Cryptocurrency Hacks - a primer

Growth in cryptocurrency users

The growth in popularity of cryptocurrencies has, in many ways, outpaced the infrastructure built to support it in terms of security, cryptocurrency exchanges that serve both as a marketplace and a store of the digital assets have become a hacker’s favorite target. Now that the cryptocurrency capitalization is earmarked to surpass over a $1 trillion, the demand for crypto-based insurance products is more important than ever before.

The widespread adoption of new consumer technologies across multiple industries has generated a new set of demands and expectations for insurance solutions and interaction channels. However, insurance brokers & aggregators are still experiencing multiple operational barriers and challenges. This can be attributed to an internally focused business that has not been subjected to the same level of consumer pressures that other customer facing sectors.

Cryptocurrency Exchange Hacks

Source: https://www.zdnet.com/article/2019-saw-more-cryptocurrency-hacks-than-any-other-year/

Since 2019, at least 10 crypto exchanges have reported a large-scale hacking attack on their platforms. One of these is Bittrue — a Singapore-based cryptocurrency exchange that lost about $5 million in XRP and Cardano. With millions at stake, not to mention a growing cryptocurrency market capitalization, the insurance industry can provide a safety net for crypto investors. Traditional insurers can restore investor confidence in cryptocurrencies as a store of value.

No federal FDIC insurance policy exists to protect users from loss as it does with fiat. The reality is that crypto demands a high level of personal responsibility managing one’s own money independent of any centralized entity means that you’re entirely responsible for all scenarios.

DeFi Smart Contract Hacks

Source: https://twitter.com/prysmeconomics/status/1275572652950855681

2020 certainly was the year of Decentralized Finance (DeFi). Driven by sudden yet growing interest by the public and striking breakthroughs by projects, DeFi protocols accelerated the crypto market while utilizing the blockchain landscape. 2020 was also a dangerous year for crypto investors as Decentralized Finance (DeFi) companies accounted for 21% of the total theft volume in 2020. The 21% is a steep number considering the fact that in 2019 such attacks were virtually negligible.

2021 is going to be even more challenging according to the cybersecurity firm Kaspersky.The firm has further warned an increase of Bitcoin thefts in 2021 due to the growing demand. It is said that it was the pandemic that led to the sudden interest in the cryptoworld as many economies and real world currencies plummeted during the lockdown. The gradual decline of traditional currencies and centralized finances is what drew the people to DeFi. The adaptation of DeFI is expected to increase with the advantages that the technology has to offer (High liquidity, removal of intermediaries and decentralized ledgers) and this is why experts are warning on expecting the hacks on DeFi to increase.

Source: https://twitter.com/prysmeconomics/status/1275572652950855681

The Crypto/Defi Asset space is growing in leaps and bounds but we are yet to see any real insurance providers build insurance solution around this rapidly growing industry. Prevention is better than cure. The crypto sector badly needs risk transfer solutions, including traditional insurance, and this goes beyond protection from hackers and thieves. It is no secret that the crypto world suffers from continued price volatility and that users could benefit from some protection against market gyrations — whether through traditional insurance carriers or by other means. Polkacover understands the threats that crypto users are exposed to in the DeFi market and the gaps in the crypto system.

And that is why the team of industrial experts are creating a platform with insurance products that will help the users to transact safely.