Coincover – Going beyond insurance for a blockchain-enabled world
15 years ago, when Satoshi Nakamoto released the Bitcoin white paper, crypto was born. Since then, the adoption of Bitcoin and other digital assets has grown at pace, with over 420 million users worldwide as of 2023. However, our latest industry report surveying over 16,000 consumers highlights that financial and security risks are the top two barriers to adoption. To help overcome these challenges, the landscape needs to welcome both preventative and curative solutions.
So, what exactly are the risks that are hindering the adoption of cryptocurrencies?
Identifying blockchain-specific risks
Blockchain technology has captured the attention of the world. What was once a niche and underground subsect of finance is now the subject of podcasts, front-page news, and dinner-party conversations. However, this unique landscape comes with its own set of risks. As businesses explore new use cases and the adoption of crypto becomes more mainstream, these risks must be mitigated. Coincover has identified five categories of risks that you are vulnerable to in the digital asset space:
Lost access
To hold and use cryptocurrencies, you may need a private key or seed phrase. Remembering and storing these phrases and keys poses the risk of a single point of failure. If you lose your keys, you will lose access to your wallets. Currently, 20% of all Bitcoin is locked away and inaccessible.
Even Bitcoin millionaires can lose access to their funds. Crypto enthusiast, Stefan Thomas is famous for losing his access to his wallet holding 7,002 Bitcoin. With only two password guesses left, and no idea what the password could be, Stefan might lose access to his funds, forever.
Cyber threats
Cyber threats are a big risk in the digital asset space. Unsuspecting victims can easily fall for spear phishing, social engineering, or ransomware attacks with £7.2 billion to date siphoned off blockchains by cybercrime.
Threats such as hacks continue to pose a risk to crypto investors. One of the biggest hacks of all time was on a Tokyo-based cryptocurrency exchange, Coincheck, which lost $532 million in digital assets. Using a malicious email, the attacker tricked Experty ICO participants into sending Ethereum funds to a different address.
Operational failure
Operational failures can pose great risks that are outside the control of the investor. Internal bad actors, exit scams, and insolvency could turn your crypto haven into a nightmare. In 2022, £18.9 billion was lost due to operational failures, which can have dramatic effects on the credibility and user adoption of a cryptocurrency service provider or cryptocurrencies in general.
An example of insolvency that led to investors losing access to the crypto assets is the bankruptcy of Celsius Network. In 2022, Celsius Network (CEL) announced they would pause all withdrawals on the platform until they were in a better position to honour their withdrawal obligations. Later, they filed for bankruptcy, leaving investors’ assets locked up on the lending platform. Then in July 2023, Celsius Network’s CEO faced criminal and civil charges during his time at the cryptocurrency lending platform where he was accused of making false and misleading statements that led to the great financial loss of many investors.
Technology failure
Biometric to multi-factor failures can leave you exposed to the risks of the blockchain landscape. In one story, hackers were able to steal $34.65 million in crypto from a top exchange by bypassing 2FA.
In January 2022, Crypto.com was hacked by compromising its 2FA technology. A hacker bypassed the systems 2FA and managed to make unauthorised withdrawals of over $15 million worth of ETH, $19 million of BTC and $66,200 in other currencies.
Human error
Everyone can make mistakes, even when it comes to sending your digital assets. If you mistype an address when sending your crypto, send funds to a corrupt account or accidentally delete access material, you could lose access to your digital assets.
In one slip-up, a Bored Ape NFT investor made a fat finger error and accidentally sold a high-value NTF for $3,000 instead of $300,000. But even the big players can slip up too. In early 2023, $50K of seized crypto was accidentally sent by the DEA to a scammer, proving that mistakes can be made by anyone.
What solutions are available to the market?
It's not as simple as it may seem to find crypto insurance, as there is so little out there. You can insure your crypto from getting stolen through exchange wallet hacks, but it comes with its limitations and usually, it only covers a small number of coins. It is also worth mentioning that insuring your crypto doesn’t mean you’re less at risk of being a target for a crypto hacker.
But insurance isn’t the only option. Self-storage of your private keys could help keep your assets protected against blockchain-specific risks. This may include a self-backup strategy. However, this holds complexities from the storage and encryption of keys to access management and contingency planning.
Other strategies could include transaction monitoring of your digital assets. There are many different companies now offering transaction monitoring that is designed to identify suspicious transactions to and from your wallet.
This poses the question if cryptocurrency is so difficult to insure and other strategies don’t cover all risk bases, is it the right solution? If the goal is to protect your crypto from being stolen, then opting for a preventative solution would be more efficient.
Coincover – offering Prevention and Cure
So, what can be done to make sure your assets are safe? Coincover exists to create a secure environment for users of crypto and blockchain, allowing them to transact safely in a web3 world. Coincover provides the best defence in Blockchain, setting the standard for safety, integrity, and protection.
Coincover’s solution is prevention-first, as we believe it is far better to prevent something bad from happening to you and your customer’s digital assets. For example, if Stefan Thomas had been protected by Coincover, he would not have lost access to his Bitcoin fortune. Our technology actively shields you and your customers’ assets from the main five categories of risks. For example, with Coincover’s recovery solution, your access will be always protected.
Coincover’s three-tier product covers the most common and significant risks specific to blockchain. Split into core, advanced and complete, Coincover can provide you with protection that best suits your requirements. For the first time, you can protect your organisation with a cost-effective solution that’s designed to scale with you.
But we understand that despite our best efforts, unforeseen circumstances can arise. Coincover’s technology is insured by underwriters at Lloyd’s of London and re-insured by MunichRe. We will pay out if our technology fails to prevent theft or loss as described in your protected risks and set out in our service agreements.
With Coincover, you’re not just benefitting from protection against threats; you’re benefitting from peace of mind. Our solution ensures that if the worst should happen, you have a reliable safety net. By going beyond traditional insurance and meeting rigorous regulatory standards, we’re revolutionising the way digital assets are safeguarded.
Join the 350+ partners already trusting Coincover to navigate the complexities of the blockchain landscape. With our prevention-first approach and comprehensive coverage, you can confidently embrace the future of finance knowing that your assets are in safe hands. Contact the Coincover team to learn more about protecting your assets.