Why Cryptocurrency Exchanges need to be Protected by a comprehensive Insurance Policy to to gain more trust from users
Feb 05, 2018 Posted / 3724 Views
Hackers have derived the ‘easiest’ means of getting their hands on millions of dollars in cryptocurrency from even some of the world’s most secure cryptocurrency vaults. Numerous cases of hacks have been reported in the cryptocurrency scene since its invention in 2009.
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One of the first significant cryptocurrency hack which still remains in the list for the most damaging hacks is the mt Gox hacking saga of 2011-2014. The Tokyo based Bitcoin exchange was robbed of about $460 million causing a major turbulence in the global price of Bitcoin since the platform was handling some 70% of the world’s Bitcoin transaction. A total of 127,000 customers of mt. Gox literally dragged the company to court and sued it for all cases of fraud and embezzlement of funds that have ever been used in a legal suit.
From 2011’s mt Gox hack major hacks have been taking place in the cryptocurrency scene and billions of dollars have been moved into hackers’ wallets. The latest issue of hacking is yet another Janese Cryptocurrency exchange, Coincheck which lost approximately $523 million worth of the cryptocurrency NEM. Although major cyber security analyst and the Founder of NEM Cryptocurrency Long Wong, blamed Coincheck for not deploying the recommended best security practices, cryptocurrency hackers seem unstoppable. However Mr. Wong Promises that they would do whatever it takes to track and retrieve the stolen XEM coins.
The insurance industry have proven effective in protecting businesses against a wide range of risks for hundreds of years now. The industry has been surviving since the late 1750 BCs and still proves to be effective to date.
Adapting insurance for cryptocurrency exchanges is giving assurance to the vast cryptocurrency users that, cryptocurrency is not a scam. Insurance means the users and the exchange platforms are properly protected in cases of any lost of funds from the exchange storage due to hacking.
However insuring schemes of such magnitudes could be daunting and over estimated in terms of premiums. But the hundreds of years the insurance has been in existence gave rise to numerous elite training institution well equipped to craft fair insurance policies for virtually any kind of conceivable risks.
Although coincheck promised to compensate all it’s customers who lost money in the biggest cryptocurrency hack of all time, although it is still unclear where the company would get the said compensation money from and when it will actually pay the affected accounts.
Reverse engineering is commonest in the software secure industry meaning the most secured online platform is just a few moments away from a major hack since hackers keeps on attempting and improving on their hacking techniques without being know.
Some cryptocurrency companies store their cryptocurrencies away from the prying eyes of hackers in cold offline storage. Although not proven to be 100% secured, cold storages are practically not possible to access remotely.
Some companies on the other hand are implementing strict, KYC and AML policies coupled with limiting the maximum possible amount and number of transactions that can be executed instantly.
Matter of fact it’s now impossible for users to trust any cryptocurrency exchange platform as even the largest exchange platform still fall prey to hackers. A Lot of upcoming exchanges in the ICOs Stages are promising to revolutionize security of exchanges using smart contracts and related technologies. We are yet to see how they will measure against the ever improving anonymous hackers terrorising the cryptocurrency industry.
Applancer is an open platform for discussion on all things like Blockchain , Cryptocurrency and Ico news updates. As such, the opinions expressed in this article are the author's own and do not necessarily reflect the view of Applancer .
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