Securing cryptoasset insurance services with multisignatures

Abstract

There is a number of threats related to cryptoassets processed by exchange services: the threats range from unintentional data leaks, through fraudulent cryptocurrency exchanges and poorly implemented protocols, to broken private keys. In this paper an information system reducing the risks related to cryptoasset loss is proposed. Specific business model as well as technological countermeasures are applied. The novelty of the presented solution is in the transfer of the security risk to the insurer without transferring full control over the cryptoassets by taking advantage of multisignature and timelock technologies. The architecture for cryptoasset insurance system has been described along with a set of corresponding communication protocols, which are followed by a short discussion. The description of the solution is preceded by a risk analysis related to cryptoasset security and countermeasures analysis related to those risks.