home, the insurance company will do 3 things.
1. charge you an excess fee which reduces the potential payout of $500 for a TV to be maybe $450.
2. use smart sells pitch words such as "valuation figures" "wear and tear value" "age of equipment" to imply that the Tv is worth alot less now due to age and they will maybe take another $100 off of the bill.
3. they will ask questions such as what security your house has, if none they will not pay because you have not done any preventative tasks to avoid the theft. and if you do have their recommended security to meet all the clauses the cost of the security would outweigh the $350 they would have finally offered.

its the same with banks. the whole financial compensation schemes if banks go bankrupt, which is an insurance policy. but tell me honestly, with all the legality that these financial insurance companies have. how many individual hard workers have actually had a proper reimbursment for losses, which did NOT involve getting the the money back from the theif (chargeback)

securing your home/bitcoin is cheaper and more of a guarantee of loss prevention compared to having an insurance policy.

A $20 lock on the door won't be of any help to you if your computer has a freak malfunction and catches your house on fire.  That's what happened to us about 5 years ago... the content insurance amounted to tens of thousands for us.

But back to Bitcoin insurance.  While many people won't find it necessary, I think that some people will.  Most of the people who hold Bitcoin today are able to secure it reasonably well.  What about grandma and grandpa though?  A lot of them barely even know how to turn on a computer.  At some point, if Bitcoin becomes widespread enough, BTC would attract all of those people who think that it's a good idea to click on links in emails they get from unknown people.  They're going to want insurance.

It's an idea whose time has probably not come yet, but thinking way down the line, there are a lot of people who have yet to adopt the currency that would want it.

but its those old grandma's and grampa's that fall for these "web browser miner" web-links that are trojans that will also be later informed about clauses x,y,z of insurance policies stating not having antivirus, not having their bitcoins in paper wallets, basically not protecting their property = no payout.

much like house insurance that probably asked a few questions as to how the computer could cause the fire, and challenged if it may have been deliberate, attempting to avoid claim payouts. which with a majority of the elderly, may not have the smarts to give viable answers to ensure the claim is successful.

its far cheaper to not have flamable products near a computer and a lock on the door. and be told the precautions to take. then to just pay a premium with promises before hand and a long list of breached clauses after the fact.

Of course there will be insurance, should there be a demand for it. TBH, I'm not sure why anyone would argue otherwise.

Bitcoin isn't anything special in terms of something to insure. The same rules apply as for any other asset.

Ofc, the insurer would need to assess how securely the Bitcoins are stored* before being able to calculate a premium. That's nothing new either though.


[* EDIT: To add, you can insure gold coins in a safe, for example. Sure, you could 'steal' them yourself, but that is factored in by the insurer.]

The argument is whether or not there would be enough demand for it.

I for ex. don't see much demand for it. It's theoretically possible to secure your bitcoins with hardware wallets + multi-signature, what would make them extremely difficult to steal in any significant amount. The only risks would be things like kidnapping, but that's another realm.

im more thinking along the lines that some half whit 17yo basement dweller proposes to be an insurer, and not a proper insurance institution with all the legal licences.

i read like 50 threads which seem to be from 'teentrepreneurs' with their business plans.