Bitcoin Forum

Members of the LXDX leadership are in London this week, by invitation from Aon, meeting with underwriters to discuss insurance policy details and coverage options for our cryptocurrency exchange platform.

But what I want to know is, does exchange insurance matter to you? Especially if an exchange utilizes multisig cold storage, does the extra insurance give you a compelling reason to utilize that exchange (all other variables being equal)?

Our high-level thoughts: https://medium.com/lxdx/aon-the-global-insurance-broker-hosts-lxdx-leadership-in-london-35c1ce8c9351 )

in my opinion personally, the insurance exchange is not important, and in my opinion the security of exchanges and transactions that have no problem from the exchange is the most important.

Insurance coverage is not important in crypto currency. It just add to the expenses to the investors, further, how could a insurance company pays crypto holders in something happen in the exchange? We are decentralized and we move in our own risk.

I kinda agree with that.No insurance company will pay anything to the crypto exchange customers,if the crypto exchange platform itself turns out to be an exit scam.Saying that a crypto exchange has insurance will create a false sense of security and more people will join and put their coins into a possible exit scam.
The crypto trading risk can't be reduced by insurance.

You are right that if the exchange itself is an exit scam, then the insurance is useless. However, no major insurer is going to offer insurance without doing extensive due diligence on the exchange. For instance, we have undergone a multi-month evaluation in order to be considered by underwriters. Simply being insured by one of the major brokers, like Aon or Marsh & McLennan, is a pretty solid stamp of approval that the exchange operators have been vetted and the security protocols examined.

The insurance for an exchange is intended to cover the cold storage funds and protect the exchange—and by extension, users/investors—from theft via hacking, employee theft, or even physical theft. If the exchange is insured, and a theft from the cold storage occurs, then the insurer will reimburse the exchange who will then provide the funds to users/investors.

I won't be needing to pay extra money for insurance since I didn't leave my coins on trading sites so it doesn't worry me.

However, I got what OP pointed out since centralized trading sites are subject to hacking so regardless in amount of trader's coins it will be covered by the insurance company but I guess it isn't easy as what it seems.

Wont really be that easy for sure where you do integrate centralized exchangers with insurances.For some they might consider or accept to pay up insurance but most people wont really tend to pay up extra fee.
Same as yours I don't really care or doesn't really matter at all since I don't store up huge amounts of tokens on exchangers either DEX or centralized ones. Anything can be hacked and this thing you should always put up on your mind.

I'm paranoid enough about third party custody that I always withdraw coins from exchanges whenever possible. And I know that insurance is expensive, and that money has to be recouped somehow......higher commissions, fees charged to me as a customer. So I feel I'd be subsidizing those who irresponsibly use the exchange as a wallet.


I imagine there might be a lengthy legal battle before the insurance company actually pays out. Coinbase has its hot wallet insured, but that's only 1-2% of their total crypto funds. I assume if you're insuring cold storage, we're talking about a much larger percentage of total funds in custody, maybe even 100%? Cold storage insurance (and crypto insurance in general) = completely uncharted waters. Thus I think insurance companies in this position have a lot of added incentive to reject future claims and go to court over it.

Of course an extra insurance means as the exchanges can be hacked and the investment lost.
Exchanges make big profits through trading fees ( Binance yearly profit over $1billion ) and
I  they can easily give this extra insurance. I would chose those exchanges with insurance  for sure.

I agree with you, not to burden investors with additional costs for insurance that may not be important for a decentralized market,

I think as long can protect and help each other, it will be fine. Today many company, countries or investor try new way to built their business. They create many ways using technology to support their vision, look the future but learn from the past. As audiences I can see when system already built and if just only news, I can't say nothing.

And which company offers an insurance service for exchanges? I believe that I am particularly pleased when the exchanges look for mechanisms of security and control in solutions linked to cryptocurrencies. Perhaps more ways of auditing the portfolios anonymously and independently would be very useful. One of the big problems is whether the exchanges have the values they say they have. The possibility that many are extremely leveraged is not so unlikely.

Aon has brokered insurance for several dozen crypto companies. We are working with them now to outline a plan for our exchange.

Good points above on cost—this is _not_ a cost that we want to pass on to investors. We consider this additional coverage a source of peace-of-mind that we would provide as part of our normal offering.

The value goes up the larger trades you are doing. Even if you withdraw every day, if you're doing tens of thousands in trades, you are still taking some risk. Also there are the potential cost of transferring all those coins around.

Love the feedback and insight! Thank you.