Welcome to my first newsletter. The goal is to give you, a member of our community, an easily digestible roundup of the latest Nexus Mutual information. I’ll be sharing details on upcoming development projects, cliffnotes on new community proposals and relevant industry news.
We’re all busy. This newsletter will allow you to stay up to date in 10-minutes, or less. If you have any feedback or questions, please share!
Uniswap v3 is now open for staking.
Custody Cover for FTX has been listed and is now open for staking.
Snapshot Vote for Operation Wartortle passed successfully.
At the time of writing (not today), Nexus Mutual has a net value above liquidity of $105m. The formula below is a decent way to look at net value in a way that allows you to compare apples to apples against the size of other projects.
wNXM price x NXM Supply - Capital Pool
$112 x 6,922,315 - $670m = $105m
- Protocol Cover is now live.
In addition to protection against smart contract hacks, members with cover are now also protected against:
- oracle attacks
- severe economic attacks
- governance attacks
- protocols on any chain
- layer two components.
- Aave V2, Liquity, Alpha Homora V1 and TrueFi currently need staking to open up additional cover.
Investment earnings are critical to the success of any insurance mutual. To date, Nexus is not investing their retained earnings, or capital pool. This proposal suggests investing 9.2% of the pool into stETH. This will:
- Generate 7.7% yield on the amount invested. Roughly a 0.6% return per year, for the entire capital base.
- Retains long ETH exposure, allowing us to capture upside from ETH price increases.
- Relatively low risk form of staking
- Development to enable this will be translatable to other investment opportunities.
If you wish to read more, you can find the full forum post here: Investing the Capital Pool in stETH
This will go to a Snapshot governance shortly.
Hugh has suggested an alternative pricing method for cover purchases. Currently, staking involves only one input; how much you want to stake. You have no influence over the price at which the cover is offered.
This proposal massively alters the pricing mechanics for cover and will have long-term implications on the Mutual. Rather than oversimplify a complex idea, I highly encourage you to read the proposal, absorb it and leave feedback if you have any.
The mutual needs to manage its exposure to single events wich have the potential to cause large losses. This idea would manage correlation risk “via several levers rather than hard rules, and it will be up to members to adequately adjust system parameters to arrive at the appropriate risk/reward settings for the mutual.”
This thread discusses the idea of giving NXM to cover buyers to help to offset the prohibitive cost of gas fees, particularly for smaller cover purchases. “The goal would be to drive cover buys, market the program in an effort to grow our membership, and remove the deterrent high gas prices for members with smaller deposits in DeFi.”
This proposal wants $50,000 to “begin legal due diligence” with Norton Rose Fulbright on the legal analysis to determine the potential impact and implementation to sunset Nexus Mutual Ltd.
The snapshot vote was successful and therefore this process will begin shortly.
“We believe that the need for a regulatorily compliant legal entity is no longer needed for Nexus Mutual and that it is in the best interests of the protocol to deprecate Nexus Mutual Ltd.”
Deprecating the entity would:
- Remove the need for KYC
- Opens the Mutual up to countries that were previously banned because of UK financial regulations
This proposal is only for an initial legal analysis as to the pros / cons. However, members should be aware that this is a step in the direction of transition to a “fully autonomous organization through a DAO without a legal wrapper around it”.
This forum post outlines a community work format, which would help to facilitate community involvement in tasks like marketing, investing and communications.
The “hub” model would involve team leads who are compensated for work in their specific area of expertise. They would be responsible for coming up with ideas and managing team members who would work on specific tasks within the strategy.
Proposed by Gauthier, their suggesting that we mint a selection of exclusive Nexus Mutual NFTs. The total cost would be $42,000. Each action in the mutual would be rewarded by a different NFT.
Hats is a decentralized cybersecurity incentive network. Nexus Mutual would put up rewards to incentivize protocol security and responsible disclosure. This work would help to highlight flaws before they are exploited.
This proposal will be going to Snapshot for a vote shortly.
Dedaub is proposing a partnership that would see them “analyze the contracts and display warnings of vulnerabilities” for each project that cover is available for. This analysis would give more information to risk assessors, allowing members to make more informed decisions. The fee would be dependant on the number of projects that Nexus offers cover for.
This proposal will be going to Snapshot for a vote shortly.
Question: What is the biggest problem that Nexus is facing right now?
Hugh: Cover demand, followed by staking.
These are the two biggest issues right now for the core team and therefore should also be for us as community members.
Growing cover demand would of course increase the revenue of the Mutual. But why is it important to increase staking? Without members staking, customers cannot purchase cover. Currently, we are at a point where the amount of staking is not limiting the cover that we offer, generally. But for more obscure, smaller projects, limited staking means that people are unable to purchase cover. Where they are able to buy, the price isn’t always affordable.
Nexus Mutual uses a cover pricing formula whereby the more staking from members, the cheaper that cost of cover. Right now, Nexus Mutual is not always the cheapest option for customers, because other insurers offer steep incentives for staking and they subsidize cover.
Insurance is a commodity in the long term, and so it’s important that our pricing is competitive. This isn’t to say that our pricing is universally high, certain projects are arguably quite underpriced, whereas those with less staking can be cost prohibitive. The pricing discussion from Hugh in the forum tries to solve for some of this issue.
Question: What is being done to improve the risk/reward for staking?
Hugh: [In the] shorter term, shield mining and investment earnings. Medium term staking 3.0, after that look to enhance rewards further through other mechanics.
Staking 3.0 will introduce “more crypto native mechanics, tokenised positions, more leverage, streaming rewards [and] delegated staking”.
NXM previously allowed only 10x leverage, recently increased to 15x. This roadmap seems to suggest that in the future members would be able to stake more than 15x their holdings. This increase would open up more coverage by allowing less risk averse members to stake across a greater number of projects.
Delegated staking, sometimes known as robo-staking, would be an option for you to handover control of staking decisions to a more knowledgeable party or committee.
Tokenizing positions means that it would be possible to trade an existing staked position. Theoretically, this allows people to get out of a stake without the lock-up period, and retains the stake in position, increasing average capital staked.