Deutsch한국어 日本語中文EspañolFrançaisՀայերենNederlandsРусскийItalianoPortuguêsTürkçe
Portfolio TrackerSwapBuy CryptoCryptocurrenciesPricingWalletNewsEarnBlogNFTWidgetsCoinStats MidasDeFi Portfolio Tracker24h ReportPress KitAPI Docs

Best Crypto Exchanges With Insurance Funds Against Hacks

4y ago
bullish:

0

bearish:

0

image

Key highlights:

  • The threat of hackers stealing cryptocurrencies is one of the biggest risks of trading on centralized exchanges
  • Decentralized exchanges are still struggling with low liquidity 
  • A number of centralized exchanges have taken out insurance plans to mitigate some of the risks

The best cryptocurrency exchanges with insurance plans

Let’s face it, we all know that there is a risk associated with trading on centralized cryptocurrency exchanges. The main risk is a threat for an outside attacker to hack into the exchange's systems and steal funds from the exchange’s wallets. This has been a major problem for the industry that dates back to the infamous Mt GOX hack during June 2011, causing a major price dump in Bitcoin at the time.

Now, you could start to look for non-custodial type exchanges which are typically decentralized exchanges (DEXes). However, these types of exchanges are still within their infancy and struggle with liquidity and the number of trades that can be placed per minute.

The other option that you have is to look for an exchange that has taken out insurance plans against outside theft from their crypto wallets. Following is a list of the best exchanges that have confirmed insurance funds to protect you against hacks.

1. Bittrex - Holding the record with a $300 million insurance plan

The very well established cryptocurrency exchange Bittrex is currently holding the record with their funds insured up to $300 million. Specifically, the insurance is dedicated to outside theft of its cold/offline wallets to the tune of $300 million. It also covers users’ holdings in the case of an “internal collusion” attempt. However, it is not clear if it covers a user’s hot wallet funds.

This is a relatively new insurance fund that was only announced in January 2020 and, according to its CEO, Bill Shihara, it should offer a strong “peace of mind” for the users.

Arch Syndicate 2012, an insurance firm that focuses on corporation insurance, provides the underwriting for the insurance. Bittrex had to demonstrate internal security and compliance protocols for this insurance to be accepted.

2. Gemini - $200 million insurance via their own company

An interesting insurance case is that of the exchange Gemini, owned by the Winklevoss brothers. Gemini is insured to the tune $200 million by an insurance company created by the Winklevoss twins themselves, which they have dubbed as Nakamoto. It is licensed by the Bermuda Monetary Authority (BMA) and is stated to be only created for the insurance of Gemini exchange clients to the tune of $200 million.

Specifically, the captive insurer will provide coverage for customers of Gemini Custody which is the cold storage service for the Gemini exchange. It is important to note that this does not seem to cover funds in any “hot wallets”, however, we can assume that the majority of the exchange’s funds are held in Gemini Custody and not held online.

3. Coinbase - A risky $255 million insurance fund

Top-flight exchange, Coinbase, is insured by Lloyd’s registered broker AON to the tune of $255 million. It is sourced from a global group of US and UK insurance companies to take positions of loss in a “tower” structure with insurers at the lower layers of the tower paying first. 

The interesting thing about this insurance is that it only covers users’ funds that are in Coinbase “hot wallets”. Now, Coinbase only store around 2% of all funds in “hot wallets” and the rest are stored offline. This means that only 2% of Coinbase funds are insured. 

Although this may seem like a problem, we must remember that a company like Coinbase employs the best security experts to keep funds offline safe. It also important to remember that cold storage is, historically, very resistant to outside attack vectors.

4. Binance - Funds are SAFU

Binance takes a completely different approach to “insuring” its users’ funds. Instead of going through an insurance broker the exchange has decided to create their own fund. This fund has become famous amongst Binance traders and is known as Secure Asset Fund for Users (SAFU).

The SAFU fund was created in July 2018 and it is created from 10% of all trading fees on Binance going directly into this fund - said to be held in a different cold storage facility. So, technically, if something happens such as an outside hack or natural disaster, users’ funds should be “insured” and covered in some form. However, we have no idea how big the SAFU fund currently is and if it is even enough to cover users’ funds on the exchange.

Verdict

If you want to have some protection in case your crypto exchange of choice getting hacked, you can take a look at the exchanges featured above - their insurance policies will certainly be welcomed by users in case of a security breach. However, it's still not advisable to hold large amounts of cryptocurrency on exchanges, as they are a very attractive target for hackers. Even if the exchange's wallets itself are kept safe, malicious actors could still gain access to your account credentials through phishing and other methods to steal crypto from your exchange account.

4y ago
bullish:

0

bearish:

0

Manage all your crypto, NFT and DeFi from one place

Securely connect the portfolio you’re using to start.