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Bitcoin vault offering insurance is 'world's first' (bbc.co.uk)
56 points by louthy 1260 days ago | hide | past | web | 33 comments | favorite

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.

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.

> 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?

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.

> This is bbc news, not fox news. I expect better.

Seeing how bbc 'news' have covered the NSA scandal so far [1] I would no longer say there's much difference between bbc and fox. Both are establishment mouthpieces, while one is quite blatant and the other more subtle.

You could perhaps argue that fox 'news' spectators are mostly clueless brainwashed Americans while bbc 'news' still has a strong following among all levels of English society.

[1] http://www.youtube.com/watch?v=f1Zvo8N3G94

I too thought it was an odd reference.

He threw out his hard drive without thinking because bitcoin literally was worthless back then. He had no need for a secure vault at the time to store his old broken HDD in.

Bitcoin is not virtual, its digital.

It's actually both.

Digital in generation and transmission.

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

The guy who threw away his coins was a big story a few months ago, was all over the news.

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.

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...

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.

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.'


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 …

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.

> 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... ;-)

> 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.

You also don't really own your Bitcoin then.

> 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.

Public metadata, irreversibility, and lack of FDIC protection are all good things. Volatility is in no way inherent to the system, and is mostly the result of an increasing pool of speculators (because it's new and people are still learning about it). The "deep cold storage" thing sounds like a bigger deal than it actually is, and is easier or more secure (or both) than the storage mechanisms of every other asset I can think of.

Lack of FDIC protection is a good thing? Seriously? Congratulations, bitcoin, you have managed to reinvent people keeping cash stuffed inside their mattresses.

Yes, lack of FDIC protection is a good thing, because better alternatives would exist. Deposit insurance can be implemented far more efficiently in a competitive market. And this has nothing to do with "keeping cash stuffed inside their mattresses," by which I assume you mean not being invested in some form (e.g. being loaned out to other people and earning interest).

In bitcoin you have an option between reversible and irreversible transactions. (see multi sig transactions)

In traditional finance you ONLY have reversible transactions.

Options are good.

lol stay pleb, volatility will continue to plummet with things like http://www.coinsetter.com , and with decreased volatility, things like insuring storage and then making profit on investment will continue to rise. You are a fucking moron

You appear to have HN and reddit confused. Consult your sibling poster for guidance on making a reasonable refutation of GP's comments without resorting to “lol stay pleb” or “fucking moron”.

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

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?

Essentially everyone trying to offer services that "improve" Bitcoin is putting themselves in the game to monopolize it. The good old Microsoft "embrace, extend, extinguish" applies just as well to it as to any other technology.

No, it's just one decentralized clearing house of many that will spring up.

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?

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,

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

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?

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.

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