2 We plan to cover BTC & ETH accounts only from the start. And if other altcoins are stolen - it's not an Inchain insurance case.
But if say Monero is stolen and exchange can't afford to cover losses from their own pocket, that would also affect BTC/ETH deposits. Exchange would have to limit deposits for every user, until they're solvent again.
In this case, Inchain would reimburse the losses as it would be recognised as a hack of the platform and users would lose their funds in BTC/ETH.
3 If insured has no loses then no compensation.
So the insurance is paid out only if exchange goes bankrupt after the hack? Otherwise, every exchange will have to compensate their users, they'd have to allocate a portion of their fee income to cover the loss. The problem is, no one knows whether they'll manage to recover and how long will it take (could be a decade etc).
And how would that work in case of say Mt Gox? Afaik the process is still ongoing and it's still uncertain what are the losses and how much will they manage to recover.
Obviously, it can vary depending on the case. In the most straightforward event, if the exchange does not recover the loss within a certain period of time, Inchain will do it itself and the user would have to transfer the debt to Inchain, which will be dealing with the exchange afterwards.
4 No, the verifying of this is very difficult task. We charge an appropriate insurance premium from the insured and we do not verify has the insured the money that he insures.
That makes potential exploit very easy, see below (hacker/exchange draining inchain)
There are a number of measures to mitigate such risks:
1. Every exchange has a total limit of the risks insured (1/12 in our finmodel sample)
2. The policy will be a time lag between the issuance of the policy and the date the coverage starts (thanks to Kazadar for the suggestion)
3. KYC
If you have any ideas, you are more than welcome to share.
5 I think it depends on insurance rank of the service. If we see a major exchange has a very low insurance rank we will not offer to insure accounts on them. And vice versa.
6 Firstly, the Inchain strategy includes an establishment of shared and clear rules for cases when exchanges are hacked. This rules must be accepted by all exchanges/wallets that participate in Inchain insurance. These rules require a fully transparent info about a hack and losses from exchanges/wallets, also all losses must be spread evenly among exchange's users of a hacked cryptocurrency. A good example of this case is the Bitfinex case.
For now, almost every hack is transparent enough to understand how much assets lost.
OK, so insurance would be possible only for businesses which agree to cooperate/participate with inchain (disclose required info etc)?
To get the clear picture - Who are your target clients (who will buy insurance)? Are you aiming for exchanges (business) or exchange users (individuals)?
Our strategy implies that exchanges would be willing to cooperate with us in order to attract more customers.
The target audience is individuals who have exchange/online wallet accounts. So Inchain insures user accounts covering losses if the platforms have been compromised.
4 - then hacker/exchange (or anyone aware of the hack before announcement) could easily drain entire inchain's capital
Could you pls explain how can a hacker/exchange drain an Inchain capital?
They know about hack before anyone else does --> they buy inchain insurance --> hack is announced to the public --> they get paid the compensation from insurance
