How Insurance Protocol Works
Last updated
Last updated
The Insurance Protocol has three pillars:
Solvability Calculator
Products Manager
Covers Manager (Covers and Pools)
Solvability Calculator
A smart-contract is dedicated to the verification of protocol solvency. It assigns the level of the insurable possibility according to the product insurance risks and based on the available liquidity. Any new insurance purchases are prohibited if the protocol reaches the solvency limit. The source code of the smart-contract has no authorization over the protocol, it is used only during the coverage purchases to determine if the protocol is solvent or not. In order to protect the project and protect the proprietary insurance calculations, the source code is not open-source.
Products Manager
This pillar of the Insurance Protocol manages the insurance products. Through this smart-contract, every user buys covers. Contains all GuardProof insurance products and it's the only smart-contract that has authorization to create a cover. This smart-contract communicates with Solvability Calculator and proceeds to cover payments, then to cover creation by communicating with Covers Manager smart-contract.
Covers Manager (Covers and Pools)
This pillar of the Insurance Protocol manages the insurance hedges which doesn't allow any exchanges or changes to the Proof of Insurance NFTs. This smart-contract delivers a Soul Bound Token to each cover buyer and it's essential to contain two parts: insurance liquidity pools and insurance hedges. The smart-contract allows insurance claiming creation for Proof of Insurance NFTs owners, claiming procedure (vote, payment, compensation), asset deposit and asset withdrawal.
Product selected: AAVE v3
Insurance period: 30 days
Covered amount: 100 USDT
Insurance cost: 1 USDT
Insurance cost approval for the products smart-contract (in our example, 1 USDT)
Interaction with Products Smart-Contract (function "buyCover")
The Products Smart-Contract checks protocol solvency and accepts or rejects new coverage
Move 98% of the fees amount ($0.98 in our example) into selected "payIn" currency liquidity pool (USDT in our example) which is distributed among all Insurance Protocol stakers (liquidity providers) according to their shares
Move 2% of the fees amount ($0.02 in our example) into selected "payIn" currency liquidity pool (USDT in our example) which is added to the GuardProof Treasury wallet
Once the payment is completed, the Covers Smart-Contract mint and send an NFT Proof of Insurance (Soul Bound Token) to the insured user's wallet.
