Keep MCR increment at 4h until 150k ETH

Hi Nexus Mutants,
The past few days/weeks have seen some incredible positive responses from the DeFi community, resulting in huge continuous capital inflow to Nexus Mutual.

Since 100k ETH MCR is within reach in less than two weeks, I propose we should continue leveraging on current capital inflow and continue 4h increment until MCR touches 150k ETH to boost cover capacity.

Previous decision at 100k ETH MCR was made when DeFi TVL was sitting at $2B. Today, it sits at ~$5B. So I strongly believe we should increase our MCR target to first 150k ETH MCR, and we will decide again whether to extend it to 200k ETH MCR.

Please let me know your thoughts! Thanks.


I personally think chopping and changing the values and targets every few weeks isn’t a good idea.
A week ago people were saying 100k is too big, now it’s too small. The 4hr increment is just to burst the capacity to enable larger covers quickly.
It’s not like we won’t get to 150k ETH MCR with the 24hr increment.

Maybe if anything we could look at a permanent 12hr increment post 100k ETH since we’re in a fairly active market cycle compared to earlier in the year.


Right now the bottleneck is cover pricing, which should be cheaper once the governance vote passes early this week. I’d wait and see if covers per contract hit the 20% MCR limit again before deciding how to adjust the MCR increment. There’s about 12 days until MCR reaches 100k ETH so plenty of time.


I agree with Richard. Lets give a few more days to judge this wave of new capital. We could see a slowdown in new ETH in the pool.

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If the project party goes back and forth to change the rules at will, there is no credit at all, and what is the difference with the scammers. They firmly oppose the plan and proceed.


Can’t agree more. Maybe you should let nxm holders to vote for or not.
Changing the rules whenever you want is dangerous. You are doing insurance service, so you should know how important the credit is. When people believe your words are shits they will leave the project ASAP.

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I can’t agree with the advise,there is no sense,what’s the reason,just as the TV rise,that’s not a good rason,very angry with the advice

Are you kidding? We’ve just adjusted the algorithm and haven’t stabilized a cycle yet! At this time, if someone puts forward such a boring proposal, is it a hope that the project will collapse?

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Echoing others, this seems like a rushed decision. Changing key parameters so frequently and depending on where the wind blows can be detrimental.

Let’s get there first and re-asses, let’s give us enough time to learn.

The suggestion should be based on practice, and we should let the 100KETH goal be achieved and operate for a period of time to see the effect before we can decide whether it is necessary to continue 150KETH, instead of changing the plan at will without verification. This is dishonest behavior, and the insurance industry cannot do without integrity.

If the rules are changed several times, the credibility of this project will only collapse. Not only will investors sell and leave, but no one wants to buy insurance anymore. This vicious circle continues.

I’ve been drafting this for the past week, so worth sharing now given the discussion has started.

I think we should stick to the current agreed schedule of 4 hr until 100k and then 1/day post 100k, but with wider changes to get us to the long run situation.

At present the MCR Floor value is increasing by 1% every 4 hours. If enough capital keeps flowing in to keep the MCR% above 130% then the MCR Floor will reach 100,000 ETH in August sometime. At this point the MCR Floor Value will revert back to increasing once-per-day as decided in the previous governance action. This post is to start the discussion on what we should do next.

Stepping back for a moment on the MCR mechanics. The MCR is actually the larger of two values:

MCR = max [ MCR Floor, f(cover amount) ]

At the moment the MCR Floor value is dominating and the more complex risk capital calculation, f(cover amount), is not being used. Without diving into the details of the risk capital calculation it can be approximated as 1/6 x Active Cover Amount, or a gearing factor of 6x.

Longer term the goal is for the risk capital calculation to drive the MCR, the MCR Floor is really just a short term measure to scale capital up to a critical mass so we can meet demand for cover. At scale we want the capital requirements of the mutual to be specifically driven by cover outstanding.

So we have a balance to strike, we want enough capital for a critical mass to meet demand, but we don’t want excess capital, as this is inefficient and could lead to issues maintaining existing capital. Discouraging excess capital also allows greater opportunity for the token price to move into the exponential section of the token price curve.

On a closely related topic, I strongly believe we should replace the complex risk calculation (currently performed off-chain once per day) with a simple factor of Active Cover Amount. This will allow the calculation to be fully on-chain and decentralised as well as being much more robust.

A more complex risk capital calculation can then be run off-chain at any point (by anyone) and parameters can be updated via governance as and when required. NB: any parameter changes would be done in a gradual fashion over time to prevent any shocks to the token price.

In general the gearing factor should increase as the mutual grows and sells more diverse range of covers. As a reference point, at massive scale AIG has a factor of around 60x and I believe we should be aiming for a factor of around 10x once we have $150m of capital and multiple products, quite a bit of judgement/art involved here though.

Taking all this into consideration I believe once we hit 100,000 ETH we should move to a more capital efficient approach and look to have cover amount drive MCR sooner rather than later. Ideally within 6 months of reaching 100,000 ETH.

So my starting point for discussion is as follows:

  • Once MCR hits 100,000 ETH revert to 1 increment every 24 hours (no change from current)
  • Develop smart contract changes to replace the complex risk capital calculation with a simple factor approach
  • Start with a gearing factor of 4x to begin with, so 25% of active cover.

This means at an ETH price of $400 the mutual could sell $160m of cover before the MCR starts increasing again, with a maximum amount on any one system of $8m = 20% of MCR.

This implies to achieve growth the mutual must start diversifying and selling cover on a wider range of protocols. Which is fundamentally how insurance works best. The initial factor needs to be:

  • High enough so that it doesn’t drive the MCR calculation when first implemented (ie Cover Amount x factor is still below MCR Floor);
  • Low enough that it gives confidence claims can be paid (anything 6 or below should be fine for now); and
  • Low enough that within a reasonable time it does start driving the MCR calculation so the mutual starts growing. At 4x, $8m of cover on at least 20 different risks is required.

I’m most certainly open to debate on factors and approach, I thought it valuable to propose something tangible to initiate the discussion.


I’m a new kid on the block :slightly_smiling_face: but this all makes sense to me. If those in the know believe the current pace of MCR growth is enough to meet the current and near-term needs of cover demand, then there seems to be little reason to extend the accelerated growth of MCR and then have a situation of capital inefficiency as you mentioned.

As MCR pertains to the price curve, getting to the steep part of the curve is not necessarily a bad thing as it was designed that way to keep the capital pool in check and lead to profit taking if it gets too high. The volatility of the token will naturally decrease over time as the market cap of the mutual grows.

In summary, if the current 100k MCR trigger meets the current and near-term cover demands, and then cover demand itself begins driving MCR growth afterwards, then I think that is the best scenario and things should be left as it. If we reach a point sometime after 100k is reached where the MCR increase needs to be ramped up again then I think we should cross that bridge if/when we get there.


I strongly oppose this. We should not make a habit of changing the formula - it would destabilize the project.

The first (and only) change to MCR increments was made when the project were really hurting for more coverage. That is how it should be with changes of this magnitude. It needs to be blindingly obvious that it is necessary in order to promote stability.


Thank you everyone for sharing your thoughts. I think it is pretty obvious that down the road, we should avoid touching the formula at all unless it is a dire situation that will compromise Nexus Mutual.

Even if we ever encounter another MCR bottleneck, we should avoid changing MCR increment again and just let the formula does its thing.


I strongly oppose any changes so soon.

Let’s give natural market forces a chance to figure it out and intervene only if absolutely necessary,

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OP /lz looks dump a lot of nxm yesterday, then suggest Nexus to change cap from 100k to 150k ?

May I suggest that this is a whole new post in case community members miss out on the response? Too important a topic I think.