
Bitcoin vault offering insurance is 'world's first' - louthy
http://www.bbc.co.uk/news/technology-25680016
======
jerf
Speaking as still-a-BitCoin-skeptic, this is interesting news because if this
currency is going to make the leap into something truly useful, this is what
it is going to take. People speak about the "transaction reversibility" that
the current financial system has as if it's the _only_ possible way to provide
security, but that's not entirely true; an insurance-based system may also
work. I say "may" on purpose; we don't know. Indeed, I've heard it
occasionally proposed that we use more insurance-like aspects in the current
system because the way the system leans on the reversibility ends up resulting
in a lower level of security than we might otherwise like. It's not out of the
question this will be a superior result considered globally.

This is, in its own way, _the_ most interesting story coming out of the
BitCoin world right now; in long-term importance it dwarfs Overstock.com
taking BitCoin for orders.

I will concede that if this can work and becomes entrenched that my skepticism
level will be forced by the evidence to decrease.

~~~
fragsworth
I don't think insurance and transaction reversibility are mutually exclusive.

The current financial system is already insurance-based (at least in the
U.S.). You are protected from fraud in every money system you use. Transaction
reversibility seems like a natural result of this, because it significantly
reduces the insurance risk.

Essentially, if you have insurance, transaction reversibility becomes
desirable (by both parties - bank and client) because it reduces insurance
costs.

~~~
pyre
> You are protected from fraud in every money system you use

If I buy a car that was stolen (which I didn't know was stolen), law
enforcement will repossess the car, send the seller to jail, and I'm out all
of the money I spent.

What is the protection from fraud here?

------
ck2
I always find it funny how news articles and TV news have to show some kind of
physical "coin" for bitcoin news.

The whole point about bitcoin is it is virtual. I guess at most a QR code is
just not sexy enough.

BTW this is how news is manipulated about what to cover. If you want a lot of
coverage for your product, make a lot of media available, photos, video, etc.
If you have bad news, political, judicial, etc. makes no audio, video, or
photos available by law or otherwise and boom, little to no coverage. Because
of "dog vs squirrel" attention span.

Now let's look at this tidbit they repeat in every bitcoin story:

 _James Howells lost about £4.6m when he threw away his hard drive, forgetting
that he had bitcoins stored on it._

This is bbc news, not fox news. I expect better. Did the BBC confirm how many
bitcoins were on his hard drive? Did someone look at the blockchain or some
other detail? I think not. So I say he lost nothing until proven otherwise.

~~~
gelutu
Bitcoin is not virtual, its digital.

~~~
ck2
It's actually both.

Digital in generation and transmission.

Virtual in that we treat it like something that has financial meaning and
weight.

------
oleganza
1\. It's a single company where all NSA, FBI, IRS will go.

2\. The insurance is fixed in GBP (mostly for financial compliance purposes,
rather than malicious intent). So when your holdings rise 10x, you'd have to
adjust your contract.

3\. "Easy withdrawals" do not sound reassuring on the frontpage. However,
somewhere in the FAQ they tell you that there's a 1 BTC limit a day and they
get it manually.

We need a personal wallet that locks up your wealth in a multisignature
transaction 5-of-9 with 9 of your friends. The key part is to solve privacy
issues (I have some ideas) and make UX usable by grandma, even if she forgets
her password and loses all backups (I have some ideas). Then, all folks will
lock up their funds in a distributed fashion, without any single place
becoming too tempting to invade privacy or take funds.

~~~
frabcus
I'd recommend gfshare as part of that solution - it's used by Debian
developers for their core server keys. We interviewed the founder at
[http://redecentralize.org/interviews/2014/01/02/10-daniel-
gf...](http://redecentralize.org/interviews/2014/01/02/10-daniel-gfshare.html)

------
jtchang
This is fundamentally great news. Insurance is a great hedge against risk. In
this case a bitcoin "bank" believes it can reduce the risk of someone stealing
all the deposited bitcoins and running off with them. Llyod's has a very
interesting and long history of insuring things that are outside the realm of
"normal". Read about it on wikipedia.

The end result is I now have a choice. I can store my bitcoins on my own
computer or pick an insured bank. If the bitcoins are stolen out of the bank I
can be sure I will get my money back because they are backed by a very large
insurance company.

Llyod's has a huge amount of capital available and they have been in the
business a long time. As an insurance company this is important because you
get to see lots of black swan events (and realistically how often they end up
happening).

I am sure their analysts have looked at what happens if someone ends up
stealing all the bitcoins vs how much money they can make off insuring against
this risk. They can give bitcoin websites discounts for security audits and
how they store their data.

------
chmars
I do not see a 'world's first':

Elliptic does not offer insurance to customers but has to get insurance itself
according to the published terms:

 _' Elliptic Vault shall effect and maintain with a reputable insurance
company a policy or policies of insurance providing an adequate level of cover
in respect of all liability which may be incurred by Elliptic Vault under this
Agreement or in respect of any loss of Stored Funds up to a value of the
Specified Cover.'_

 _' In the event of any claim against the insurance company by Elliptic Vault,
in respect of any loss, damage or corruption of Stored Funds up the value of
Specified Cover, any Stored Funds subject of the insurance claim will be
valued at the average USD ask price offered on the Bitstamp exchange in the
24-hour period ending at 00:01 am GMT on the day on which Fees are payable, or
on such other basis as the insurer may adopt from time to time.'_

[https://www.elliptic.co/vault/terms](https://www.elliptic.co/vault/terms)

Insurance coverage for data loss, data theft etc. is not new, on the contrary,
it is quite common if you store digital data and do not plan to go bankrupt
because of customers suing you …

------
minimax
Transaction metadata is public. Transactions are irreversible. You have no
FDIC protection of your savings. Volatility, volatility, volatility. Oh and
now I guess if you really want to hold on to your bitcoins you have to keep
them in "deep cold storage," whatever that means.

Bitcoin is the technology equivalent of the emperor's new clothes.

~~~
VMG
> Transaction metadata is public

So I can verify the transaction

> Transactions are irreversible.

I can be sure the transaction is final

> You have no FDIC protection of your savings

I can be sure that no currency can be created out of thin air. I still have
the option to buy third-party insurance

> Volatility, volatility, volatility

Better than artificial stability that hides risk

> Oh and now I guess if you really want to hold on to your bitcoins you have
> to keep them in "deep cold storage," whatever that means

Ownership of the private key(s) is equivalent to ownership of the funds.

> Bitcoin is the technology equivalent of the emperor's new clothes.

Either that or
[http://tvtropes.org/pmwiki/pmwiki.php/Main/UnderdogsNeverLos...](http://tvtropes.org/pmwiki/pmwiki.php/Main/UnderdogsNeverLose)
;-)

~~~
foobarqux
> Ownership of the private key(s) is equivalent to ownership of the funds.

You don't hold the private keys when using a third party service, including
this insured storage.

~~~
VMG
You also don't really own your Bitcoin then.

------
xedarius
This seems to form the basis of a central clearing house, which is exactly
what Bitcoin is designed to defeat.

~~~
gtirloni
Exactly. I don't understand how people can be so naive.

The "freedom fighter" and "fighting the man" themes are going down the toilet
so quickly people don't even realize.

Many people, including these self called entrepreneurs, are jumping in because
they see an opportunity to make money. Plain and simple, they couldn't care
less about Bitcoin, privacy, fighting the man, whatever.

People should be angry the established monetary powers are taking an interest
in Bitcoin. At the end, Bitcoin will be just another currency the powers at
the top manage, make money on top of it, tax, etc, and what will remain of it?

------
amalag
How can anyone prove where the coins came from if they are spent? If there is
a copy of the wallet that is not with this third party and is spent, how can
they insure the coins?

------
gremlinsinc
what's to stop someone essentially robbing from themselves, ie logging in and
stealing bitcoins, sending to an anonymous account, then filing a claim? Also,
why not have a wallet that has optional insurance built in. Take 2% of every
deposit to cover losses,

------
moe
This is an easy 5 on the Cuil-meter (cf. cuil theory).

------
notastartup
I think this bitcoin craze is seriously going to hurt the chance of
cryptocurrency ever being accepted. Most likely the governments are letting it
slide because they probably know it's not going to work. Let a black swan hit
and crash the bitcoin that robs it of any trust. Is a government that invades
a country who tries to accept Euros for petro oil seriously going to allow a
currency they can't tax? People couldn't do shit when NSA snooping on them hit
the news, and they are seriously thinking that this new cryptocurrency will
replace the status quo?

~~~
mahyarm
You can tax bitcoin, just like you tax P2P cash transactions. Whats even
better is there is a permanent record that will never go away once you start
attaching identities to addresses, which exchanges contain the vast majority
of, so you have plenty of time to tax these people.

