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 for members who don’t have massive holdings or anyone looking to mitigate gas costs.

For a short while, we all enjoyed low gas prices toward the end of April that averaged about 56 gwei. Gas prices once again are on the rise. The average gas price in the last week has been ~174 gwei. Because buying cover is a more complex transaction, the gas fees for cover buys can be prohibitive for members who are buying cover for assets <$100,000 in value.

Here’s a good Dune Analytics Dashboard for Gas Price Averages over time.

Though we’ve had larger cover buys, we’ve had fewer daily transactions by unique users according to the data in this Dune Dashboard. I can’t make a direct correlation, but I would assume prohibitive gas costs have been a deterrent for many members as of late.

One way to overcome significant gas costs and encourage cover buys is to offer NXM rewards that offset the gas costs associated with buying a cover policy.

The program would apply to cover purchases: no other transactions would be eligible.

Case Study: Balancer Labs

Balancer Labs run a similar program, which started as a pilot program and then was approved by the community to run for a longer period due to the success of the pilot program.

In this Dashboard, we can see that weekly transaction volumes (in USD) increases starting in January and have stayed consistent with the initial increase and, in some weeks, trended higher. One consideration we can take into account is the price increase of many assets from November '20 until present. But look at the volume of DAI and USDC transactions:

Weekly Volumes for Balancer Exchange (Rounded)

Again, we can attribute an uptick in volume to the bull market to some degree; however, the weekly volumes rose across the bar for multiple assets, which includes the stablecoin assets listed in the above table. USDC trading volume increased notably from the 2020 months to the 2021 months: January was the start of the pilot program and in March, the program was extended through governance.

In this Dashboard, we can see a large jump in new users on Balancer’s exchange. An aggressive marketing campaign was done to promote the BAL gas incentives. If you listened to the Bankless podcast in March, you heard about the program.

Balancer’s program delivered results, and I think it can be a driver for cover buys in smaller denominations.


The benefit of rewarding members with nominal amounts of NXM—fractional amounts of NXM cannot be wrapped. A member would have to buy significant numbers of cover policies to game the system.

We could introduce a measure that doesn’t allow a member to buy small cover policies over and over to accrue NXM. The rewards wouldn’t be equivalent to gas costs; it would be an amount that offset gas costs.

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 introduce to members with smaller deposits in DeFi.


I’m just looking for community sentiment and feedback on this idea. This would be a solution we can introduce in the near future. For now, if members can provide any comments on this topic, I would appreciate it.

Please take this poll regarding this idea: https://forms.gle/YQDzyB2BpTrXMFQW9

Any additional feedback is welcome below this post. Thanks for taking the time to read this post. :v: :turtle:


Looking forward to the communities feedback on this. Gas costs do reduce the amount of cover buys.

Subsidies make the most sense when they overcome some initial barrier, because they aren’t sustainable in the long term. So interested to hear view on this aspect

Some wider input for consideration:

  • Lots of smaller covers result in higher gas costs for reward distribution and cover expiries, which the Foundation is currently paying.
  • Medium term the goal is for material cover buys to be bought as a group (socialising gas costs)
  • We’re going to be looking at buy cover changes over the coming months and we hope to reduce gas costs somewhat.

I think the added cost of the Foundation having to spend gas to expire a bunch of new smaller covers outweighs having more cover purchases albeit in smaller cover amounts. From what I’ve seen with other projects, subsidizing gas is not sustainable as people will very quickly abuse it.

A more robust long-term solution is to integrate L2s for gas intensive txns in Nexus such as cover purchases and staking.


I completely agree on the L2 aspect and this should be the preferred solution, since many projects are about to move to sidechains/L2 (i.e. polygon, soon optimism whatsoever). However, for the time being some sort of liquidity program for coverage takers could be beneficial.

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I like the idea to think about solutions to onboard also smaller cover buys, it could help to reduce barrier of entry for smaller and new users and help to drive broader adoption. This might not be attractive in the short-term, but rather for Nexus to remain the first stop when a user is thinking about getting covered.

On the other hand I agree that many might just try to game the system and in the end subsidies is always just a thing for supporting user adoption.

Thus, I would also think that the pooled cover buy option Hugh mentioned is probably a best of two worlds solution, which allows onboarding of smaller covers in batches to share gas fees. Depending on how long it might take until this can be implemented, we might consider to bridge a certain period of time with an incentive program.

Agree with @rchen8 idea of just focusing on building out an L2 solution instead. Doesn’t see a huge benefit for us to do a liquidity mining on the cover purchase now.

Not sure to what extent it is feasible but maybe we can start with a cross-chain cover purchase application with the main operation still in mainnet Ethereum to save the cover buyers’ cost?

it will also help to establish our presence in the cross-chain ecosystem without too much upfront cost. Maybe can start with Matic?

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