From The News Desk Coinbase dropped a bombshell on the bitcoin world yesterday by revealing that not only are its bitcoin deposits insured, but they have been so for more than a year.This after months of competitors listing insurance as a differentiating feature.The company wrote in a blog post: While Coinbase’s latest announcement is undeniably good news, the details of the insurance protection demand further analysis.First, the company specifies that it is insured against “losses due to breaches in physical or cyber security, accidental loss, and employee theft,” by not “bitcoin lost or stolen as a result of an individual user’s negligence.” Fair enough.The caveat to what has thus far been all good news is that Coinbase’s insurance only covers deposits held in its online wallet, or “hot wallet.” This means that the company’s offline deposits, “cold storage,” or vault are not insured.Cold storage could be thought of as a bank holding cash or gold reserves, except in the case of bitcoin, it means (hopefully encrypted) hard drives and occasionally even paper printouts of data corresponding to bitcoin deposits.

These assets are typically stored in a secure facility, of unknown location, and often have round the clock security.Coinbase likely holds just three to five percent of all deposits in it online wallet at any time, which means that 95 to 97 percent of all deposits would be uninsured.But is this a bad thing?The answer to that question depends on the reliability of the company’s security procedures pertaining to its offline storage and the faith that consumers have in Coinbase to make them whole should something go wrong.Surely, the most vulnerable portion of any bitcoin company’s assets are those which are connected to the internet, and thereby subject to remote attacks.The prospect of locating and then breaching the security of an offline storage facility is far more demanding of a task, but it’s not impossible.Gox, for example, lost deposits in both its hot wallet and cold storage, but we do not yet know if that was a result of incompetence, fraud, or simply an impressive feat of hacking.

Gox’s online deposits been ensured at the time of its security breach, the exchange would have still lost more than 800,000 uninsured bitcoin, worth several hundred million dollars.The challenge with securing and insuring offline deposits is that they are very difficult to monitor in real-time, and will require regular manual audits to verify their existence.bitcoin current value in inrIt’s little surprise that insurers are not yet comfortable with this arrangement, given the nascency of crypto-currencies.litecoin mining performanceIn fact, the only precedent is the Mt.bitcoin silver bullionGox fiasco, a memory that is sure to give any underwriter nightmares.kurs bitcoin 2012

Coinbase goes out of its way to compare its newly revealed insurance coverage with that of its (unnamed) competitors.Not surprisingly, the company believes that it comes out ahead, writing: Of course, given this setup, it should come as no surprise that Coinbase works with accredited carriers.The company “teamed up with , the world’s largest insurance broker, and only use underwriters with high credit ratings,” its blog states.ethereum programming languageWhile not stated explicitly, the veiled pot shots above appear to be aimed at Xapo (self-insured) and Circle (fully insured, but nominal deposits).bitcoin crash torNeither of these strategies is a permanent solution, but then again, insuring only your hot wallet as Coinbase does is also less than ideal.It’s a fair bet that all three of these leading bitcoin companies companies are aware of and working to address their shortcomings, including Coinbase seeking to insure its cold storage sooner rather than later.

The good news for consumers with regard to all three companies is that each is heavily funded – Coinbase has raised $32 million, Xapo $40 million, and Circle $26 million – backed by top tier investors, and led by capable and well-respected founders.None of this is a guarantee against weak security measures or rogue employees, but as far as recipes for trust go, you couldn’t ask for much more in the startup world.It’s common for hardcore bitcion users to refuse to allow any third-party to take custodianship over their deposits, preferring instead to secure their own online and offline storage.And it’s true, Coinbase (like Xapo and Circle) go against bitcoin’s fundamental tenet of decentralization.But for bitcoin to truly cross the chasm and become a mainstream financial tool, trust and ease of use will be paramount.Each of these companies has made major progress toward lowering the barriers to entry for new bitcoin users, including through offering familiar and approachable user experience designs.

Insurance is the next key piece of this jigsaw puzzle.For sure, some insurance is better than no insurance, and Coinbase’s coverage appears as legitimate as any in the ecosystem today.There remains room for improvement across the board, but the bottom line is consumers should have more peace of mind, not less, as a result of today’s announcement.There are pivots and then there are wholesale about-faces.Circle’s choice to halt bitcoin trading in favor of doubling down on more traditional mobile pay certainly counts as a bit more of the latter than the former.Circle launched three years ago mostly as a consumer finance firm built on a bitcoin backbone.Customers were able to buy and sell bitcoin on the platform — and as a blockchain-based firm, Circle was able to snap up around $70M in investor funds.But buying and selling bitcoin is now officially finished on the Circle platform, supplanted by “full messaging features” that will transform Circle into an app that more closely resembles What’sApp or Messenger with the payments features more prominently displayed.

Bitcoin isn’t totally gone from Circle.Users, for example, won’t be able to send bitcoin back and forth via Circle, but on the back end, bitcoin will still be the platform’s settlement token.To make that blending possible, Circle is also launching the Spark protocol, which allows digital wallets to use blockchains to exchange value.Circle will also be partnering with Coinbase — insofar as it will be directing all of its still bitcoin-enthused customers over to Coinbase where the blockchain action carries on.Circle will also be moving into Philippines and Korea via partnerships with Korea’s Korbit and the Philippines’ Coin.ph.U.S.-based customers can now use Circle as a remittance service in those nations.The bigger question for Circle is how it will attract customers now that it so strongly resembles services already in the market.Services that are quite popular already — customers could use Circle to send funds back and forth, but they can also use Facebook’s Messenger service or WeChat — and so far, what square needs to be circled here is how Circle will lure customers away, particularly since it is dropping its bitcoin differentiator.