NMPIP | Reform the Claims Mechanism to Build Trust & Upgrade Governance to Formally Use an Optimistic Model
Note: I’m transitioning @Hugh’s [RFC] Building on Trust: The Future of Nexus Mutual and the Evolving Onchain Insurance Landscape to the NMPIP stage on Hugh’s behalf. The RFC was open for review from 15 July 2025 until 20 August, with supportive feedback from members.
This proposal will be split into three (3) separate NMPIP votes:
- NMPIP | Reform the Claims Mechanism to Build Trust & Part Upgrade Governance to Formally Use an Optimistic Model
- NMPIP | Bridge Nexus Mutual’s Capital to Traditional Markets
- NMPIP | Redirect RAMM Value to Stakers to Increase NXM Staking and TVL
Summary
Since its inception, Nexus Mutual has firmly established itself as the original, leading decentralized insurance alternative protocol serving the crypto-native community. As we look toward the future, it’s essential to reflect on the foundation we’ve built, the impact we’ve had, and the bold steps ahead to scale and evolve.
Before diving into Hugh’s proposal for the next wave of protocol enhancements, let’s review the rationale for the proposed changes:
Rationale
A Proven Track Record in Crypto-Native Risk Protection
Nexus Mutual was created to provide meaningful protection against risks inherent in decentralized systems. Over the years, we’ve successfully delivered cover against smart contract vulnerabilities, slashing events, depeg scenarios, and custodial failures. Our track record and transparent claims process have made us the go-to insurance alternative for top-tier participants in the space.
Trusted by DeFi’s Elite
Nexus Mutual has built deep trust within the industry. Some of the most respected and well-capitalized DeFi allocators rely on Nexus Mutual to protect their portfolios. Their ongoing support is a testament to our resilience, reputation, and the value proposition of a fully onchain mutual. This established trust places Nexus Mutual in a very advantageous strategic position, as the next wave of capital into DeFi is not only going to be much larger but it will be more risk averse. New entrants will be looking for assurances across all aspects of investing and coverage will be a key part of that. If we execute well, this will have a multiplier effect as larger waves of risk averse capital seek coverage.
Proposed Next Steps for the Protocol (Specification)
To maintain momentum and amplify our impact, Hugh is proposing the following key next steps on behalf of the Nexus Mutual teams:
Reform the Claims Mechanism to Build Trust
Taking a critical view of the claims mechanism—we effectively have a model where a handful of expert members drive the majority of decisions but potential users struggle to understand that’s actually how it works. This set-up leaves material doubts that “random DAO voters might impact my legitimate claim”, which is regularly cited as a concern.
This means the Mutual gets the worst of both worlds. We effectively operate with a small claims committee but cannot openly say that’s how it works as we can’t specifically identify the experts voting a potential users claim. This becomes a meaningful barrier to building trust as large users want to know who is voting on their claim and that they have the required expertise.
As per NMPIP-237 members have voted to pursue this model and as a result the Advisory Board (AB) has outlined the proposed details, as follows:
- Shift from open community voting to a specialized claims community of 3-to-5 members for crypto-native claims.
- Rationale: Based on the user research we have conducted, cover buyers of all sizes want to know who is assessing their claims. Cover buyers want to know that the individuals and/or teams assessing claims are qualified and credible. All of the respondents we spoke with indicated this would improve trust in the Mutual’s claims model.*
- Introduce a delegated claims model for new and existing products where warranted, especially those requiring specialist input. This would delegate claims assessment to an individual account controlled by a team who has the required knowledge.
- Existing Products: such as The Retail Mutual (TRM) cover where offchain information, some of which has privacy concerns. As well as cover sold through Native and other brokers.
- New Products: There are many cases of new products that a delegated claims model will allow such as:
- Kidnap & Ransom
- Property Coverage (e.g., Bitcoin Mining)
- Any product where offchain information, particularly with privacy concerns, are involved.
- Parametric Covers (delegate to an automated agent)
- This will build greater trust in the claims process while enabling new product and distribution innovations on the Nexus Mutual protocol.
Upgrade Governance to Formally Use an Optimistic Model
The current governance set-up is that all changes go to a full member vote where the Advisory Board (AB) sets the default outcome. If quorum isn’t met, the default outcome proceeds. If quorum is met, then the AB default is discarded and the member vote result applies.
Functionally this is equivalent to using an optimistic voting approach whereby the upgrade proceeds as per the AB recommendation unless it is voted down.
Since voting participation is low, as with nearly all DAOs, it makes sense to simplify the governance contracts, remove technical debt and move to formally adopt this model.
Importantly, members will still retain the power to replace AB members as they wish onchain, which remains a process that cannot be blocked by the AB members. This means members still retain full control.
If members vote to accept Hugh’s proposal, the AB would be granted the authority to formalise this change with the following details:
- Transition governance to formally adopt an optimistic model where the AB proposes upgrades and enhancements that pass automatically unless members vote against them.
- Proposals will be placed on snapshot for gasless voting.
- A quorum of 15% of NXM supply will be set to match the current quorum parameters the Mutual currently uses.
- Voting rewards will be removed.
- AB members will be responsible for accurately implementing members’ decisions onchain.
- If AB members go rogue, they can be replaced by an onchain member vote, see below.
- AB members are legally responsible to implement members’ wishes as they are councilors of Terrapin International Foundation, the legal wrapper behind Nexus Mutual.
- This reflects the current practical governance process, but with updated, streamlined contracts to enhance protocol efficiency, performance, and security.
- Members will always retain the power to replace AB members via an onchain vote that cannot be blocked by existing AB members.
Conclusion
DeFi is becoming much more acceptable throughout the world and is about to experience material inflows from traditional markets as the regulatory barriers come down. While Nexus Mutual is already very well positioned to take advantage of this, the proposed changes will make sure we capture as much growth as possible.
Proposal Status
This NMPIP will be open for review and comment from 21 August 2025 until 4 September 2025. After that time, this NMPIP can be put onchain for a full-member vote.
Onchain Voting
This NMPIP will be open for voting from 1:40pm UTC on 9 September 2025 until 1:40pm UTC on 12 September 2025.