Consumers who sign up with Coinbase must feel sure that their online wallets will not be hacked, its executives say. To minimize the risk of a catastrophic data breach, Coinbase stores roughly 99 percent of its customers’ funds in formats that are not connected to the Internet. The remaining 1 percent — the liquid funds that Coinbase uses to carry out trades — comes from the company’s reserves, so that customer funds are never directly connected to the marketplace. That 1 percent is privately insured by Lloyd’s of London, Hirji said, offering another layer of protection.
Here is more from Brian Fung at WaPo.