According to Batman, people are buying cover on yinsure.finance and reselling the yNFT token on Rarible secondary market for up to 3x what they paid in premiums (and earning RARI tokens at the same time).
This hurts stakers as it leaves money on the table for what could have been paid in staking rewards.
I propose changing the pricing formula so that either staked NXM limit is increased from 100k NXM right now to TBD, or the minimum cover premium cost is increased from 1.3% APY right now. That way cover premiums are more expensive and more in line with what the market is willing to pay, and this also increases the staking rewards.
Edit: All covers on yinsure.finance have been sold out for SAFE farming.
I agree as well. But we should solve the root cause of why yNFT is worth much more: we are unable to meet demand as many protocols are MCR maxed out: https://app.nexusmutual.io/staking/stats
I agree 1.3% as the cap feels a bit low, I think the curve to get there is fine but minimum of say 2.6% still feels appropriate given the yields being thrown around in DeFi at the moment.
I do intuitively feel that 1.3% is a bit low, given the yield provided on some contracts and the risk associated with smart contracts, at this point, in general. Also, a higher minimum pricing would incentivize more staking, in general. However we should first understand the reasoning behind choosing 1% as minimum risk cost, as detailed in here: https://nexusmutual.gitbook.io/docs/docs#risk-cost
If that was arbitrary, then we may consider raising it… but anyways, we should first hear Hugh’s opinion on this.
I agree with both Richard and Batman, but I think Richard’s angle here is a partial answer to increasing capacity. NXM is a really interesting asset, but in a world of 50%+ APY opportunities, low-to-mid single digit yield on underwriting insurance is less competitive. 1.3% was great for driving adoption when yields were small, but with farming driving excess demand, we’re in a different boat now.
We currently have demand way outstripping supply, so we need to increase supply. Improving NXM’s yield should help incentivize capital pool contribution. Raising the base price for cover is a good way to do this, and when farming yields die down at some point we can bring the base price back down.
Is this anecdotal or is there hard evidence? I think if you could post here some examples it would make the case stronger, and in any case evidence is needed to make an informed decision on such an important matter.
I’d increase min price from 1% to 4% immediately as a temporary measure given demand/supply imbalance.
More generally, we need a more flexible pricing mechanic that allows high price and high capacity (as well as low price and low capacity). This can be achieved but needs adjustments to staking contracts.
Enabling this would move these decisions to the market rather than governance, which is much better.
So the immediate strategy is to raise the price to 4% first and then spend time figuring out the general formula that will subject the price to market demand. Sounds good for a short term solution. It might be hard to take into account the demand of wnxm tokens that are not intended for staking and might be further used for other yield farming activities.
@Hugh
God this is killing me. I’ve seen the governance proposal. I thought we were supposed to increase the minimum price from 1% to 4%… not the staked_risk_cost_low… to 4%. In your proposal description, it is said “As per forum discussions increase staked_risk_cost_low from 1% to 4%”. Please look above. We have discussed to increase price , not staked_risk_cost_low.
This effectively raises the minimum price to 5.2% which seems too much now…
My gut feeling is that given the choice, e better minimum pricing would be staked_risk_cost_low of 3%, that would give the miminum effective price of 3.9%, which sounds more acceptable, and it is basically a 4% price… but with a price psychology twist to it, if you may.
While this is still early and not adopted yet… I ask you for another proposal of 1 to 3% increase in staked_risk_cost_low…
Poor communication on my part. Will do better in the future.
I think higher is better right now given SAFE farming. Basically all cover is being purchased via bots for farming so I’m still in favour of 4% min_stake_cost and 5.2% minimum price. When farming subsides we should revisit.
