The Backed Protocol – Cryptocurrency Insurance Goes Decentralized
The Backed Protocol is a next-gen decentralized insurance network. The protocol wants to offer protection against losses for cryptocurrency traders while giving control back to them, rather than the huge insurance conglomerates currently dominating the market.
What Problems Does The Backed Protocol Attempt to Fix?
The developers behind the Backed Protocol seek to provide users with a new insurance model that eliminates centralization in the market. Today, the insurance sector is dominated by billion-dollar corporations. These large firms enjoy near impunity in deciding the pricing, features, payouts, and more. Worst of all, the state often backs these firms. In some instances, they can even make their services legally required, such as car insurance.
According to their website, the Backed Protocol will leverage advanced smart contracts to eliminate the need for intermediaries. Instead, regular users provide insurance policies to the community via a policy market. This strategy provides users with benefits that centralized counterparts are unable to provide.
The Backed Protocol Features
The Backed Protocol’s approach to insurance introduces a host of features to the market. The platform exists as coding that facilitates contacts between insured persons and insurers. This approach will enable traders to insure their positions against negative market fluctuations.
The Backed Protocol will be extremely flexible in terms of insurance policy features. Each contract is customizable, and users have full control over their policy without any external interference. In this way, The Backed Protocol lets users create nearly infinite different contracts to meet the market’s needs. Best of all, these policies allow each user to adapt the clause settings to fit their needs.
The integration of blockchain technology provides some serious benefits to users as well. For one, it removes human intervention from the equation. Instead, smart contracts execute clauses in an automatic, transparent, and decentralized way. Best of all, the transparent nature of the network ensures compliance with every clause of every contract.
Users can earn passive rewards when they create and host insurance policies on the Backed Protocol. According to their whitepaper, the network is structured to ensure that premiums are paid regularly to the insurer by the insured. Additionally, the protocol uses an oracle to ensure that all user payments are paid under clauses. Best of all, users can accumulate contracts to create a steady income source. They can also use contract customization to manage their risk-reward ratio.
The Backed Protocol Mechanics
The Backed Protocol leverages blockchain technologies to redefine insurance contract functionality. The protocol streamlines the process via an intuitive interface and smart contracts to facilitate the enforcement of policies. In the Backed Protocol, there are two participants – the insured and the insurer.
Any cryptocurrency owner who has the Metamask extension linked to his Ethereum account can “insure” their positions. They can create contract proposals or join an existing one. In return for the protection, the insured pays the insurer a premium.
Anyone can become an insurer using the Backed Protocol. You can easily develop your own insurance business and start collecting insurance premiums. Insurers can set all of their contract stipulations using the network dashboard. After your parameters are set, you can offer your policies to the world.
Insurers may also manage multiple contracts to gain extra profits. To open a contract, an Insurer must first set their parameters and make a deposit. Notably, these deposits are made in stablecoins to simplify the accounting side of the equation.
Insurance cover is the amount paid to the insured by the insurer as compensation in case of losses. The value of the insurance cover is defined freely by the creator of the contract proposal during the contract’s creation.
The Backed Protocol Contract Guarantee
Another critical component of the Backed Protocol is “Contract Guarantees.” Both parties put up a contract guarantee when they join a policy. This payment aims to guarantee compensation in case of a contract breach by the other partner. Notably, you are free to opt out of any contract prematurely, but you will first need to pay the guarantee.
BACKED is the main utility and governance token for the network. Users must hold BACKED to participate in the features and benefits of the platform. For example, you can use BACKED to pay fees, guarantees and participate in the community governance mechanisms. BACKED is an ERC-20 token that enjoys full interoperability within the Ethereum ecosystem.
Each premium payment has a 10% fee that goes towards the network’s maintenance and further development of the community. This fee structure ensures that community-approved projects have access to the funding they need to take flight.
The Backed Protocol Community Governance
As part of the Backed Protocols decentralized approach to the market, the platform integrates a community governance system. These systems are a powerful way to keep the community engaged and in control. Users control the evolution and development of the platform via proposals. The community votes on these upgrades, and those that get approved go into effect without delay.
The Backed Protocol – Decentralized Cryptocurrency Insurance
Decentralized insurance is an excellent example of how the disruptive nature of blockchain technology can upend industries. In addition, the Backed Protocol wants to create a more democratic, inclusive, and fair business model by eliminating the centralized insurance firms from the equation.
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