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.
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.
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.
A detailed step-by-step guide on becoming a member, performing swaps, buying insurance etc. can be found in this manual.
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.
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.
More on Soteria Finance.
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On May 29th, Belt Finance was the victim of a flash loan exploit. Two days later, the team officially released their first compensation plan for users affected by the exploit. After the initial plan received backlash from their community, Belt posted a revised effort on their Medium page on June 8th.
Like the initial plan, Belt aims to take a more reactive approach to loss compensation for victims of the exploit. The plan focuses on protection of the BELT token value, division of yields between different pools, and gradual rebuilding of the protocol for full service and productivity. Below is the breakdown of the revised compensation plans.
The team initially introduced the buyback plan with their first compensation proposal. The goal of the buyback is protecting the BELT token value as the compensation commences. Without a buyback plan, there would be little incentive for users to continue to hold the token. This could lead to a drastic price correction if the buyback recipients all dumped their compensation at once. If a token gets hit by more sell pressure than buy pressure, the value often reduces far more drastically than anticipated.
For this reason, the team will keep the initial planned $3 Million buyback funds. Part of the funds will be sourced from the PancakeSwap IFO. The buyback plan will help to counteract the impending sell pressure. The details of the buyback program are as follows:
The Liquidity Pool (LP) for 4BELT-r4BELT has been canceled. The team cited in their Medium post that the division of yields among new and established users was a key factor in this decision. There will not be a separate pool for r4BELT under the revised compensation plan. The collection pool was redesigned to keep 4Belt as profitable as it has always been, with r4BELT holders able to further optimize their 4Belt yields replacing the LP.
According to the team, liquidity mining with r4BELT will be activated for either r4BELT or 4BELT based on whichever has a lower balance. For example, if you have a lower amount of 4Belt than the r4BELTyou receive, you will receive the boost for the amount of 4BELT you have. This is a conditional compensation plan - the target is not to lock in user funds but to correctly target and compensate loyal customers of the protocol.
Those who were previously using 4BELT tokens will not be significantly affected in terms of BELT rewards, since their 4BELT tokens will generate close to the same amount of BELT rewards as previously. The only difference now will be that their r4Belt tokens will be generating additional yield to compensate for losses incurred.
More details of the plan as regards the emission rate is detailed in the revised compensation plan.
The revised emission distribution slightly reduces rates across the board, but adds a 20% allocation to r4BELT with 4BELT as part of the compensation package.
To receive r4BELT, users must have held at least one 4BELT LP token (either held or staked) or one beltBUSD (either held or staked) at BSC block #7839266.
According to both the initial and revised compensation plan, it will be entirely up to other yield optimizer platforms on how they would compensate BELT users affected by the exploit. However, Belt Finance has assured that every user on the platforms they know about and are in contact with will have r4BELT tokens airdropped to them. More details are available in the revised compensation blog post.
Judging by the response to the Tweet detailing the compensation plan, the community response has been critical of the platform’s decision. Many users have hinted that the revised plan barely differentiates from the original released plan. Other users expressed disbelief at being asked to supply more liquidity to the platform after having incurred losses from the exploit.
Whatever the decision of the affected community members and protocol team, it must be a priority that this situation gets resolved in a win-win situation for everyone. Belt has taken the approach of protecting their protocol while trying to provide a compensation package, which has caused consternation amongst those affected by the exploit. Only time will tell if their hesitance to directly compensate users will be enough to regain the trust of the community.
On June 14th, Alpaca Finance announced via Twitter that they have partnered with Immunefi to step up efforts in improving security. Immunefi is one of the largest bug bounty platforms on the blockchain with more than $20 million in rewards to be offered. This partnership aims to improve the Alpaca’s DeFi platform by giving its community the peace of mind from any glitches or exploitation in its protocol, as well as giving them a chance to offer solutions to mitigate any potential risks.
The growing number of exploits in the DeFi community of late has been a concern for the community. This concern is addressed through a proactive campaign by Alpaca to reward bounty hunters for successful detection of bugs and implementation of preventive measures.
Immunefi rewards users for the discovery of smart contract vulnerabilities according to the impact of the vulnerability. This is classified through Immunefi’s ‘Vulnerability Severity Classification System’. The system breaks down the vulnerabilities into 5 categories ranging from critical, high, medium, low, and none. The scale has 3 metrics that contribute to the classification.
1. Consequence of successful exploit
2. Level of access that is required for the exploit
3. Probability of a successful attempt in exploiting the vulnerability
One example of a Level 5 (critical) threat is where the contract’s holding is emptied or frozen. This can be done through economic attacks, flash loans, reentrancy, logic errors, and integer over/under flow. On the other hand, a contract that fails to deliver on its promised returns but does not lose its value is categorized as a Level 2 (low) threat.
Interested participants must include a complete description of the bug and instructions to reproduce the issue or a Proof of Concept (PoC). A higher value is attached to reports that include problem solutions, and will be reflected by a higher likelihood of receiving full reward according to the severity classification tier. Payouts are handled by the Alpaca team, denominated in USD and paid in $BUSD.
Perhaps the largest incentive for Alpaca to scrutinize their platform security is the troubling trend of flash loan exploits. The latest trend of using flash loans to exploit and drain-off liquidity pools in DeFi platforms has rocked the trust of investors. Apart from suffering financial losses, the platform also loses the confidence of its community when such an exploit happens. Here is a short list of BSC protocols who have recently suffered an exploit in their smart contract.
February 11, 2021 - IceCreamSwap was exploited and 6,000 BNB tokens were stolen by the hackers.
May 2, 2021 - Spartan Protocol was hacked and a sum of $30 million was drained from its Liquidity Pool.
May 7, 2021 - ValueDeFi was hacked and suffered losses of $11 million
May 16, 2021 - bEarn.Fi lost a total sum of $10.86 million in a series of flash loan attacks.
May 20th, 2021 - PancakeBunny faced 97% correction in price after a flash loan exploit.
The list of hacks through vulnerabilities in the smart contract has revealed that much needs to be done to improve on patching up the loopholes that can be exploited. By partnering with Immunefi and offering the community a chance to find bugs in the project, Alpaca is increasing user trust in their platform. Their transparency and willingness to engage the community in the process is crucial for building a rapport that will increase adoption.
This additional effort by Alpaca apart from a standard smart contract audit is a good practice. Any reduction of risk through proactive initiatives by the platform operator will increase the likelihood of a new investor trusting the protocol. By incentivizing their community to participate in project security measures, Alpaca is proving their dedication to transparency - something that will elevate their reputation in the long haul.
Alpaca Finance is a community owned project that allows lenders safe and stable yield and borrowers to get loans for leveraged yield farming positions undercollateralized. This allows the borrowers to multiply their farming principals and the resulting profits. The project has partnered with other promising BSC projects like Wault Finance in an effort to expand the reach of the platform.
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.
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.
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.
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.
A detailed step-by-step guide on becoming a member, performing swaps, buying insurance etc. can be found in this manual.
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.
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.
More on Soteria Finance.
