DAO-Governed Cryptocurrency Insurance

Litepaper 1.0

Introduction 3

The Problem 6

The Market 7

The Solution 8

Use Case Summary 9

The Process 10

The DAO 11

DAO Tribute 12

DAO Incentives 13

The FORS Token 14

Roadmap 15

The Core Team 16

Table Of Contents

- Warren Buffett

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“It’s only when the tide goes out that you discover who’s been swimming naked.”

Introduction

Despite the remarkable technology backing cryptocurrencies, cybersecurity remains one of the largest threats to the industry. According to CipherTrace, fraudulent activities and scams involving cryptocurrency reached US$4.3 billion in 2019. Of this, $3.1 billion was lost as a direct result of cryptocurrency projects who vanished with the money raised from their investors, a form of fraud known as an exit scam.

While there are certainly some high profile, large volume scams which occur, there are also countless small cap exit scams which occur on a regular basis. Not only do these scams often go unpunished, but they also cause significant hardship to everyday cryptocurrency investors.

The Problem

These risks have led cryptocurrency users and entities to seek out ways to protect their assets. The cryptocurrency insurance market has grown rapidly in the past two years, from being near non-existent in 2017 to worth an estimated US$200-500 million per year in 2019. Some analysts believe it will grow to a multi billion dollar premium market within the next five to ten years.

At present these insurance solutions are mainly utilized by institutional investors and high profile cryptocurrency exchanges. Unfortunately the vast majority of individual investors do not have adequate access to a reliable insurance mechanism against cryptocurrency fraud, exit scams and misappropriation of investment funds.

The Market

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Foresight is an insurance solution designed for everyday cryptocurrency investors. By combining the reliability of smart contracts with the collective intelligence of a decentralized autonomous organization (DAO), Foresight protects users from financial losses they may unwillingly suffer due to exit scams and other fraudulent cryptocurrency events.

The Foresight method is unlike any other insurance provider. While traditional insurance companies tend to insure the entirety of a client’s asset base for an extended period of time – often years – Foresight instead insures a user’s purchase(s), on a short to mid term basis. This is what we call ‘purchase insurance’.

We don’t see the need to have you pay expensive premiums to insure the lower risk coins (eg. Bitcoin) that you’re holding in secure cold storage. We trust you to look after your own cryptocurrency. We also don’t want to tie you into long insurance contracts as can happen with traditional asset insurance.

However, we do want you to be protected from negative market events which are outside your control, such as when:

• You are the victim of an exit scam.• There is a malicious blockchain disruption, hack or project abandonment which renders your coins permanently irretrievable and/or worthless.

If this occurs, you should be compensated. Every satoshi of your lost investment should be returned to you.All it takes is a little Foresight.

The Solution

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USE CASE SUMMARY

Providing short-term insurance to cryptocurrency investors and traders to protect them from exit scams, blockchain hacks and project failure.

ONE

Allowing cryptocurrency project teams to purchase insurance on behalf of their investors, to assure them that the risk of the team abandoning the project or attempting an exit scam is minimal. Teams can also apply to Foresight to have their token pre-vetted forinsurance request approval by the Foresight DAOs, making it easier for potential investors to take out insurance if they wish to do so.

TWO

Tokenizing insurance contracts as Non-Fungible Tokens (NFTs), allowing cryptocurrency traders to speculate on whether or not a project will exit scam or irreversibly fail in a particular timeframe. This is a unique use case which we plan to explore with future development of the platform.

THREE

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Example use case 1

Speculative cryptocurrency investor Hal has identified a micro cap cryptocurrency which he believes could return a significant profit over the next month. However, there is a red flag: the exchange liquidity has not been locked.

Hal can see the massive upside if the team is legitimate, but rather than risk losing his investment to a potential exit scam, Hal decides to protect his money using Foresight. He applies for and approves a quote for insurance to cover his $1000 investment at a 3% premium rate ($30) over a four week period. He makes the insurance premium payments and proceeds with the purchase of the cryptocurrency token.

Three weeks after the purchase, Hal’s investment has returned an impressive +250%. Unfortunately a day later the coin’s team pull all liquidity from exchanges and sell off all of their remaining funds in what is a clear exit scam. Hal’s investment plummets and is now near worthless.

Many other investors also fall victim to the scam and lose the entirety of their investment.Thankfully, Hal had the foresight to take out purchase insurance.

He submits a claim via the Foresight dApp and his claim is reviewed by the Foresight decentralized autonomous organization (DAO). The DAO votes in Hal’s favor and he receives the entirety of his $1000 investment back.

Example use case 2

Dorian, the founder of a new altcoin, would like to reassure investors that there is no risk that he and his team will exit scam. As well using methods like an audit of their smart contact, they also apply to Foresight to provide ‘Project Funded Insurance’ (PFI).

Dorian agrees to use project funds to cover the insurance premiums (up to a maximum value of his choosing) for the first 500 investors in his coin for three months following the pre-sale round. The team advise a well-known trust score provider of this and Dorian’s project gains an excellent trust score. Confident that their investment is protected, investors flock to Dorian’s pre-sale and the team reach their hard cap in less than week.

At the end of the three month period Dorian’s cryptocurrency project remains active and the coin has appreciated in price. As there has been no exit scam the insurance period expires. Dorian, his team and their investors are pleased with the outcome.

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The Process

The Process Explained

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User identifies a coin they wish to buy and makes a decision to take out purchase insurance via Foresight.

User navigates to the Foresight dApp and requests a quote for insurance, which includes the proposed coin they will be purchasing, the intended purchase quantity and the requested duration of insurancea.

User’s request is received by the Foresight platform. Their premium price is automatically determinedb. The user receives an immediate quote for insurance.

User reviews the premium quote and if satisfied, approves the smart contract for purchase insurance and submits paymentc. User is notified that their premium payment has been received and that their insurance is live they are now protected.

User purchases the coin they requested insurance for.

If no claims have been made by 5 days following the end of the insurance period, the insurance cover expires.

If the user makes a claim, the platform immediately assigns a panel of 50 DAO members to address the claim, of which a minimum of 2 must be from the Su-preme DAO who will act as moderators of the case. The panel will be provided a secure chatroom in which to deliberate upon the claim over the subsequent 72 hours. During this time DAO members will collect and submit evidence to answer the four cardinal questions:

1) Has the user been the victim of an exit scam, or has there been a significant and irreversible blockchain disruption, hack or project abandonment which renders their coins permanently irretrievable and/or essentially worthless?d

2) Did the user have valid insurance at the time that the alleged exit scam, hack or disruption occurred? This means: correct token, correct dates of cover, with premiums paid in full.

3) Has the user taken profit during their insurance period?e

4) Is there any evidence to suggest that the user is attempting to game the Foresight system?f

If a similar claim has already been made by another user and approved (ie. a project has been confirmed to have exit scammed), this process will be streamlined.

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At the end of the 72 hour deliberation period the DAO panel will vote on the claim: ‘Approved’, ‘Not Approved’ or ‘Abstain’ . DAO members will be able to submit their vote at any time during the 72 hour deliberation period, so claims may be closed early if >90% of DAO members vote unanimously for the same outcome at any point in time.

If the claim is approved by a significant majority of the DAO (>65% of voters agree that the user has been a victim), the user receives their full insurance payout (100% of their invested funds, according to their initial quote) immediately.

If the claim is not approved by the DAO (<40% of voters agree that the user has been a victim), the user does not receive any insurance payout.

If the claim result is equivocal (40-64% of voters agree that the user has been a victim), the case proceeds to the Supreme DAO.

The Supreme DAO rules on the user’s claim in a similar process to that outlined for the Common DAO with a further 72 hour deliberation period. If the claim is approved by a majority (>50% of voters) the user receives their full insurance payout (100% of their invested funds, according to their initial quote). If the claim is not approved, the user does not receive any insurance payout.

a Insurance durations range from one week to three months and premiums are adjusted according to the duration of cover required. A user may renew their insurance prior to the end of their cover if they wish to have a longer period of purchase insurance.

b The Foresight team and DAO will endeavour to have coins vetted in advance in order to allow for automatic quotes. However there will be times when the DAO will be utilised to rule on cover approval and premium fee. This is more likely when coins have not been pre-vetted, or for significantly large coin purchases and/or new or poorly known cryptocurrencies, particularly micro caps. If a manual approval via the DAO is required, this will take no more than 2 hours from time of user submission. A small panel of ten DAO members will be drawn upon for this purpose.

The team also has the right to decline cover if the requested coin is deemed to be at exceptionally high risk of being fraudulent (this is also to prevent someone gaming the system, eg. creating their own token, taking out insurance for a large sum, then faking an exit scam).

c Premiums are payment received for the provision of insurance and are non-refundable. The premium fees vary depending on the amount of cover requested and the pre-determined risk of the cryptocurrency being invested in. For example, an investment into an established, higher market cap coin would have a lower premium than a new micro cap coin. In general, premium fees will range from 2-15% of total investment (in FORS equivalent).

d Claims are not accepted when coins are lost due to user negligence where the cryptocurrency remains functional (eg. storage of your coins on an ex-change, wallet or computer which is hacked or stolen).

e As the user has retained their initial investment the claim is deemed void.

f Examples of this may be: A large wallet holder who appears to be the only victim of the hack; a user who seems to have ties to the project team in some way; insurance which is taken out moments before an exit scam/hack occurs (suggesting inside knowledge).

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The DAO

Decentralized Autonomous Organization

Traditional insurance companies are top-down hierarchical structures, with each claim being decided upon by one or two middlemen according to a strict set of rules: the insurance policy.

We believe that avoiding this centralized authority is more in keeping with the dogma of cryptocurrency and for this reason Foresight will utilize DAOs. The DAOs forms an essential part of the Foresight platform. Their specific roles include:

• Assessing and ruling on insurance claims as described in the Process section of the Litepaper.

• Regular vetting of different cryptocurrencies to determine their risk of exit scamming.

The methods required to do the role of vetting will include assessment of tokenomics (ie. market cap, wallet size), smart contract auditing, proof of liquidity, trust scores, exchange coverage, team assessment and review of the project’s social/community reputation. This information will be used to pre-determine the premium an investor will pay when investing in that particular coin. Lower risk projects will be granted a lower premium and vice versa. Intermittently the Common DAO will have to review coins which have already been vetted, as risk of an exit scam occurring does change over time as each project evolves.

There will be two separate DAOs: the Common DAO and the Supreme DAO. The Supreme DAO will have every function described above. It will also have these additional functions:

• Assessing and ruling on insurance claims which achieve an equivocal result in the Common DAO. • Acting as Moderators for claims being assessed in the Common DAO. • Ruling on governance decisions pertaining to the Foresight platform including appropriate use of project funds. • Voting on the promotion of Common DAO members to the Supreme DAO.

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DAO Tribute

The two DAOs will be made up of individuals who have invested in the Foresight platform and hold the FORS token. Investors will be able to join either the Common or Supreme DAO by offering up FORS as tribute. A larger tribute of FORS will be required to join the Supreme DAO.

To join a DAO, investors will lock the required number of FORS tokens into the Foresight platform. Locking tokens not only makes the provision of DAO rewards easier but it also reduces the circulating supply.

5,000 FORS Tokens 50,000 FORS Tokens

Common DAO Tribute Supreme DAO Tribute

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DAO Incentives

In exchange for their service to the platform and to acknowledge DAO members for locking their tokens, the following incentives are provided to DAO members:

1) Regular FORS Token Rewards. An allocation of tokens distributed every two weeks among the DAO members. See the text below for further explanation.

2) The DAO Lottery. A weekly FORS lottery where a random DAO member will win 5,000 FORS tokens from the DAO Fund. Common DAO members will be granted one lottery ticket per week and Supreme DAO members will be granted five tickets per week.

3) Insurance Discount: 20% off insurance premiums for Common DAO members and 40% off insurance premiums for Supreme DAO members (in addition to the 10% off provided when premiums are paid using FORS tokens). Note that there will be mechanisms in place to prevent DAO members from being able to vote on their own insurance requests and claims.

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FORS Rewards

All DAO members will be compensated for their service and locking of tokens. There will be regular FORS rewards which come from a pool of tokens called the DAO Fund. At outset of the project the DAO Fund will have a balance of 15,000,000 FORS tokens.

Every two weeks 1% of the DAO Fund will be distributed, with 65% of each reward parcel being divided among the Common DAO members and 35% being divided among the Supreme DAO members. As there will be significantly fewer Supreme DAO members than Common DAO members, the overall number of FORS tokens received by the Supreme DAO members will be higher than those in the Common DAO.

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To illustrate this further we can use a theoretical group of 100 DAO members of which 95 are in the Common DAO and 5 are in the Supreme DAO. If the two weekly reward distribution is 150,000 FORS tokens, 65% of these will go the Common DAO (1026 tokens each) and 35% will go to the Supreme DAO (10500 tokens each). This variance makes sense, given that it is ten times more expensive to join the Supreme DAO than it is to join the Common DAO.

Maintenance of the capital in the DAO Fund will be derived from premium payments. 50% of incoming premium payments will be directed to the DAO Fund to continually replenish its supply (the other 50% will go into the Insurance Payout Fund).

If premium payments are received in cryptocurrency other than FORS (eg. BTC, ETH), this will be used to purchase FORS tokens on the open market which will then be added to the DAO Fund and Insurance Payout Fund.

As it will be relatively inexpensive to join the DAOs once the token goes live on exchanges, early investors will be rewarded for joining Foresight in its start up phase. However, as there will be equally loyal investors who join the platform later on in its development, there will also be a pathway created for Common DAO members to be promoted to the Supreme DAO regardless of their FORS holding. This pathway will be reserved for Common DAO members who have a large number of ruled cases under their belt and have a positive standing within the Common DAO and Foresight community. Positions to join the Supreme DAO will open up intermittently, allowing Common DAO members to vote for who they believe should be promoted. The Supreme DAO will have the final say as to which members are promoted.

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The FORS Token

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FORS TICKER

TECHNOLOGY

TOTAL SUPPLY

INITIAL CIRCULATING SUPPLY

ERC-20

100,000,000

20,000,000

Token Distribution

Token Details

FORS is a utility token which is the backbone of the Foresight ecosystem.

Utility aspects include:

• Payment of insurance premiums • Reduced premiums when paying with FORS • Payouts of successful insurance claims • Tribute payment for investors joining the two DAOs • Payment / incentives for DAO members • Enabling smart contracts which fuel the Foresight platform

There will be no private sale, seed round or ICO prior to initial exchange listing. 20% of the supply will be allocated to liquidity and sales, this will be drip-fed into circulation so as to avoid sudden devaluation of the token price. Over-the-counter (OTC) sales may be considered on enquiry.

As the platform cannot function without an Insurance Payout Fund (IPF), the largest allocation will be to this. These tokens will be vested and released gradually: 25% available at outset, 50% at one year, 100% at two years.

Founder & team tokens will have a vesting period as follows: 25% available at outset, 50% available at six months, 100% available at one year.

The DAO Fund is used to incentivize and reward the DAOs for their service. Every two weeks 1% of the DAO Fund will be distributed to DAO members (see ‘DAO Incentives’ for more information). The DAO Fund is also used to pay for the weekly Lottery. The DAO Fund is replenished by premium payments (see ‘Platform Tokenomics’).

DAO Fund tokens will have a vesting period as follows: 25% available at outset, 50% available at six months, 100% available at one year.

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Platform TokenomicsFunds enter the platform when users pay their insurance premiums. If the FORS token is used to pay for these, users will receive a 10% reduction in the cost of their insurance premiums. Users will also be able to pay for these with other major cryptocurrencies (eg. BTC, ETH). As the project’s survival relies on maintaining a healthy insurance payout fund, most of these payments will be used to buy FORS from the open market, thus increasing the token’s value in a secondary manner.

Premium payments will initially be allocated as follows:

• Insurance Payout Fund: 50% • DAO Fund: 50%

Depending on the relative size of each fund at any one point in time, the team may apply to the Supreme DAO to have this allocation adjusted. For example, if the DAO Fund is starting to run low on capital but the IPF is in a strong position, the team may apply to have a higher payout allocated to the DAO Fund.

All successful claims will be paid out in FORS. A visual overview of the Foresight ecosystem is demonstrated below.

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Road Map

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We are a group of six associates who have been involved in various roles in the IT and tech spaces for some years. Our Founder & CEO is an entrepreneur, working in the healthcare innovation and technology sectors.

We have also been passionate crypto investors for a number of years now. We developed the Foresight concept after getting fed up with seeing everyday cryptocurrency investors having their hard-earned money stolen from them. We want to assure investors that we are fully committed to wiping out the harm done by exit scams.

You are welcome to come and chat to us on our social media channels if you have any questions.

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The Team

Disclaimer

The information provided in this Litepaper and the Foresight website does not constitute investment advice, financial advice, trading advice, or any other sort of advice and you should not treat any of the content as such. The team does not recommend that any cryptocurrency should be bought, sold, or held by you. Always do your own due diligence. 

While the Foresight team will endeavour to create a final product which is consistent with all of the information contained in this Litepaper, you ac-knowledge that in the natural course of business there may be occasions where this does not occur.  By purchasing FORS, you agree that you are not purchasing a security or investment and you agree that you will not attempt to make the Foresight team liable for any losses or taxes you may incur. You also agree that the team is presenting the token “as is” and is not legally required to provide any support or services. You should have no expectation of any form from Foresight / FORS and its team. Always make sure that you are in compliance with your local laws and regulations before you make any purchase.

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www.foresightdefi.io