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Comment by lhnn | Hacker News Reader

It seems there is a market for an insurer of Bitcoin exchanges. Carry out extensive physical, procedural and offensive reviews against a set of standards, in exchange for certifying the exchange as "not easy to break", and insure its accounts up to a certain % of reserves.

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The problem is people don't want to pay a storage fee for leaving value on an exchange; they think they're getting ripped off because they're not earning interest like they would at a bank engaged in fractional reserve banking. Since the exchanges don't make money on deposits, it's tough for them to spend money to protect the deposits.

It would be reasonable for individuals to purchase insurance against loss of bitcoins held by an exchange. The insurance would be much less expensive for exchanges who have agreed to an audit (and possibly other controls) by the insurance company.

As a sidenote, the previous comment trumping up the FDIC is kind of misplaced. Government is needed for some things (like police), but not insurance.

What would be interesting is if there were real online bitcoin banks that leant or invested the bitcoins to both make a profit themselves and offer their customers some interest on their savings.

I heard there's one called Bitcoin Savings & Trust.

Jokes aside, there are a number of people doing this "for real" (or at least, "not obviously a ponzi"). They can be found on bitcointalk.org.

Since bitcoin is defined to deflate over time as use grows but eventually no more bitcoins are circulated, banks should be expected to charge for storage. You're paying for the privilege to hold onto the money, since the optimal strategy in a permanently deflating economy is to hold on to your money as long as possible.

One could argue that it's still in the interests of Bitfloor and similar exchanges to pay for such a service. Where will they be left off financially if such an event occurs?

From the article:

"BitFloor may take one of two options. They may either take the loss and continue running in an attempt to eventually earn the money back or, in the worst case, shut down entirely and begin an account partial refund process out of the available funds."

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