[RFC]: Boost rewards for Long Term stakeholders


Using NXM incentives to boost rewards for long-term stakeholders was briefly explored about a year ago. Nexus will work best, and will scale best, when it has lots of members who are focussed on the long term. Therefore, it would be beneficial to introduce a mechanism to gain greater alignment over longer time frames.

(link to original proposal : Long Term NXM Bonuses)

Overall goals:

  • use some form of locking mechanism to create a long term aligned group, this could also be linked to staking.

  • long term aligned group to take over Advisory Board powers once established & viable (listing new risks, managing correlation issues, managing total capacity risk, burning fraudulent claims assessors)

  • reward them with additional NXM, short-med term this could come from buyback, longer term it could be calibrated occasionally (eg once a year) to balance with burns from the sell spread or it could be simply inflationary.

Implementation Options

There are quite a few options here and some of them depend on the precise detail behind the V2 staking implementation.

Regardless of the exact implementation, the biggest strategic question is if we keep the Long-Term Aligned Group relatively small and more technically focused or wider with a significant capital like component (e.g. like “ve” token models). If the former, the amount of wNXM used will not need to be that large, if the latter then it would be significant.

The original proposal suggested a simple linear bonus system based on MCR%, but there are now more established models with proven success based on governance locking and boosted rewards for providing other services to the platform.

Pros & Cons

Key Benefits:

  • Provides a potential path to greater decentralisation by having a long term aligned subgroup that could perform actions currently performed by the Advisory Board.
  • Attracts more wNXM back into the mutual to access bonuses.
  • Greater incentive to re-capitalise the pool in case of large claims if rewards based on current MCR%.

Potential Downsides:

  • We end up with an implementation that backfires compared to the original aims.
  • Existing long term holders access NXM bonuses but nothing significant changes regarding the operation of the mutual, resulting in ‘wasting’ wNXM.
  • If based on current MCR%, implementation fails to provide meaningful enough incentives regarding recapitalisation.
  • Implementation will take time and resources away from core development team.

@Gauthier thanks for raising this important topic! I thought I’d provide some extra context that can help with the discussion.

At this stage I believe we should keep the discussion high level and conceptual, as we need to get agreement on the big questions before working out precise implementation options. I see the big questions as follows:

  1. How do we best select and reward a Long Term Aligned group to take over the AB functions.
  2. Should we run any rewards programs (either inflationary or long term sustainable) to boost the capital in the pool.
  3. Should the above two be linked or quite separate.

Some points/context on the above items:

  • LTA members are likely best filled by specialists so there is an argument they shouldn’t be selected via capital alone. If so what is the best way to select them and remove them? I’ve been pondering this for some time and I’m a bit torn, I like the automated approach capital gives but am somewhat concerned it is easier to capture and might not give us the right skill set.

  • Inflationary rewards for additional capital in the pool make sense if we need to bootstrap capital to another level to access new customers, there is some evidence this would be helpful.

  • V2 staking mechanics are very likely to have a “ve” flavour to them, so these could be used to help select LTA members. eg if you have ve tokens with expiry > x months/years then you get LTA powers.

  • V2 will have commission functionality built in with commissions generated from the main Nexus app being directed to the Community Fund. This revenue can be used to conduct wNXM buybacks and then diverted to long term stakers as bonuses. Main point is there is going to be some long term sustainable revenue from this (plus any sell spread) that can be used for boosted staking rewards.

  • Once we have V2 I’m quite a heavy proponent of boosting staking rewards in some fashion. I’m fully behind models that are long term sustainable and open to other inflationary models if they have clear objectives, defined end points, and don’t just incentivise temporary mercenary capital.

More generally, I would be really open to a community formed working group on this topic as there is a lot to it that warrants considered thought and analysis.

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