How safe is it to borrow cryptoassets (DAI) on SODA? 🥤

SODA
SODA
Sep 8, 2019 · 4 min read

People often ask our team: is SODA a non-custodial solution? The short answer is: no. Don’t close this article just yet, before we can tell you about the security that SODA provides our borrowers with and the way we are working with users’ collaterals in Bitcoins (BTC).



#1. State-of-the-art Custody Solution:

So how do we receive, store and return the borrowers’ collaterals in Bitcoins? As you know, to take out a loan in DAI (and in the other cryptoassets in the nearest future) on SODA the borrower provides BTC as a collateral.

We have integrated the BitGo’s custody solution in our workflow. There are multi-signature hot-wallets that the system automatically generates for each borrower and this is where we store our borrowers’ collaterals. SODA users should be aware that BitGo is not responsible for the users’ funds on the multi-sig hot wallets managed by the SODA Foundation.

However, you can trust the technological solution that we are using for that crucial part of our system. Why so? Because BitGo has skin in the game in the cryptoassets custody space. BitGo is a company with a monthly transaction volume of $15+ billion in cryptoassets. BitGo is insured by Lloyd’s, backed by Goldman Sachs and is CCSS Level 3 and SOC 2 compliant.

To learn more you can visit their website: https://www.bitgo.com/


#2. SODABTC as a Code-Based Guarantee for Receiving Your Collateral in Bitcoins Back:

Before taking out a loan, the user chooses the terms that suit their needs (collateral amount, loan period, loan amount) using SODA interfaces.

Loan Calculator: https://www.soda.network

After choosing the loan terms and clicking the button, SODA automatically generates a unique Bitcoin-address that will be linked to the borrower’s Ethereum-address that they’ve connected using MetaMask previously. After the borrower sends the collateral, the system will check the BTC-ETH addresses pair and mint SODABTC (ERC-20 token) for that borrower.

Convert BTC to SODABTC: https://www.soda.network

SODABTC is a form of guarantee for the borrower to get their collateral back. When the borrower sends their SODABTC back (“Withdraw BTC” button), they automatically receive Bitcoins to the same Bitcoin-address that they have previously used to deposit BTC (convert to SODABTC).


#3. On-chain Proofs:

As mentioned previously, every borrower has a unique Bitcoin-address for storing their collateral during the loan period. After sending the collateral in Bitcoins, SODA will find the transaction in the blockchain. When the miners confirm the Bitcoin-transaction, SODABTC will be automatically minted and sent to the borrower’s Ethereum-address.

On-chain Proofs: https://www.soda.network

#4. Open-Sourced Codebase:

We don’t want to have any secrets or concealments from our users. That’s why everyone in the world can digg deep into our code that we are using to mint SODABTC after receiving the collateral in Bitcoins (BTC) and to burn it after the borrower has paid back the loan and converted SODABTC to BTC.

#5. Hedge Against the Smart-Contract Risks:

People often say how amazing it is to use non-custodial DeFi solutions. This industry is a spectacular one, but young and only just developing. And just one mistake in the code can bury hundreds of millions of dollars of borrowers’ collaterals.

In order to diversify your collaterals allocation while using loans, don’t bet everything on a-few-months-old non-custodial solutions. It can be a wise decision to use 30–50% of your cryptoassets (Bitcoins in our case) to provide them as a collateral on the custodial platforms, because you never know what and when can break in the non-custodial solutions.

SODA is created using the CeFi (centralized finance) approach with a vision to become a fully autonomous DeFi (decentralized finance) organization. And one day we will definitely become a non-custodial decentralized company.


🥤 Take out your first loan in DAI (7.9% APR) on SODA with Bitcoins as a collateral: https://www.soda.network/


🥤 Join the SODA community:


SODA

Written by

SODA

Use Bitcoin on Ethereum. Non-custodial Bitcoin-backed loans: live in Q1 2020. Learn more on: https://soda.network

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