Would you pay for (or want) FDIC-style Insurance for your BTC?

[ducatitalia]

Another layer being built upon the Bitcoin economy is coming...and at an accelerated rate given recent events.  Would you want bank-style insurance for your BTC holdings and wallets?  Questions to ponder...should it be underwritten by the decentralized network community or traditional and established carriers?  How would claims be verified?  What would this kind of coverage be worth to users (how much should it cost)?  Are efforts like Elliptic and Inscrypto on the right path?  Is this a game-changer...?

Latest press: https://bitcointalk.org/index.php?topic=499071.0

[dre_2ooo]

Fuck no.

[jonald_fyookball]

Insurance being available would be great.  However I don't think it should be underwritten by the network. I also think it will be difficult to implement, because like you said, how would claims been verified.

[keithers]

I actually would to be honest, but the catch 22 is that id rather pay for insurance in USD rather than BTC

[LostDutchman]

Another layer being built upon the Bitcoin economy is coming...and at an accelerated rate given recent events.  Would you want bank-style insurance for your BTC holdings and wallets?  Questions to ponder...should it be underwritten by the decentralized network community or traditional and established carriers?  How would claims be verified?  What would this kind of coverage be worth to users (how much should it cost)?  Are efforts like Elliptic and Inscrypto on the right path?  Is this a game-changer...?

Latest press: https://bitcointalk.org/index.php?topic=499071.0

No, no and no!

Implementing such a program defeats the purpose of crypto in general which is ANONIMITY!

My $.02.

[Prelude]

Hell no. I can take care of my BTC on my own just fine.

[Bit_Happy]

Free market Insurance for your BTC sounds better.

[LostDutchman]

Hell no. I can take care of my BTC on my own just fine.

Thank you for your insightful and 100% correct reply!

My $.02.

[DannyHamilton]

Obviously insurance shouldn't be forced on individuals.

However, a free market has room for entities that are willing to voluntarily accept risk for a price from those that are willing to pay someone to accept that risk.  I am certain that many people would take advantage of such an option, especially if the risk accepting entity was globally recognized (such as lloyds of london).

The claims would be verified the same way any claim of theft is verified, through investigation.  No reliable trustworthy insurance underwriter is going to just arbitrarily insure anything of value without making sure that something is in place to mitigate the risk (security protocols, audits, limited access, etc).  To make a claim, you'd have to prove to the underwriter that the required steps were taken exactly as specified, and that the bitcoins were stolen regardless. Insurance fraud would be prosecuted just as it is today.

It would be up to actuaries to determine what the risk is, and then the cost would be based on that risk plus an amount to maintain profitability for the underwriter.  Competition between underwriters should eventually reduce the profit to something reasonable.

[Soros Shorts]

Yes, I would love an FDIC-style insurance program for my coins ... as long as the premiums are paid by other people's taxes and not mine.

[QuestionAuthority]

I think FDIC type insurance is unnecessary at this point for Bitcoin. In simplified terms, fiat banks profit from lending the deposits of individuals (fractional reserve banking). To bolster support for this truly fucked banking mechanism the government insures individual deposits (it was $100k but I think they just raised it to $250k per depositor). Bitcoin has no banking industry so FDIC style insurance is unnecessary. Individuals should be storing their Bitcoins in some secure offline manner especially since interest bearing accounts don't yet exist for stored Bitcoins. However, a custom tailored system designed for day traders that leave large balances on an exchange could be useful. I don't believe it should be mandatory for all exchange account holders but an option for those willing to pay a percentage to support the system. This idea falls apart when you realize that you must trust the insurance carrier (to pay you on default) more than you trust the exchange (to safely store your coin).

[AnonyMint]

I predicted this with very detailed logic and analysis of the legal situation:

https://bitcointalk.org/index.php?topic=491181.msg5497952#msg5497952

[jonald_fyookball]

Anonymity, Stop linking to your FUD thread that has nothing to do with this.  

First of all, you didn't predict shit. 

Second, you're entitled to your opinions, but when you start cross linking like that,
now you're just spamming.  Nobody likes a spammer.

[hellscabane]

Is it a game-changer? Quite possibly because it adds a sort of "regulatory legitimacy" layer onto Bitcoin (or at least a perception of that) which could make it more appealing to a broader audience. In general, people are willing to take risks on things they don't fully understand if there is some sort of protection and that is what this would provide (at least to a certain extent). I'm actually very interested in seeing the risk analysis that is developed from this. The predictive models and financial break points have got to be very interesting in the crypto-currency realm.

That said, I think it deviates from some of the fundamental ideas behind Bitcoin. I personally wouldn't pay for FDIC-style insurance when anyone can take measures to protect their Bitcoins. An equivalent sort of functioning mechanism would be to insure deposits to exchanges so that we only need to insure "active" coinage, but that could easily become tricky.

[tvbcof]

Yes, sort of.

If there were a credible bonding entity, as Joe User I would pay attention to how big an organizations bond was and how big their liabilities were.

For those who don't know how bonding works out in the real world, it goes something like this:

 - Investors put money into a bonding authority expecting to get a rate of return.  This money forms the pay-out if something bad happens.  That is the risk investors take in order to achieve a return.

 - The bonding company analyzes their client's operations and decides how much to charge them for a certain size of bond.  If the bonding company does their job right they do good and thorough analysis and are well prepared to monitor for various kinds of malfeasance since they stand to lose a lot of money if they don't do it right.  As Joe User I rely on this analysis be virtue of relying on the bond.

One other thing that is needed is a REAL escrow service.  Not some individual John K. type thing.  A credible escrow would include multiple parties with split zones of authority.  This escrow service would hold the bond and decide whether to pay out.

All of this stuff could happen with no government involvement at all.  I am actually surprised that some professional organizations doing this type of work have not evolved by now given the size of the Bitcoin 'market cap'.  Perhaps they have and I'm just not aware of them.  But it is true that I have never heard any service provider crowing about the size of their bond as I used to hear back when I was involved with large scale contracting work and such.