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August 29, 2014

Coinbase "insurance" - cold storage uninsured, nothing insured against the government

Filed under: Uncategorized — @ 12:00 a.m.
Coinbase "insurance" - cold storage uninsured, nothing insured against the government

Two notes about Coinbase's insurance:

1:

Coinbase is insured against employee theft and hacking in an amount that exceeds the average value of online bitcoin it holds at any given time.

That is to say that all of the coins in cold storage are entirely uninsured.

2:

Coinbase's insurance also contains standard policy exclusions (e.x. force majeure).

That is to say that should the United States Government decide to requisition all BTC in exchange for notes that promise delivery of bitcoins in the future which will never be redeemed, everyone keeping coins at Coinbase is completely fucked.

Put this announcement in the context of the USG's relentless endeavours to bring as many coins as possible under their control, and:

Consider the repeated and ongoing scam of refusing to sell coins during periods of high volatility (they can't even move money to Bitstamp fast enough to buy coins quickly enough to cover the liabilities that they incur on an ongoing basis - how much does that reassure you about this particular BTC counterparty?).

Consider the absurdity of asking people where they're sending bitcoin and why1.

Consider the case of "drugs and terrorism" - where they closed someone's account on the basis of the account's description of the intended use of the funds2.

Consider that they refuse to transmit coins to certain addresses3.

Consider Coinbase a barely-masked front for USG activities related to Bitcoin. They're advertising insurance that will not pay out for theft of funds in cold storage, a trivial feat for the government to accomplish by bank coercion. They're advertising insurance that will not pay out for "force majeure", which blankets all government action.

Given that one of the most important features of Bitcoin is how (for those capable of handling the radioactive stuff in the first place) it keeps the government from seizing your funds4 and the CB insurance barely protects funds in hot storage, consider their claims of insurance void and worthless. Sheeeeit! It doesn't even make FDIC guarantees! What lolz.

Updated with a bit of fun from contribuderpers to the lulzfarm:

Being able to be in control of your own money is great, if you can do it, but I tend to think most people don't want or can't handle that level of responsibility.

Let me give you a slightly different perspective: the only ones who will have any money in the future are those responsible enough to encrypt it and back it up redundantly themselves.

Footnotes:

1

If this question doesn't strike you as absurd, you don't understand bitcoin yet.

2

If this doesn't strike you as the utterly batty practices of a pathologically insane state, you've yet to realize that you live in a socialist dystopia.

3

If this consideration doesn't strike you as laughable, you don't understand how bitcoin works in some dangerous ways.

4

Shy, of course, a soldering iron in the pooper…

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