Cryptocurrency exchanges and insurance — work together for better security for users
For the business world, cryptocurrency is now getting the support of different industries. Blockchain-based technology is now valued for the performance of the decade. Once 1,309.03 bitcoin was worth a dollar, now you can see the evolution. Bitcoin and other cryptocurrencies now cover almost 277 billion dollars of the market. The popularity has increased since the price increased in 2013 and 2017. That two significant years helped to promote cryptocurrency and bitcoin. Now, the price of Bitcoin is going to $10,000.
While the industry is absorbing cryptocurrencies, the risk associated with cryptocurrencies is not less, if you assume. No investment or trading is simply assumed to be free of this risk. Whenever you enter the trading world, you will understand that every investment is glued to risk. Cryptocurrency exchange, though, carries potentially high risks.
Which threats remain inevitable for the crypto industries, even though technology promoted for a secure platform?
The trend of the future, as more and more companies and countries are adopting them as legitimate money types, might be cryptocurrencies, such as bitcoin. But the risk and error potential is widespread, as with any new technology. Although different blockchains designed to reduce risk support cryptocurrencies, there is an inevitable amount of risk.
· The first explanation that the cryptocurrency industry is classified in a high-risk region is lack of regulation. Since the outbreak of bitcoin, many cryptocurrencies have been introduced to the system, but the government is still uncertain about building a proper structure to regulate the technology. As a result of the lack of oversight, the government will not be responsible for any losses on the sector.
· The next factor I could mention is market volatility. Not only bitcoin, but the entire market has been showing turmoil throughout the year. Market prediction sometimes doesn’t save investors from losing money through cryptocurrency trading. Uncertainty of the business still left the dealer covered and the danger zone.
· The theft is the third reason to give the cryptocurrency market a risky market tag. Yes, yes. Thanks to the open and entirely computer-based system, the industry has suffered billions of dollars to date due to hacking. Because the system is designed as a highly secure and almost untraceable network, it’s always hard to find the intruder. Once you’ve lost your crypt to a hacker, it’s unrecoverable.
Here, three of the most effective reasons that are screaming high for insurance for the industry. Maybe the risks which are associated with the cryptocurrency companies are limited but the effects are intense. Insurance is needed to cover the asset risks and create a safer environment for users inside the crypto space.
What does it mean to users if crypto exchanges purchase insurance?
It was in 2014 when the Great American Insurance Group provided Bitcoin insurance coverage. The initial stage was to build custody of the bitcoin criminal case. Particularly in the case of hacking, robbery, etc. guarded via insurance giants in the market.
That initial approach to bitcoin triggered the idea for exchanges to create custodianship for better service to users. Today, the US government has also given a custodial warning where companies hold large amounts of funds.
Crypto exchanges carry users ‘ hard and cold wallets. Many consumers want crypto exchanges to protect their assets. But what the networks have been hacked? Since exchanges get most of the fund from customers. We have a pocket of people. Which makes exchanges the hacker’s prime target. It’s more convenient to hack a platform and steal money than to go to a user account.
CipherTrace reported that $4 billion worth of cryptocurrency, was stolen by hackers in 2019. Exchanges like Bitfinex, Bittrue, Binance, etc. lost a million dollar worth of cryptocurrencies due to security problems. Custody also needs insurance companies ‘ networks to ensure that any criminal act in the crypto-exchange does not harm the assets of the client.
The insurance scheme would guarantee the stability of the wallet and the crypto-exchange firms are pushed towards it. Coinbase received a portfolio worth $255 million from Lloyd’s of London. Bakkt, the Bitcoin Futures Trading Platform, has covered $125 million. BitGo has acquired a $100 million contract from Lloyd’s of London. In 2018, Gemini purchased insurance form, two insurance giants, Aon and the Federal Deposit Insurance Corporation. Other than these Exchanges, the Kingdom Trust, Anchorage and Fidelity all purchased insurance for ultimate protection.
Insurance companies cover the exchange platform that holds the customer’s assets in their wallets. Big markets are open forums for criminals, and alluring to rob funds in one stroke. Such markets buy, sell and also provide the customer with custody. Wallet stability is one of the major achievements of major exchanges including Binance. This site already holds a large number of consumer assets. Getting an insurance policy not only enhances confidence towards the company but also renders the platform more stable. There is no guarantee that crypto exchanges provide customers with full solidity on the platform.
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