Cyber Insurance Providers are Taking Aim at Cryptocurrency Exchanges
With the growing demand for cryptocurrencies comes to the risk of hackers potentially infiltrating exchange websites and stealing the private keys of customers. Hackers can attack crypto exchanges through a variety of ways with one of the most common techniques being phishing scams. Once a hacker has access to the private keys it is only a matter of a few clicks before all funds in digital wallets are stolen with no way to retrieve the money.
This has been a repeating cycle ever since Mt. Gox, a popular cryptocurrency exchange, was hacked in 2011. This attack led to around $460 million worth of cryptocurrency to be stolen from customers in what is known as the most infamous attack in cryptocurrency history. This is where cyber insurance comes in.
Cyber insurance is one of the fastest growing forms of modern-day insurance. After seeing the damages that hackers inflicted upon Mt. Gox in 2011 cryptocurrency exchanges have been racing to find a way to ease customer fears of attacks and to find a way to ensure customer funds in the case of an attack. Cyber insurance has already seen double-digit growth in the past few years and with that comes larger premiums than most common forms of insurance. These higher premiums have led to a gold rush for insurance providers hoping to profit off a growing cryptocurrency community.
Crypto insurance, which is what they are now referring to the coverage as is only just beginning to gain traction and with a new industry comes to a lot of remaining obstacles to overcome. As of now cryptocurrency exchange, Coinbase, is leading the charge with individual coverage up to $250,000 for U.S. customers cash accounts and all digital currencies held by Coinbase online are fully insured. The trouble comes in the fact that only 2% of Coinbase’s customer funds are held online, leaving the other 98% to possible attack although these funds are held in cold storage which is normally very secure.
As crypto insurance becomes more mainstream expect to see a growing number of exchanges utilizing the benefits of this added layer of protection for customers in the coming years. As always, the best way to secure your cryptocurrencies is through the use of a hardware wallet that stores your private keys offline. One of the most popular and easy to use hardware wallets is the Ledger Nano S which is available online for around $65.