Pioneering Decentralized Insurance: SOY Finance's Solution to DeFi's Security Challenges

Discover SOY Finance's novel approach to DeFi security with our built-in insurance mechanism. Enhancing trust and user protection, we're shaping a resilient decentralized financial landscape.
As the Decentralized Finance (DeFi) ecosystem continues to grow, it is essential to address the risks and challenges associated with smart contracts and other DeFi applications. In this article, we introduce SOY Finance's novel built-in insurance mechanism, which aims to enhance security and trustworthiness while protecting users from potential financial losses.
Without a doubt, the rapid growth of the Decentralized Finance (DeFi) ecosystem has brought many opportunities for investors and users by democratizing financial services and making them accessible to anyone with an internet connection and a computer. However, it has also introduced various risks and challenges, such as smart contract vulnerabilities and other security issues. To address these concerns, SOY Finance has developed an innovative built-in insurance mechanism designed to enhance the security and trustworthiness of DeFi platforms while protecting users from potential financial losses. As an integrated feature, the mechanism's coverage capacity will be further strengthened by receiving newly minted SOY tokens through farming. Consequently, a multiplier will be assigned, directing these newly minted tokens to the Insurance treasury, thereby enhancing its ability to cover potential claims.

Decentralized insurance based on Smart Contracts

SOY Finance's insurance mechanism is based on Smart Contracts; hence, it is decentralized, transparent, and efficient. The insurance treasury serves as the mechanism's financial backbone, ensuring adequate capital to cover potential claims. The platform employs a Callisto Risk Assessment Engine to evaluate the level of risk associated with each smart contract available for insurance coverage.

Callisto Risk Assessment Engine

The Callisto Risk Assessment Engine" (CRAE) uses the audit results from the Callisto security department to determine the required insurance premiums for users who wish to insure their funds. Each audited smart contract receives a score based on its quality and security level, which is then used to calculate the insurance premiums.
The insurance mechanism flowchart

Insurance Treasury

The Treasury serves as the primary source of funding for potential claims. Its primary function is to collect premiums and manage the funds to ensure sufficient capital to cover potential liabilities.
To support its operation beyond the collected premiums, the Treasury will be initially held in CLO and SOY and will receive a portion of the newly minted SOY tokens. This will help bolster the Treasury's financial reserves, ensuring that it can effectively meet its obligations to policyholders in the event of a claim.
Additionally, the Treasury will be supplemented by the IDO funds collected for insurance purposes, which will be deposited directly into the Treasury to enhance further its capacity to cover claims and support the platform's overall financial stability.

The Claim Process

The claim process on the SOY DeFi Platform is designed to ensure transparency, efficiency, and fairness. In case of a covered event, users submit their claims through the platform's user interface, providing all relevant details and supporting evidence. The Callisto Network Security Department analyses the claim, verifies the covered event, and reviews the provided proof. The decision regarding the claim's validity and eligibility for compensation is communicated transparently. If approved, the insurance treasury processes the payout, with the compensation amount depending on the insurance policy terms and the loss extent.

Insurance tiers for higher flexibility

To cater to the varying needs and risk preferences of users, SOY Finance offers three different tiers of insurance coverage: full coverage (100%), partial coverage (65%), and minimal coverage (25%). These tiers provide the required flexibility in the level of coverage users can choose, allowing them to select an option that best aligns with their individual requirements and risk tolerance. The coverage ratio will also be closely related to the score assigned by the Callisto Risk Assessment Engine.

Adjustable coverage

SOY Finance's insurance mechanism will also implement measures to maintain the stability and solvency of the insurance treasury, such as regular rebalancing of the Treasury's token composition, dynamic coverage limits based on current values, additional funding mechanisms, and coverage adjustments in response to changes in token values. If the purchased coverage exceeds the Treasury Fund's capacity, measures will be taken to incentivize users to reduce their coverage, such as offering lower fees.
Through its built-in insurance mechanism, SOY Finance aims to offer a unique and robust solution to the existing challenges faced by the DeFi ecosystem. By providing a transparent, secure, and efficient insurance platform based on Smart Contracts and leveraging the experience of the Callisto Auditing Department, SOY Finance aims to mitigate the risks associated with DeFi platforms and pave the way for a more resilient and thriving decentralized financial landscape.
As the DeFi landscape evolves rapidly, SOY Finance remains committed to continuous innovation and improvement, striving to adapt and enhance its platform to provide the best possible experience and protection for its users.