Detailed Nexus Mutual Crypto app Review by DeFi Teller

Name: Nexus Mutual
Item: Nexus Mutual
Author: Kate Stormina

Last updated: Aug 16, 2023

What is Nexus Mutual?
How does Nexus Mutual work?
How to use Nexus Mutual?
The NXM token
Is Nexus Mutual safe?
Partners
What's next?
Links

What is Nexus Mutual?

Nexus Mutual is a community-owned risk-sharing DAO on the Ethereum blockchain that provides an alternative to traditional insurance services. In simple words, Nexus Mutual lets developers and users mitigate any future losses by depositing assets into pools of shared mutuals.

Nexus Mutual launched its decentralized autonomous organization in May 2019. For now, Nexus Mutual has three separate products and covers only losses that occurred from smart contacts failures and exchange hacks, but the team promises to expand its model to cover wallet protection and other use cases, as well as to turn to more traditional strategies, like earthquake insurance, in the future.

How does Nexus Mutual work?

Although Nexus Mutual is based on Ethereum, the platform offers cross-chain coverage for protocols built on different blockchains.

For now, there are three main products on Nexus Mutual. Users may choose Protocol Cover or Custody Cover where the first is meant to protect against a hack or a bug on a specific protocol, while the latter mitigates losses that occurred as a result of halted withdrawals of lost assets on centralized exchanges.

The third option, Yield Token Cover, is tailored to suit the needs of Yearn v2 vaults, Idle Finance pools, and Curve Finance pools’ users who want protection against the situations when yield-bearing tokens lose their peg in those pools. Nexus Mutual promises up to 90% of losses to be covered in case a yield-bearing token in question de-pegs in value by more than 10%.

There’s also an NXM staking option on the Nexus Mutual app. DAO members with technical audit skills may participate in Risk Assessment procedure and choose up to 20 projects they think are secure to stake their NXM in pools of those projects. This brings some fair APRs to stakers, and they also receive NXM rewards each time anyone purchases cover. But if the project in question claims coverage, the deposit may be partly or fully lost. Another staking opportunity comes from Claims Assessment, where DAO members get to vote if the project should receive payment coverage.

How to use Nexus Mutual?

The platform operates as a DAO, and only DAO members can take part in the governance processes or buy the platform’s native NXM token. To become a Nexus Mutual DAO member, a user needs to go through KYC and AML screenings, pay a one-time memberіhip fee of 0.002 ether and purchase NXM tokens via a bonding curve. There are no other fees on Nexus Mutual, and there is no other way to buy the Nexus Mutual token.

Users need to choose the desirable duration of the coverage which is between 30 to 365 days, as well as decide on which cryptocurrency they are going to use to pay for their policy - it may be Ether or DAI.

Nexus Mutual app supports a variety of wallets including Metamask, Wallet Connect, Coinbase Wallet, Ledger, and Trezor, as well as Opera.

The NXM token

NXM is an ERC-20 standard token fueling the Nexus Mutual protocol. It is used to pay for cover policies on the platform and to incentivize members to actively participate in the life of the Nexus Mutual DAO.

Aside from buying coverage on Nexus Mutual, there are currently three other ways to use NXM - either by locking tokens to take part in the governance process or by staking NXM to participate in Claims Assessment and Risk Assessment procedures.

Is Nexus Mutual safe?

Nexus Mutual is a London-based non-profit company that is operated by a team of seven. Hugh Karp is the founder of Nexus Mutual. He is the ex-CFO of the UK Life reinsurer company who spent 15 years working in the traditional insurance fields.

Though the platform is governed by a DAO, Nexus Mutual has an Advisory board that whitelists proposals and acts according to the will of the community. There are five seats on the board and DAO members may propose changes and vote for other candidates to replace one of the members of the Advisory board.

Though no user funds were affected at the time, there was a hack Nexus Mutual was related to in November 2020 that involved the platform’s founder, Hugh Karp. The attack wasn’t related to a smart-contract breach, and rather caused by a personal device hack, but has cost Karp 370,000 NXM, worth $8million at the time of the attack.

Partners

Nexus Mutual is known to collaborate with Yearn Finance, Idle Finance, and Curve Finance protocols - via its most recent product Yield Token Cover aimed to protect yield farmers from market fluctuations.

There’s also a Nexus Mutual community project Wrapped NXM that allows wrapping NXM tokens to freely trade them across Ethereum without the need to become a Nexus Mutual DAO member.

Nexus Mutual also partners with Armor.fi which is actually a modified fork of Nexus Mutual. Armor.fi allows users to stake their wrapped NXMs without the need to pass KYC procedures.

The platform also runs a trial Bug Bounty Matching Program with Immunefi.

What's next?

Future implementations of Nexus Mutual will offer coverage for some additional insurance cases such as severe oracle failure, dev liability, or MGA policies.

Following the governance proposal and further discussion between DAO members, NeXus Mutual is now exploring the possibility of removing KYC requirements for users and dissolving its UK-based legal entity in an initiative called Operation Wartortle.