Dear Nexus Community,
I’m Jeremiah one of the founders at OpenCover, we’ve had the privilege to build with Nexus since early 2022 and are now seeing signs of product market fit for Protocol Cover on L2. We would like to ask the DAO for support in scaling this opportunity which directly drives protocol cover purchases.
Summary
OpenCover has been distributing Nexus Mutual products on Layer 2 since September 2023 to help drive onchain cover adoption. So far we have been focused on building, making 30+ Nexus products purchasable directly from Base, Optimism, Arbitrum and Polygon with more chains and products coming soon. Our goal is to make virtually all retail-facing Nexus products available on L2 (this should happen this month), list new products shortly/immediately after they are listed on Nexus (from May) and support 10+ EVM-compatible chains by the end of summer.
To date, we’ve sold over 500 covers on L2 totaling $4,158,304 in protection which generated $27,799 in premiums for the mutual with a net increase in sales in the last 3 months. Our model is based on socializing gas costs across users by bundling purchases on L2 into a single aggregate cover on L1 and purchasing L1 cover at off-peak times to further minimize L1 gas costs.
The model is sustainable at scale but with L1 gas prices significantly increasing in the last couple of months, we would like to ask for a one-off grant to help us scale and continue to grow Nexus cover sales on L2.
Impact areas
Increased cover purchases, adoption catalyst: Nexus products accessible on Layer 2 at no cost to the mutual (beyond this potential grant).
Specification
Historical onchain data shows an all-time total cost of 2.99 ETH on L1 to serve 502 covers on L2.
Since January, the cost was 2.31 ETH in L1 gas fees to serve 215 covers on L2 with a bundling factor of ~2.25 (OpenCover was able to deliver an average of ~2.25 covers on L2 per L1 cover). The average collected in premiums by the mutual per L2 cover sale was $123.46 and the growth rate in number of covers sold on L2 is growing at around 10% month-over-month (CAGR since Jan).
Grant request
We would like to ask for a total grant of 230 NXM (~4.7 ETH) to support the next 4 months’ worth of operations broken down into the following: 60 NXM (retrospective commission on cover sales) + 170 NXM (forward-looking L1 gas subsidy).
- 60 NXM corresponds to the commission that’s been directed to the DAO treasury from our L1 cover purchases to date (capturing these directly is on our near-term engineering roadmap but have prioritized user-facing features so far)
- 170 NXM to support 4 months’ worth of L1 gas expenses to purchase cover from the mutual.
Ceteris paribus, given the current monthly growth rate of L2 cover purchases we anticipate this will support at least 190 L1 cover purchases driving at least 425 cover purchases on L2 expected to generate ~52,000$ in premiums in the next 4 months.
It is understood this would be a one-time request to help us scale offering Nexus covers on L2 sustainably. We do not seek to recover any retrospective development or gas costs.
Proposal status
Open for Comment
Thanks for reading! We’d love to hear your comments and/or suggestions about how OpenCover can help drive cover purchases for the Mutual.
Jeremiah
