Depositors insurance?

[nayrB16]

I have been dwelling on the idea of how to insure bitcoins. Just bitcoins, not securities, bonds, or investments, just plain bitcoin deposits.

I understand that Bitcoin is inherently safe and anonymous and their is no need for a "bank". But the one thing Bitcoin does not offer is "assurance" for lost or stolen coins. And I wanted to present the idea here and see what the community thinks.

The problem of trying to insure a persons bitcoins is the ease of fraud, given the anonymous nature of Bitcoin. So to make an insurance option feasible I the insurer will retain the private keys to a bitcoin address that a depositor can use to store their bitcoins with the assurance of guarantee. If they are ever lost or stolen they will be replaced by the insurance they paid for.

When signing up for an insured Bitcoin address the depositor will provide a return payment address when they want to collect their bitcoins. The only way to change to depositors return address would be a verified account which would require documentation such as drivers license and corresponding bill such as utility, rental agreement, cellphone....etc with the same address.
During the application process 3 Bitcoin address will be used

                             Insured address to deposit to                Payment address for services rendered
                                                |                                                           |
                       111111111111111111111111111111111       1222222222222222222222222222222222

                                  Depositors return address
                                                 |
                       1333333333333333333333333333333333

The insured deposit address will retain the bitcoins deposited, they will not be pooled into a single address or account. This allows the depositor to monitor the insured address

The insurance rates are due monthly at the first with a 25% discount if you pay the first 12 months in advanced. Sorry but there are no refunds or pro rates, failure to pay the bill will have it deducted from the insured deposit, until depositor withdraws their bitcoins.

Instead of using flat fees or large percentage rates the insurance rate is calculated on the deposit using the equation y^3=.03/x where (x=your deposit)>0. This rate is calculated down to the 4th decimal space.

example deposit 10Btc the solution to the equations is 0.1442249570307408382321638310780109588391869253499350
and the fee would be the first 4 decimals 0.1442Btc per month

A 100Btc deposit would yield a rate of 0.0669Btc per month
if the first 12 months are paid in full then a 25% discount is added
0.0669*12months = 0.8028+25% discount=0.6021Btc per year

Again this is just something that I have been thinking of and wanted to know what others think about it.

[1715022882]

1715022882

[kjj]

Sweet!  A way to (nearly) double my bitcoins with no risk!  Where do I sign up?

[Draino]

if there was a way to make bitcoin insurance actually profitable in the early stages, i think this would be huge

think about how seriously insurance companies investigate their claims-- i imagine there would be some very intimidating questions to answer  regarding why the police report wasn't filed or why best practices weren't followed with wallet security.

edit:
now that i think about it, it's too bad a big player didn't have the funds/inclination to hire the appropriate people from insurance backgrounds and an army of lawyers to start that sort of thing up.

no insurance?  i won't do business with you
yes insurance?  they'll pound your ass into the ground on behalf of the depositors for negligent behaviour

[dissipate]

if there was a way to make bitcoin insurance actually profitable in the early stages, i think this would be huge

think about how seriously insurance companies investigate their claims-- i imagine there would be some very intimidating questions to answer  regarding why the police report wasn't filed or why best practices weren't followed with wallet security.

edit:
now that i think about it, it's too bad a big player didn't have the funds/inclination to hire the appropriate people from insurance backgrounds and an army of lawyers to start that sort of thing up.

no insurance?  i won't do business with you
yes insurance?  they'll pound your ass into the ground on behalf of the depositors for negligent behaviour

No respectable insurance company is going to insure a site that doesn't have regular security and account audits. Them asking questions after the fact about wallet security would just be idiotic, unless the exchange hid stuff from them.

[Draino]

if there was a way to make bitcoin insurance actually profitable in the early stages, i think this would be huge

think about how seriously insurance companies investigate their claims-- i imagine there would be some very intimidating questions to answer  regarding why the police report wasn't filed or why best practices weren't followed with wallet security.

edit:
now that i think about it, it's too bad a big player didn't have the funds/inclination to hire the appropriate people from insurance backgrounds and an army of lawyers to start that sort of thing up.

no insurance?  i won't do business with you
yes insurance?  they'll pound your ass into the ground on behalf of the depositors for negligent behaviour

No respectable insurance company is going to insure a site that doesn't have regular security and account audits. Them asking questions after the fact about wallet security would just be idiotic, unless the exchange hid stuff from them.

well that's sort of my point, being insured or insurable would help get us through this garbage phase with large online wallets being mishandled

i don't think we're audited would have the same marketing appeal as we're insured

[justusranvier]

Properly-priced deposit insurance would be expensive due to the nature of the risks involved.

[Melbustus]

I don't think you, the insurer, can hold the private keys. That essentially just adds risk to the system, and also requires additional counter-party trust.

I agree that there's a dire need in the bitcoin community for what I'll call "confidence services": security auditors, business auditors and reviewers, and insurers. I believe that's what the following thread is about: https://bitcointalk.org/index.php?topic=101832.0

These services will emerge, but it'll take time. Each will have to build a level of trust within the community in and of themselves, but if there are several (and they're independent), it could work. But it's going to take time.

[optimator]

I've been pondering the insurance question as well. I think what would be required would some type of audit to ensure compliance to a publicly agreed / vetted security policy. .

I see this as being a very legit business but initially applicable to the larger commercial businesses who 1) have the funds for initial compliance; and 2) can pass through the insurance costs to the consumer.

THEN insurance becomes a competitive differentiator.  (e.g., exchange 1 has a .5% fee, exchange 2 has a .6% exchange fee, exchange 2 insures your account up to 100,00 btc - who do you do business with?)

[benjamindees]

You understand that insurance is inherently fraudulent, right?  It can't exist without force, fraud, and eventual state backing.  If you pay for Bitcoin "insurance", the insurer is going to use your payments to set up ways to track you and all of your transactions.   You understand that, right?

I mean, people here just got done losing a whole bunch of Bitcoins in a fairly obvious ponzi scheme, so I feel obligated to point this out.

[Bitcoin Oz]

CPA https://bitcointalk.org/index.php?topic=85444.0

[finway]

Depositors insurance is a scam.

[dissipate]

You understand that insurance is inherently fraudulent, right?  It can't exist without force, fraud, and eventual state backing.  If you pay for Bitcoin "insurance", the insurer is going to use your payments to set up ways to track you and all of your transactions.   You understand that, right?

I mean, people here just got done losing a whole bunch of Bitcoins in a fairly obvious ponzi scheme, so I feel obligated to point this out.

HuH? How is insurance inherently fraudulent? Yes, many insurance companies are the scum of the Earth because states let them get away with a lot of bullshit, but that doesn't mean it is inherently fraudulent.

[P4man]

So to make an insurance option feasible I the insurer will retain the private keys to a bitcoin address that a depositor can use to store their bitcoins

The only thing in/assured here is that the depositor will lose his coins.

[Insu Dra]

Insurance is just a way to get other people to pay for your ignorance, negligence or bad luck ... in the end someone will have to pay for the lost value. I for one don't wane pay for other's ignorance or negligence. As for bad luck, shit happens learn how to deal with it, for true bad luck you can usually count on the community/people around you ... if you can't your probably doing something wrong to start with.

So no thx, I'l pass.
There is no need for any kind of insurance scam.

[Draino]

Insurance is just a way to get other people to pay for your ignorance, negligence or bad luck ... in the end someone will have to pay for the lost value. I for one don't wane pay for other's ignorance or negligence. As for bad luck, shit happens learn how to deal with it, for true bad luck you can usually count on the community/people around you ... if you can't your probably doing something wrong to start with.

So no thx, I'l pass.
There is no need for any kind of insurance scam.

Sounds like a solid contingency plan to me:

don't worry these things, my mom will hug me

[benjamindees]

You understand that insurance is inherently fraudulent, right?  It can't exist without force, fraud, and eventual state backing.  If you pay for Bitcoin "insurance", the insurer is going to use your payments to set up ways to track you and all of your transactions.   You understand that, right?

I mean, people here just got done losing a whole bunch of Bitcoins in a fairly obvious ponzi scheme, so I feel obligated to point this out.

HuH? How is insurance inherently fraudulent? Yes, many insurance companies are the scum of the Earth because states let them get away with a lot of bullshit, but that doesn't mean it is inherently fraudulent.

Basically, in the long run it is impossible to both cover worst-case losses and turn a profit.  The only way it works in the real world is via the fraud of fiat currency and the force of government backing.  Bitcoin has neither, thankfully.

[kjj]

You understand that insurance is inherently fraudulent, right?  It can't exist without force, fraud, and eventual state backing.  If you pay for Bitcoin "insurance", the insurer is going to use your payments to set up ways to track you and all of your transactions.   You understand that, right?

I mean, people here just got done losing a whole bunch of Bitcoins in a fairly obvious ponzi scheme, so I feel obligated to point this out.

HuH? How is insurance inherently fraudulent? Yes, many insurance companies are the scum of the Earth because states let them get away with a lot of bullshit, but that doesn't mean it is inherently fraudulent.

Basically, in the long run it is impossible to both cover worst-case losses and turn a profit.  The only way it works in the real world is via the fraud of fiat currency and the force of government backing.  Bitcoin has neither, thankfully.

Insurance is older than central banking money-from-nothing.  Policies have limits for the exact reason you are talking about.

[Insu Dra]

Insurance is just a way to get other people to pay for your ignorance, negligence or bad luck ... in the end someone will have to pay for the lost value. I for one don't wane pay for other's ignorance or negligence. As for bad luck, shit happens learn how to deal with it, for true bad luck you can usually count on the community/people around you ... if you can't your probably doing something wrong to start with.

So no thx, I'l pass.
There is no need for any kind of insurance scam.

Sounds like a solid contingency plan to me:

don't worry these things, my mom will hug me

I guess you rather leach on others to make sure your sweet life can keep on rolling, ow yha it's not leaching sins every one singed up on it, including the insiders (people) that will try to get value out of the system for what ever scheme they can come up with.

As for the 'mom' reference, grow up. If my house burns down I'm sure the people in this small town will provide everything I need to build a new one and we will deal with payments/reimbursement later. The same is true for any other situation, being financial, health or any thing else ... Why would they do that? Because they know they can count one me to do the same. Over here we still know, trust and depend our neighbors, if you want live in a community or a society where such help isn't a faq then thats your call.

Personally, I prefer this way of living and thinking over the kind where you are forced in to paying insurance to be accepted for anything else.

[Melbustus]

You understand that insurance is inherently fraudulent, right?  It can't exist without force, fraud, and eventual state backing.  If you pay for Bitcoin "insurance", the insurer is going to use your payments to set up ways to track you and all of your transactions.   You understand that, right?

I mean, people here just got done losing a whole bunch of Bitcoins in a fairly obvious ponzi scheme, so I feel obligated to point this out.

HuH? How is insurance inherently fraudulent? Yes, many insurance companies are the scum of the Earth because states let them get away with a lot of bullshit, but that doesn't mean it is inherently fraudulent.

Basically, in the long run it is impossible to both cover worst-case losses and turn a profit.  The only way it works in the real world is via the fraud of fiat currency and the force of government backing.  Bitcoin has neither, thankfully.

For insurance companies with incapable underwriters, sure. But as kjj points out, insurance is not inherently tied to fiat, and doesn't inherently fail. In the present environment, a number of the big guys clearly rely on government, but that doesn't have to be the case. Berkshire Hathaway comes to mind as an example of a substantial long-term independently viable insurance company.

For what it's worth, in a bitcoin world, better consumers would yield good insurance companies. Consumers should demand insurance companies that don't write stupid policies, and vote by refusing to give business to the undisciplined insurers.

A lot of this idealism relies on better consumers (more rational demand incentivizing better business behavior). In the current environment where most people expect to be taken care of by someone else (particularly government), consumers have little incentive to be discerning, so the system is broken. In a world without handouts and bailouts, would consumers be materially better; enough to generate a more disciplined, sensible business environment? I think it's an open question.

[freeAgent]

This does not seem useful at all to me.  What backs your claim of insurance?  Since the only way for someone to lose their bitcoins with you would be to have your accounts get hacked, what's to stop the hacker from getting access to your reserves as well?  You're also introducing more risk into people's bitcoin holdings.  The only reason I would store bitcoins in an account like yours is if I thought there was more chance of my bitcoins getting stolen while I was storing them personally as opposed to having you store them.  It doesn't make sense to me what would attract anyone to this idea.