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Does the Bitcoin Model Offer the Future of Technology Insurance?

Does the Bitcoin Model Offer the Future of Technology Insurance?

The rash of Bitcoin attacks reveals the vulnerabilities all developers and IT professionals face on a daily basis. Luckily, E&O Insurance can cover data breach lawsuits.

Wednesday, March 19, 2014/Categories: cloud-security

Since Mt. Gox, Poloniex, and other Bitcoin exchanges (and mobile software) were hacked, developers have increasing concerns about digital security and data breach lawsuits. Bitcoins can be a polarizing issue. Some folks are completely sold; others have major doubts. But wherever you stand on the spectrum, the cryptocurrency can teach you a lot about IT liability.

Small mobile developer firms, freelancers, and system administrators might be wondering, What does Bitcoin have to do with my small business? Quite a lot, actually.

In order for Bitcoins to work, every layer of technology – software, hardware, firmware – must be totally secure. Every exchange or mobile wallet app is a test of how secure our technology really is. And so far, we've been failing the test.

What Bitcoin Hacks Mean for Small IT Businesses

Most of the news coverage about Bitcoins doesn't look at it from the angle of a small business looking to manage its technology risks. So let's do that. Bitcoin's security gaffes highlight four data security issues that all IT small businesses have (even small businesses with no interest in Bitcoins).

  • Problems with off-site data storage. In a recent article on TechRepublic, security experts argue that Bitcoin's problems reveal some fundamental weaknesses in off-site data storage. Whether you're storing digital currency at a cryptobank or customer data through a cloud service, you trust your security to someone else, and that comes with risk.
  • Developer and web host liability. Whether your business sells mobile / web apps or provides web hosting services for your clients, it's important to remember how much risk comes with having access to customer data. Data breaches on your network or flaws in your code could lead to expensive lawsuits from angry customers and clients. Bitcoin's struggles show that no one is totally safe. Even the nerdiest of the nerdy can get hacked.
  • Inherent security weaknesses / platform issues. According to a post on ArsTechnica, scientists have shown a new way hackers can break into Bitcoin exchanges while not even running privileged software. It turns out the cryptographic functions on some Intel machines can be hacked, and newly discovered flaws in OpenSSL can leave users exposed. These exploits point out the sad nature of security weakness: sometimes they are an unavoidable part of using popular platforms.
  • New technologies and new risks. In order to run a successful tech business, you need to stay on top of new trends. Unfortunately, that also means you're going to be exposed to new risks. We're not suggesting you jump on the Bitcoin bandwagon. What we are saying is that whatever the new technology is – whether it's the Internet of Things, mobile wallets, or near-field communication – there will be new risks and security vulnerabilities to hammer out.

Insurance for Bitcoins? Yep, We Went There

For the record, TechInsurance doesn't offer any Bitcoin Insurance (that's beyond even us), but CNBC reports that a new Bitcoin startup is guaranteeing its customers’ Bitcoin deposits with insurance. The San Diego-based fund Falcon Global Capital is hoping to capitalize on the fears Bitcoin users have by offering more security.

While it may seem strange to insure your Bitcoins, in reality this service isn't so different from what traditional banks offer. A bank tracks your purchases and refunds you for fraudulent purchases if you're the victim of identity theft. In essence, this new Bitcoin company is adopting some of the standard practices seen in other financial sectors.

Data Security Insurance: E&O Coverage for IT Professionals

As Bitcoin exchanges and Target have demonstrated, no one is immune to data breaches. As a small business with fewer resources to spend on data security, it's important to protect your business from data breaches and identity theft lawsuits.

E&O Insurance covers these professional liabilities and other lawsuits specific to the IT industry. To get an estimate on the cost of business insurance, contact one of our insurance agents, or browse our free sample E&O Insurance quotes.

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