From the Discord discussion with @BraveNewDeFi, I wanted to open up a forum for discussion on building a process for more actively onboarding/ listing new protocols and offering covers.
However, rather than waiting for unlisted protocols to come to the mutual with an application, what if we screened unlisted protocols ourselves and more actively engage in attempt to get them onboard on the mutual for protocol covers?
As @BraveNewDeFi pointed out in the Discord chat, there are 2 main criteria that we should consider when listing a new protocol:
A) Is there demand for cover?
B) Will Risk Assessors stake against this protocol/custodian/yield token cover product?
Let’s consider about each criteria.
Demand for cover – Unless it’s a blatantly popular protocol that many users are using, often it’s hard to judge what the demand will be for a particular protocol’s cover. So one way of simplified thinking is to consider TVL, as likely positive correlation between TVL and demand to protect their capital. If we decide to use TVL as a measurement, then we could screen for protocols with $x mm TVL or more to vet a target group that we can actively work with.
Appetite for Risk Assessors to stake against the protocol – One way to quantify the rough demand for staking is to run a soft poll on Discord, and the poll can run for a day or two to check the demand from Risk Assessor side. If there is enough ‘Yes’, then we go ahead and try to list the protocol.
The big picture reasoning for taking more active approach in adding unlisted protocol is for the mutual to expand the range of protocol cover offerings and build the momentum for growth on Active Covers underwritten. As part of this effort, building a simple process where we can quantify difficult judgement factors like ‘demand’ would be beneficial and deliver more clarity.
Would like to hear what others think about this potential initiative.
To give you a bit of context, we currently receive dozens of requests for new listings on a weekly basis. This is in addition to our own outbound discussions with projects that might not have launched yet through community introductions.
What you’re essentially referring to is the bootstrapping challenge for new listings.
Case A) Most of the feedback we receive from users is that we should list project X/Y/X because “TVL is high”. However, if we would list all projects that hit a TVL requirement (e.g. $100M), you end up in a situation that majority of these projects won’t attract enough staking capacity, which leads to a high price, and no demand.
Case B) Vice versa, if we would list only projects that stakers will deem “safe” from day one, we likely end up with too few projects and miss out on crucial demand for cover on riskier projects.
This is why at the moment we prioritize projects that:
Have good traction at the start, and are likely to attract both demand and supply quickly
and/or
Have signalled to us they are willing to provide shield mining rewards. This attracts stakers and lowers the price.
and/or
Are integrating with our distributor contract to provide point-of-sale Nexus cover. This increases demand conversion.
Moreover, all of the above is in addition to other standards that we have to take into account at the moment such as:
Correlation Risk: Many projects that want to get listed are forks of already listed projects. Adding too many forked/correlated projects is a risk we have to take into account.
Security standards: Many projects - even ones with significant TVL - have unaudited codebases or do not pass a common sense “smell test”.
Past initiatives to have users signal which protocols to add ended up getting brigaded and became useless. However, ultimately we want these decision to be made in a less centrally curated fashion, and one day become completely permissionless.
There are two main initiatives that we’re working on at the moment to achieve this:
Protocol Update: The next version of our protocol will have new pricing mechanisms that will allow for lower prices at smaller stakes.
Nexus Marketing Hub: With the official launch of the Nexus Marketing Hub, @BraveNewDeFi will make sure that the community will have greater input on new listings. Would be great to have more proactive members like yourself involved in this!