Secure protocols for smart contract based insurance services

Abstract

Abstract Cryptocurrency‐based transactions are exposed to serious security risks, usually higher than risks related to traditional online transactions. The threats range from unintentional credential leaks, through fraudulent cryptocurrency exchanges and poorly implemented protocols, to broken private keys. Therefore, there is a business need for insurance services dedicated to cryptocurrencies that would be technologically as well as economically secure for both insuring and insured party. In this paper an architecture for cryptocurrency insurance framework along with a set of corresponding communication protocols and a smart contract template that jointly reduce various security risks are proposed. The detailed description of the solution is followed by the security analysis section. Also, the description of the presented solution is preceded by a general risk analysis related to cryptocurrency unit security and countermeasures analysis related to those risks. The authors believe that the presented technological solution can potentially enable new business models based on crypto‐insurance services.