Nexus Mutual Community Fund

Summary

There has been a lot of debate in the community about the rewards for risk assessment and that they are too low to justify the risk. This, among other reasons, has led many people to exit the system and issue wNXM, which has now reached a point where the price of wNXM is lower than that of NXM.

While the team is working on product improvements and improved distribution channels, I suggest we mint 100,000 NXM and move them to a multi-sig controlled by community members. This way, we are essentially creating a Nexus Mutual Community Fund to give the community more means to help progress the protocol.

Purposes

This community fund could be used for many purposes. Here are a few ideas:

  • Reward additional staking incentives per week to increase Risk Assessing rewards
  • Reward community contributors for outstanding work (like writing a newsletter for example, or help in coordination of the community fund)
  • Give grants for projects building on top of Nexus Mutual
  • Marketing expenses

Governance Progress

A dedicated Discord channel and category in this governance forum should be enough to coordinate issues regarding this community fund.

To streamline decision-making, I suggest using snapshot.page to cast votes on how to spend the funds. This will also mean that NXM holders are still in control over how the funds are ultimately spent. The multi-sig holders then execute the action as soon as possible.

Logistics

Last but not least, let’s talk about logistics and how to manage this efficiently.

The multi-sig will require one technical person to prepare the contract calls at least. I am suggesting to use a 5/7 multi-sig with the following composition:

  • one member from Nexus Mutual itself
  • three members from investors in Nexus Mutual
  • three members from the community who have been vocal in showing their support in the past

If a multi-sig holder is not responsive or has been too slow to sign, they can be voted out by the community, given a replacement can be found.

100,000 NXM would be worth roughly $2 million at the time of writing and would dilute the supply of Nexus Mutual by 1.5%. This would give the community fund enough firepower to be taken seriously and not hurt NXM holders too much, as dilution is minimal.

Some initial suggestions for multi-sig signers (please nominate your own suggestions in the comments):

Should we create a community fund for Nexus Mutual?

  • Yes
  • No
  • Abstain

0 voters

How much NXM should we mint for the community fund?

  • 10,000 NXM (0.15% dilution)
  • 50,000 NXM (0.75% dilution)
  • 100,000 NXM (1.5% dilution)
  • 150,000 NXM (2.25% dilution)
  • 250,000 NXM (3.75% dilution)
  • More (please comment)
  • Abstain

0 voters

6 Likes

I think it’s worth pointing out that NXM holders have been “enjoying” 0 inflation so far. However, that puts the protocol at a disadvantage compared to others who have a smart inflation schedule/community treasury to accelerate the goals of the network.

I, therefore, vote for 100k NXM inflation, which at 1.5% dilution is still tiny compared to most other protocols which tend to have smaller float (Uniswap for example has 78% inflation ahead, Compound 59% and Cover Protocol 17%).

2 Likes

I’m supportive of the mint, but I’d like to know first how this differs from the Nexus Foundation’s goal and why a mint should go to a separate community fund rather than the Foundation. If there’s an overlap, then logistically it’s easier to do a mint to the Foundation and use the inflation to reward community members.

Since Batman sold his NXM and isn’t very active in the community anymore, I’d like to nominate 8fold and Gauthier as signers. I also think having at least two members of the team (Hugh and Rox) is important.

4 Likes

I think this is a great idea. Nexus has gotten very far with basically 0 additional token based incentives. Well designed incentives will go a long way and the supply dilution will be negligible. Really appreciate the nomination, more than happy to fulfill that role if the community chooses to do so.

5 Likes

Appreciate the nomination and happy to fulfil the role. From what I see, the pros of the recommendation is to delegate more power to the community which is aligned with defi ethos and may rally more members to be involved in the community governance. This is a good idea to divert the public attention from negative news the mutual has been having recently and can help to invigorate positive vibe around the project again. But I agree with rchen8 concern regarding the potential duplicity of roles here against the Nexus Foundation and may be much more efficient for the foundation to just carry out the inflation.

3 Likes

And here we go talking about printing money like the FED.
A previous debate was about storing a part of the treasury in dollars.

I’m strongly supportive of this. I believe it’s a great step along the “exit to community” path.

I think there is material value in setting this up separately to the current Foundation.

  1. It gives direct control and ownership to the community over certain items, and can be a strong means to grow community participation.
  2. Foundation can get caught with tax issues depending on structures.
  3. Foundation is more restrictive in some of the actions it can take and activity it can support.
  4. While the Foundation is likely to be around for some time yet, the longer term vision is to remove the Foundation.

I see the Foundations role as:

  • developing and hardening the core protocol
  • running website, KYC and pricing/capital until they can be removed
  • business development and partnerships

For the Community Fund I see the main goal as incentivising long-term sustainable growth of Nexus Mutual. With the following examples of specific ideas:

  • Experiment with “liquidity mining” programs, especially around Risk Assessment, to encourage platform growth and adoption.
  • Identify long term sustainable incentive programs for Risk Assessment.
  • Provide grants for actual work done; eg
    • Paid working groups to investigate and propose protocol changes
    • Set-up and decide on grants for building on-top of Nexus Mutual
  • Foster a group of technical protocol experts that can inform long term decision making.
  • Employ a full time Head of Community to coordinate work and grow the community.
  • Employ other resources as appropriate.

I think there should be strong focus on developing sustainable liquidity mining programs. There is an option to divert some of the 2.5% sell spread to this type of activity well into the future. So I believe we should view the extra mint as a one-off to experiment with a view to long term sustainability.

Multi-sig holders:

  • Personally I would prefer this to not include myself to further increase decentralisation
  • @gyoung10 is another candidate I would like to put forward
  • I also support Gauthier/Nedicto and 8fold should they wish to get involved.
6 Likes

Confirm that this is the goal vs. letting the foundation run everything.

Strongly in support for the following reasons:

  • Strengthen the community & attract new members
  • Create well designed incentives for sustainable growth

Appreciate the nomination of Richard and Hugh, would be happy to fulfil the role.

2 Likes

I appreciate your concern, but you also have to see that Nexus Mutual is at a great disadvantage in comparison to all other DeFi protocols who usually have 5% of their whole token supply dedicated to something like this on top of massive inflation. So I still believe that even a 3.75% dilution would be very very conservative in comparison to what our competitors will be doing and what other DeFi protocols are doing. It is about staying competitive and a community governed fund would massively increase our flexibility. I strongly invite you to participate in how to spend these funds, to make sure there will be no overspending. It is certainly no one’s intention to spend all of these funds at once but over a multi-year horizon.

This is separate and not initiated by Nexus Mutual itself, but by us as community members.

1 Like

If this is an investment in the community, this should come from the treasury. A dilution is a hidden tax on investors.

If you go with the dilution anyway, at least give the opportunity to investors to exit before, either by delaying the printing to leave the time to unstake, or by unstaking immediatly investors who wish to leave.

Fair enough, but the ultimate gain from this will very very likely outweigh that “tax”. Community funds and similar instruments have lead to >100% of increases in token prices in other projects due to their actions. And also consider: A good portion of these funds will be redistributed to risk assessors, severely reducing the “tax”. The ultimate goal of this is to make NXM a more attractive investment and to increase its reach, so we are very aligned with all investors.

1 Like

I’m torn on this one, TBH. On the one hand, the backing of @Hugh and @lasse mean a lot to me and when compared to other protocols, it’s still more value.

At the same time, I hear @nanopowered argument that this becomes a slippery slope for us when times get tough instead of tightening our focus more on improving customer value. For example, seeing this on Cream made my day.

I know this comment doesn’t add a lot of value one way or the other, but wanted to weigh in.

2 Likes

I’m strongly in favor and will be voting for this should it become a proposal. For those who are opposed, I encourage you to consider what the ROI on empowering the community and investing in growth might be at this stage.

DeFi grew 16x in deposit-base this year. By far the biggest inhibitor to DeFi’s growth is security and lack of protective measures. Nexus provides a huge piece of that solution. At the same time, we now have competitors popping up who are subsidizing usage significantly. As the first mover and leader, as well as one of the most naturally profitable DeFi protocols, we have a materially lower customer acquisition cost than anyone else. As such every dollar we spend on growth likely goes further than what our competitors spend. That’s a fundamental advantage that we should use to consolidate market share and discourage competition.

Even without a first-mover and brand advantage, the growth of DeFi this year suggests the ROI on growth spend for any insurance protocol would be materially higher than the impact from dilution at levels were discussing here (sub 4%). If the return on growth spend is higher than the dilutive impact, this is value accretive to NXM. So from a financial perspective, I think it’s hard to argue that this isn’t an accretive move.

To me the questions are amount and structure. I voted for minting on the larger end above, due to my beliefs around the ROI of growth spend. But I also appreciate that this is an experiment at a structure that can be used to empower the community and may be a candidate for perpetual funding via part of the sell spread. In that vein, 100k seems appropriate as being only marginally dilutive while likely being sufficient to run some experiments.

On structure, I think it’s important to establish this separate from the Foundation to empower the community.

2 Likes

I’m opposed to minting NXM for this.

The idea is a nice, but quite frankly the community is not mature enough for this.

Thank you @Hugh for the suggestion - would love to be involved going forward if the community is supportive.

Personally I agree with the sentiment that a higher mint % is net beneficial as it will allow the protocol the flexibility to pursue several initiatives to resolve the current issues the project faces.

From a value creation perspective, for those who are worried about the net impact of minting new supply on price, in my view we will see far stronger price appreciation in being able to attract new capital to take the MCR % above 130%, and instill more confidence for further capital to flow in which will more than offset this small dilution in the short term - unfortunately right now with no additional incentives I don’t see material amounts of new capital entering the mutual and we have seen this play out in the last two months. As many have pointed out even the 3.75% is very small compared to other projects who have been able to drive accretive outcomes with far larger mining incentives - I don’t see it as a slippery slope but rather a direct response to the first time the project has faced a real issue on attracting new capital to grow, and competitive threats from other projects amassing capital.

1 Like

While I think this may be a good idea, provided the funds are decently managed and with little inflation… I’d like to express that rewarding stakers from inflated NXM is detrimental in my opinion. It is an inefficient use of capital. I don’t see it as a long term solution. Staking incentives should come from a good pricing. Good pricing comes from good assessing of the risk/reward and/or adjusting to market demand.

I wouldn’t give a lot funding to marketing as I believe in focusing on building a better product first and the growth should be long term, organic in order to be sustainable. Why invite a lot of guests when you don’t have room?

I see merits in rewarding community for various contributions and give grants for projects related to Nexus Mutual, and I would vote for this. This is a mutual, after all. :slight_smile:

2 Likes

I think the idea of increasing the staking incentives is worthwhile. It is such a bad look to consistently not have any capacity on some of the most popular protocols, plus presumably we are missing sales as a result. Anyone staking on a contract that is currently maxed out is therefore not receiving any more income from their stake.

However, I am concerned that we should should not fall into the pattern of repeatedly minting new tokens to try and get the mutual out of any ruts it is in. I think we should look at other solutions to building a pot we can use for incentives that do not involve inflation of the supply. I love the idea of taking the NXM-ETH spread and using it for incentives. I’ve no idea how we make that happen though. Could we use part of this mint to get that scoped and developed?

1 Like

I am very supportive of this also - however I think main focus should be on marketing and building on Nexus. I understand the the concern about dilution and I was originally against the previous rapid MCR increases for the same reason - but they worked out really well and I think if we are focused on the long term a small inflation now should be inconsequential. I am particularly excited about encouraging built on Nexus as that is a pretty key moat for us if we can fill it.

@cburniske from PlaceHolder might be another good signer for consideration he has a lot of credibility and believes in the protocol’s long term future

Yes, it is, and the incentives for staking can and should be increased. However, my dear fellow members, this should be done, in general, via good pricing mechanisms. And it should not be done by punishing with inflation those members who don’t stake, as a means of coercion.

Yes, this is very unfortunate and … in a healthy and mature mutual we should almost never be confronting with such a situation. The solution to this, at least partially, was suggested recently by Hugh, via updating capacity factors for popular and more battle-tested contracts . Also, we discussed in the past the so called surge factor, that extracts more revenue out of covers that are close to global capacity limits, and that is a form of… dynamic pricing, that I believe to be very beneficial and argued for it on numerous occasions in the forum.

And again, ladies and gentlemen, we should not be doing this by diluting NXM to increase rewards on popular contracts! That is if we want this inflation to be a one time jab, at least… As I’m afraid that in order for this incentive to be efficient on popular contracts, it would require a lot of funds… constantly. So whatever amount we decide to take out via inflation, would not last a long time.