Bitcoin is an online payment invented in 2008. It was released as an open-source software in 2009. The system is peer-to-peer. Users can transact directly without needing an agent. People find this currency attractive as no bank can control it.
Bitcoin. The ledger uses its own unit of account also called bitcoin. The system works without a central repository or single administrator. This has led the US Treasury to categorise it as a decentralised virtual currency. This is the first cryptocurrency.
Bitcoins are created as a reward for payment processing work. Users offer their computing power to verify and record payments into the public ledger. This activity is called mining. There can only ever be 21 million bitcoins. The smallest denomination is called a Satoshi. Besides mining, they can be obtained in exchange for different currencies, products and services.
With an estimated $14 billion worth of Bitcoins in circulation 82,000 merchants now accept this currency. Eight million users have set up wallets. These are accounts where they store and manage the currency. The number is growing.
Bitcoins are a way of using and moving money without a bank account or credit card. The currency fluctuates in value against other currencies. Recently, a Bitcoin was worth about $10,571 in U. S. dollars.
Users can purchase this currency, store them in a virtual wallet linked to their smartphone. They can then scan their account information at participating establishments to pay for merchandise.
Insurers that consider the possibilities of protecting Bitcoin users have other lingering concerns. For one thing, Bitcoin has some volatility. Therefore you can’t have the same approach to storing it as you would a commodity. Volatility in price is one of the things carriers are concerned about. An upward move in price can be beneficial to an owner. It is difficult to understand. The price movements is a very complex problem for insurers.
Individuals or businesses are protected when holding bitcoins This is in much the same way a safe deposit box at a bank secures valuable. Once stored in a virtual wallet, the currency can only be moved or accessed through the use of two “keys” – or codes. One held by the Bitcoin owner and the other held publicly. A person could lose the thumb drive that has the private key on it, then they are no longer able to unlock the Bitcoin wallet.
Investment in Bitcoins has been relatively robust. The growth in investment so far in the short life of the currency has been stronger than the growth of Internet-related investments during a similar period in its startup.
Venture capital companies have invested more than $670 million worth of Bitcoins into security-related enterprises. Insurers have viewed Bitcoin use as a cybersecurity risk. There is a distinction between ensuring Bitcoin value and covering the management of a Bitcoin company. The price of the currency cannot be insured but the company could be covered like any other Directors and Officers insurance.
Bitcoin theft insurance is available, however, it is pricey and there are only a few policies. However, over time more people will get involved. Thus there will be more consistency in the security of the underwriting.
An interesting aspect of Bitcoin is the anonymity of users. While every Bitcoin transaction is digitally recorded, parties to the transactions are identified only by account numbers, not names. The anonymity seems to be part of Bitcoin appeal for many users.
Any transaction that is done via email leaves an electronic “track” that can be followed back to the user, so the anonymity is hardly complete.
The vast majority of people in the world do not have bank accounts or credit cards, but many of them do have smartphones.
Bitcoins could become a simple and reliable currency for millions of people. Bitcoin is the cutting edge of where monetary systems may be going, although this would not happen overnight.
If Bitcoin is going to survive as a digital currency, it is going to have to convince investors that their holdings are safe. There has been a huge problem lately as two exchanges recently shut down due to hacker attacks. This attracted unwanted headlines and added fuel to detractors who believe cryptocurrencies are untrustworthy stores of wealth.
Falcon Global Capital, a San Diego firm launched a fund that will offer investors access to insurance should their bitcoins suddenly disappear, as they have for other unfortunate believers operating in the MX GOX or Flexcoin exchanges.