Soteria Finance Project Review: Pioneering Insurance on the Binance Smart Chain

As more developers build on BSC, there is a need to have a robust insurance platform that will help the BSC community mitigate the inherent risks of smart contract vulnerabilities and hack attacks.

By
Abriks
on
February 20, 2021
Category:
Project Insight

Introduction

When an unanticipated inconvenient event such as a car accident or a natural disaster occurs, many affected people often realize that they cannot deal with sudden financial emergencies. Traditionally, the insurance industry arose because of the need to protect against such life's uncertainties, ultimately catering to human nature or loss aversion.

Generally speaking, insurance requires two parties to function properly. First, there's an individual/group of individuals who put their resources together to provide a pool of funds that can be drawn from, the other is an interested party who pays a token (fee) to be given guaranteed financial coverage if a specified unwanted incident happens in the future. 

While there are ample examples of insurance platforms for physical assets and fiat, the insurance industry was almost nonexistent for owners of digital assets and users of decentralized finance. The rapid blossom of DeFi equally attracted hackers who saw it as a new market to carry out their malicious enterprise. When such hackers successfully carry out an attack, affected DeFi users are often left to grapple with huge losses. To protect the DeFi community from exposure to future losses due to hacks and other vulnerabilities, initiatives to offer insurance began to spring up, one of which is Soteria Finance. 

What is Soteria Finance?

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Soteria Finance is a mutual insurance platform developed on the Binance Smart Chain (BSC). It was launched on January 13, 2021 and its goal is to shield members of the DeFi community from exposure to losses. This is a result of arising hacks and compromised smart contracts across the entire De-Fi ecosystem. Soteria Finance is made up of four core parts: risk protection fund pool, claim assessment, risk assessment, and governance. In line with the core goal of decentralization, it is wholly owned by members of its community and anyone can contribute to the pool of funds. 

Features of Soteria Finance 

  1. It is fully decentralized. The governance power to approve claims resides with the community. 
  2. It runs on the Binance Smart Chain and uses BNB as a guarantee and claims asset.
  3. The insurance policy for any particular smart contract can range from 30 to 365 days.
  4. Soteria uses a co-insurance model alongside community members pool resources; in turn, users share risks as well as income from premiums.
  5. Soteria developed a unique economic model that spurs public participation in risk protection capital and ensures a (Minimum Capital Requirement (MCR) guaranteeing that every claim will be fully settled. Details of MCR and other technicalities can be seen in the Soteria Rules documentation.

How It Works

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The Soteria platform has a governance token, SOTE. Each policy is priced in SOTE, while settlement of claims are done with Binance Chain token BNB. Users can stake their SOTE tokens for several purposes, such as assessing and approving claims, determining a smart contract's safety, or projects to be insured. While SOTE only circulates within the Soteria platform, users who stake SOTE tokens can also mine wrapped SOTE tokens, WSOTE, which can be traded across different platforms. WSOTE is a standard BEP20 token, and exchanges between SOTE and WSOTE is in the ratio of 1:1. 

The community's pool of funds forms the capital from which insurance claims are settled. Also, 50% of the funds purchased by a policyholder are committed to the pool. For each contract, a certain amount of SOTE is pledged. When a claim is successful, the SOTE pledged in the contract will be burned to make the settlement. If the amount of SOTE promised for the contract is insufficient to cover the claims, additional funds are drawn from the pool to make it up. In this way, there's always a guarantee that every successful claim will be settled.

To become a member of the Soteria community, payment of a membership fee of 0.1BNB is required. Once the fee is successfully paid, a member can perform other functions such as staking; swaps between BNB, SOTE, and WSOTE, buy insurance, make claims, evaluate the users' claims, etc. 


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A detailed step-by-step guide on becoming a member, performing swaps, buying insurance etc. can be found in this manual.


Key Metrics

Milestones

Ever since its launch, Soteria Finance has enabled insurance services for projects such as BLINK entertainment platform, BakerySwap, Sphinx Protocol, Bscex, dForcenet, DittoMoney, ForTubeFi

The platform has exceeded 8,000 members with an active mutual cover amount of over $10,000,000, which are rapidly growing daily.

Conclusion

Binance Smart Chain is a rapidly expanding DeFi ecosystem. As more developers build on BSC, there is a need to have a robust insurance platform that will help the BSC community mitigate the inherent risks of smart contract vulnerabilities and hack attacks. Soteria Finance is an insurance platform with so much promise. As it expands its platform's functionality, the Binance Smart Chain network will increase utility and utilization, creating a space for Soteria's rapid growth.

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More on Soteria Finance

Website 

Github 

Twitter

Telegram 


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Abriks

Ahamdi Abarikwu is an Electrical Engineer and a lover of anything crypto. He is also an avid writer, proofreader and editor. He loves to play Scrabble in his spare time.