bitcoin blocksplit insurance

[gen. specific]

Hello,

I would like to know other's thoughts on having insurance in the event of block splits. The software glitch between mining versions required centralized guidance to recommend which block series to continue with, something that people would have preferred the network to figure out on its own. Within those 30 minutes the price of bitcoin fell on Mt Gox over 20%, and merchants were advised not to take any transactions until this was solved.

This makes me imagine a world where transacting in bitcoins is highly liquid, but occasionally having to wait 30 minutes at a store front due to some network emergency where transactions cannot be validated. As if it was a modern reality of moving away from fiat.

Instead, what if there was blocksplit insurance. Where merchants and miners may have made contributions to a block chain but found out later that they were on the "wrong chain" and that major pools had democratically decided to use a different chain rendering some merchants and miner's transactions obsolete. With blocksplit insurance they would still be compensated for the value of those transactions.

This would enable merchants and miners to have peace of mind. It would also enable people to not have to wait for transaction confirmations to complete a purchase, something that some people voluntarily do and others voluntarily do not, due to the riskyness of not being able to complete a transaction. Especially given the competition in which other cryptocurrency transactions can be verified faster

This kind of insurance would be better than hedging with derivatives since futures and options do not account for block splits, only change in price.

Sorry if the terms I use are not the ones everyone else uses, but I think the context is clear.


Does this seem like something useful?

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[edmundedgar]

If blockchain splits like that were common enough to be worth insuring against I guess there would be better technical ways of dealing with it - for example, if you're trying to confirm a transaction, couldn't you check it had been added to both chains?

A much more common thing to want to insure against would be volatility - I guess this is a big part of what guys like BitPay offer vendors. (IIUC they eat the loss if somebody buys something priced in dollars using Bitcoins, then the value of the Bitcoins drops before they convert them back to dollars.)

Another would be double-spends of unconfirmed transactions. Since they're possible but not very common, people who want to confirm payments fast might be willing to pay somebody a predictable cut of their revenue in return for being covered for the occasional cases where somebody pulled off a double-spend. But like volatility, this feels like something that would usually be best combined with a payment notification service; The people who would eat the loss if a double-spend happened would be the same people who checked the original transaction and decided it looked legit (sufficient transaction fees for the transaction size etc).