Newsletter - Week of 17th May 2021

[Dopeee]

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!

Official News

1. Uniswap v3 is now open for staking.

2. Custody Cover for FTX has been listed and is now open for staking.

3. Snapshot Vote for Operation Wartortle passed successfully.

4. 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

5. Protocol Cover is now live.

Nexus is growing: Protocol Cover is 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.

6. Aave V2, Liquity, Alpha Homora V1 and TrueFi currently need staking to open up additional cover.

Community Discussions

Investing the Capital Pool in stETH

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:

1. Generate 7.7% yield on the amount invested. Roughly a 0.6% return per year, for the entire capital base.
2. Retains long ETH exposure, allowing us to capture upside from ETH price increases.
3. Relatively low risk form of staking
4. 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.

Flexible Pricing

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.

Flexible Pricing

I’ve been doing a lot of thinking on pricing recently. Since launch we’ve tried a few different models and have learnt a lot. We also need to shift the pricing engine on-chain to make integrations easier and increase decentralisation. Ideally we’d like a pricing (and capacity) mechanism that achieves the following: Flexibility - pricing result is independent of capacity offered, so we can offer high price/high capacity and low price/low capacity. Bootstrapping of new covers can be difficult,…

Managing Correlation Risk

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.”

Managing Correlation Risk

Background The mutual needs to manage its exposure to single events that could cause large losses to make sure it is sustainable in the future. The current products manage this by limiting exposure to any one risk to a global maximum of 20% of MCReth. This works quite well from a risk perspective but is challenging from a UX perspective as the user needs to buy many covers to get full coverage. New products like Yield Token Cover (soon) will address the UX issues at the expense of making it a …

NXM for Gas Program

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.”

NXM for Gas Program

I was thinking about Balancer’s BAL liquidity mining program to offset gas costs over the weekend. Though I’m working on more than enough objectives right now, I thought I would take the mutual’s pulse regarding this idea. NXM for Gas Program Since the launch of Protocol Cover, the mutual has seen some massive cover buys. In my opinion, this is a testament to the value that we are providing with Protocol Cover. Ethereum scaling solutions, layer two solutions, and other chains are all options f…

Community Fund and Requests

Operation Wartortle

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:

1. Remove the need for KYC
2. 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”.

Proposal: Operation Wartortle

[unnamed (6)] Background: While Nexus Mutual is an on-chain autonomous organization, it is also represented by a UK-based limited company (Nexus Mutual Ltd.) that is regulatorily compliant with the FCA’s Mutual standards. This entity was originally set up to protect the core from a range of issues such as liability and tax relating to the Mutual while it was in a far more centralized state early on. As an effort back then to remain compliant with UK regulations, it had to implement a variety …

Nexus Hub: Proposal, Structure, Next Steps

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.

Nexus Hub: Proposal, Structure, Next Steps

Overview Since I became an active member in the Nexus Community, I have been trying to figure out ways to utilize the talent within our community. The Nexus Core Team is top notch, and they do the heaviest lifting for the community; however, there are so few team members and many, many members within the mutual. We have the Community Fund to use in ways that benefit the mutual through member contributions. My one concern about the grant-proposal structure is the passive aspect. We are waiting …

Nexus Mutual NFT Proposal

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.

Official Nexus Mutual NFTs Proposal

The Community Fund is pleased to begin it’s consideration for the community granting process for the creation of Official Nexus Mutual NFTs proposed by Gauthier Gauthier has presented this proposal to Forum back in March and here is the original post to refer with project goals; The original proposal has been amended in projected costs to account for artist commission, minting, gas and project management fees of $42,000 USD. Here are the program specifications: Each action in the mutual wo…

Hats.Finance

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.

Hats.Finance - Decentralized Cybersecurity Incentive Network Proposal

The Community Fund is pleased to begin it’s consideration for the community granting process for Hats.Finance Hats is a decentralized cybersecurity incentive network. Governed by its community stakeholders - Hackers, Projects, and Token holders — to incentivize protocol security and responsible disclosure. NXM will be one of the first Hat incentive vaults providing active protection to Nexus Mutual. This incentivizes vulnerability disclosure for NXM smart contracts while farming rewards in the…

Dedaub

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.

Dedaub <-> Nexus Mutual Collaboration Proposal

The Community Fund is pleased to begin it’s consideration for the community granting process for a Dedaub & Nexus Mutual Collaboration. We (dedaub.com](http://dedaub.com/)) propose to create, install, and maintain a vulnerability analysis and continuous monitoring service over the smart contract systems that the Mutual covers. About Dedaub We maintain a static analysis infrastructure, demonstrated at contract-library.com, and deployed over all contracts on the blockchain. We decompile deploye…

Upcoming Developments

Question: What is the biggest problem that Nexus is facing right now?

Hugh: Cover demand, followed by staking.

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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.

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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.

[franciscodanconia]

this is awesome. looking forward to reading the next one