How to protect your bitcoin from theft? Take out an insurance policy
The easiest way to protect your bitcoin is getting it offline in a process called cold storage. That makes you immune from hackers, but it also means you’ve got to protect your private key like you would a fat pile of cash. A secure safe in your home or a safe-deposit box at your local bank are two good options. Now, there’s a third option, though: paying a third-party firm to store your bitcoin for you, and taking out an insurance policy against loss.
That’s the idea behind the UK-based company Elliptic Vault. The company uses a range of security measure to keep your bitcoin safe:
- Bitcoin private keys are stored in multiple secure areas.
- Private keys are cryptographically and “physically” secured.
- Copies of private keys are only accessible by a quorum of Elliptic’s directors.
Should your bitcoin get compromised, your loss will be reimbursed by an insurance policy. I find it particularly interesting that the insurance policies are underwritten by Lloyds of London – a sign that bitcoin’s going increasing mainstream.
The coverage levels for the insurance policies are interesting, too. First, clients pick the amount of bitcoin they’ve got to store, then they choose a “coverage level” for those holdings (since the price of bitcoin fluctuates). Some users might not want to insure the full amount either:
“If I was going to use them, I would try to get the lowest coverage possible… like 10k or something, even if the coins were worth 500k+ and just rely on their good storage.”
That’s a response from a user on Bitcoin Talk in a thread created about Elliptic Vault. Another user writes:
“I wouldn’t (use a vault) just because I don’t want any official entities knowing about my bitcoin holdings. Period.”
Elliptic fees run around 2 percent per year. Should bitcoin prices rise much higher, I expect services like this will become commonplace.
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