Understanding $SAFE

Can someone smarter than me comment on what’s going on with $SAFE?

I see lots of excitement around it in the crypto twitter sphere, but I’d like to understand the first and second order effects on Nexus a little better. Anyone fancy ELI5-ing it for everyone?

SAFE is basically created by another community, presumably has some ties with YFI. But currently the roadmap is vague and very likely will be changed. They started out with the idea of offering bite sized covers using nxm covers as a base, but now it seems like the discussion has strayed away to even offering insurance tied with real life events. So they might evolve into a potential NXM competitor but as of now I doubt the viability of SAFE team is carrying out this grand vision as they have yet to deliver anything and insurance business is not easy to bootstrap, time will tell.

Now they are attracting attention as the first yield farming that involves wNXM. They have also created two pools with yearn NFT version of nxm insurance. Those are rare in supply and some geniuses have figured out how to buy nxm insurance in yearn format for the yield farming and they have maxed out all the cheap covers available. So now we are running low on capacity due to this, but the silver lining is it has pushed the capital formula to the new stage where MCR is dependent on covers purchased instead of arbitrary 1% increase each day.


Thanks very much for the color @luciusfang!

Definitely a fascinating experiment that has put Nexus on the spotlight, so that’s good. I do worry a little about some of the second order implications here, namely the drain on Nexus governance (more than 1/3 of all NXM supply is now wrapped) and the fact that they are effectively boostrapping a parallel capital pool.

They have yet to have any loyal capital so I wouldn’t call that capital bootstrapping. wNXM is always a risk in the sense that those tokens are not in staking, with yield farming it literally creates competitors for staking. But the proposal to increase price might just make staking more lucrative but still 3 months lock is still very long.

It actually exceeds my expectations that until now there is no viable competitor to NXM. I guess there are just too few people who thinks insurance is interesting, as compared to lendings, swapping and derivatives.

‘insurance’ is a very complex and fundamentally unsexy product, requires deep knowledge to build up and scale. I think that’s why it’s been mostly ingored (so far at least!).

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In the future, I think is going to become more common to offer WNXM holders options for staking or rewards (like in $SAFE now $COVER).
So definitely an issue that $NXM holders get better rewards/yield by using the token outside the mutual environment. However, there is also a risk associated with these new project.

On the other hand, earning 1.3% APY for staking your $NXM in some super demanding projects doesn’t make any sense and I don’t think it is attractive at all. This should change in the future. There is another forum topic discussing how to change this already! Incentives should be more attractive for $NXM holders and align to market conditions (offer/demand)

The same case with the cover that you bought directly from the mutual or using yearn.finance and then later resell it as NFT for a higher price.