The concept of insurance comes from communities in the past who pooled their resources to protect each other from the risks they all faced. It works better the more people are in the pool as the numbers become more reliable. But this method isn’t scalable because it is a trust-based system and the network of individuals trusted by everyone in the pool only extends so far. Hence traditional insurance companies emerged.
When Ethereum and smart contracts came along we realised we could apply our insurance industry knowledge to our passion for decentralised technology. We realised we could build a mutual on a platform where individuals only need to trust the system, not everyone in it.
Specifically, we could see a solution to the problem of agency—where an insurer looks after customers' money on their behalf. We also saw the opportunity to make significant cost savings compared to the traditional insurance model. As we’re already in the UK, we have the perfect base to build out this concept due to the existing law around mutuality.
The aim is to provide our members with more simple, transparent, accessible, and affordable financial protection against their risks.
Nexus Mutual is a decentralised alternative to insurance. We’ve used blockchain technology to create a risk sharing pool in the form of a mutual to return the power of insurance to the people. The platform is built on the Ethereum public chain. It allows anyone to become a member and purchase cover. It replaces the idea of a traditional insurance company because it is wholly owned by the members. The model encourages engagement as members will get economic incentives for participating in Risk Assessment, Claims Assessment and Governance.
Initially, we launched with only one product: Smart Contract Cover. The purpose is to provide the Ethereum community with protection against hacks in the value-storing applications (known as smart contracts). We added a second product in December 2020: Custody Cover. Now, users of centralised exchanges and custodians will be able to purchase cover from Nexus Mutual, which will provide protection against:
The custodian gets hacked and a user loses more than 10% of their funds; or
Withdrawals from the custodian are halted for more than 90 days.
We created Protocol Cover, a cover product that is more comprehensive than smart contract cover, to widen coverage and provide members with protection against material financial losses due to failures in either the protocol code, economic design, governance set-up or oracles. The new protections include:
Oracle, economic, and governance attacks.
Protection for assets on Layer-2 solutions.
Protection for non-Ethereum smart contracts.
Protection for a protocol across multiple chains.
All covers written before 21 October 2020 9:00:00 UTC will have the existing Smart Contract Cover wording.
All Smart Contract covers written after 21 October 2020 9:00:00 UTC will transition to Protocol Cover as of 26 April 2021 9:00:00 UTC. Protocol Cover protections will apply to material losses that occur after 26 April 2021 9:00:00 UTC.
Down the line, we intend to move into more mainstream products. We started building the platform on the premise of providing cover against earthquake risks.
We love to hear thoughts and questions from our community members. Our development team and community members are active on the following social media channels:
You can also find more information on the Nexus Mutual website.
We're established as a company limited by guarantee in the UK and have received approval by the Financial Conduct Authority (Bank of England) to use the protected word "mutual" in our company name.
By becoming a member, each participant in the mutual becomes a part-owner of the mutual, with membership rights represented by NXM tokens. This structure has no shares or equity by definition, it is a company run solely by members for the members.
An overview of the Token Model can be found here.
A token is needed in order to bind together the internal economics of the mutual, so that the platform can;
dynamically react to the prevailing conditions and capitalisation levels; and
reward active members for participating in the day-to-day operations of the mutual.
Nexus Mutual uses a token bonding curve (also known as a continuous token model), with the price in ETH driven by two main factors:
How much capital the mutual has.
How much capital the mutual needs to meet all claims with a certain probability.
For more details see our Token Model page.
No. We have launched with a live, working product on main-net and the platform is immediately available for use by the community.
Tokens can be purchased directly from the platform for use in buying cover, Risk Assessment, Claims Assessment and Governance.
The NXM token is not listed on exchanges and the mutual doesn’t expect to list NXM on exchanges in the future. Due to the nature of the token model and the requirement for tokens to belong to members only, any exchange listing would have to be bespoke.
Tokens will be redeemable directly from the platform for ETH, subject to some restrictions.
Yes, as long as the address being transferred to is also a Nexus Mutual member—the transaction will fail if this is not the case.
Cover is available for purchase by members from the application interface using a Metamask account.
We're making the process as simple as possible:
Specify which smart contract address you want Cover for.
Specify the Cover Amount, currency (ETH or DAI) and Cover Period.
Generate a quote and make the transaction using Metamask.
You are now covered!
The price is entirely driven by the amount of NXM staked by Risk Assessors against each protocol and custodian.
You can find the full pricing algorithm here.
All protocols and custodial accounts can be covered by the platform provided sufficient staking has been obtained.
The quote may return an un-coverable price for some smart contracts, these contracts do not have sufficient value staked against them by Risk Assessors. If you can't get a quote please join our Discord and ask Risk Assessors to stake!
Risk Assessors are likely those members with code audit expertise or capital providers relying on auditors' judgement.
Risk Assessors can stake value in the form of NXM, thereby vouching for the security of the protocol/custodian and dropping the price of cover. NXM can be unstaked at any time subject to a 30-day withdrawal period.=
When cover is subsequently sold on a protocol or custodian, Risk Assessors earn proportional rewards in NXM equivalent to 50% of the cover premium.
If a claim is accepted and a payout occurs, Risk Assessors staked against the protocol/custodian will have their staked NXM burnt on a proportional basis to facilitate the payout of the cover amount. This may result in a Risk Assessor having all of their NXM staked against the protocol/custodian burnt to provide capital for the payout of the claim.
For more detail, please see our Risk Assessor docs page.
Protocol Cover is intended to provide protection against material loss of value resulting from failures in either the protocol code, economic design, governance set-up or oracles. In practice, this means that a protocol has been exploited in a way defined in the cover wording and a material amount of value has been drained or made permanently irrecoverable.
Custody Cover is intended to provide protection against material loss of value resulting from centralised exchange hacks and discontinued access to withdrawals beyond a 90-day period.
All other security events as defined in the cover wording as ‘Exclusions’ (for example, loss of private keys) are not covered.
Importantly, there are several areas in the definition where human judgement is required. The idea is to pay claims where a genuine loss has occurred but not pay claims where members are trying to game the system. This can never be fully captured by words and must be interpreted by the membership base as a collective group.
Members will act as judges, with each claim subject to a yes/no vote by members who have chosen to stake a portion of their tokens to act as Claims Assessors.
The Claims Assessors earn rewards for voting with the consensus outcome. If anyone is deemed to have voted fraudulently, their stake may be burned via the Governance process.
More detail is available in the Claims Assessment docs page.
If Claims Assessors were to begin denying legitimate claims, thus failing to fulfil the core purpose of the mutual, then no new users would come to the platform and make contributions to it.
While it's true that successful claims would lower the value of the capital pool and hence the value of the NXM tokens the Claims Assessors hold and earn in the short-term, Claims Assessors are also financially incentivised to take a longer-term view as they are required to lockup a stake. This stake can be burned if there is deemed to be clear fraudulent voting activity by Claims Assessors (see Advisory Board section for details).
Denying legitimate claims would result in Claims Assessors having their NXM stake burned and, in the long term, the NXM earned through Claims Assessment would lose its value. The economic incentive aligns interests between members to promote positive contributions and to deter fraudulent behaviour in the Claims Assessment process.
At present, cover can be bought in ETH, DAI or NXM. If paying in ETH or DAI, the system will convert the contribution to NXM in the background, then immediately use that NXM to purchase cover.
Yes, definitely. We actually started development with a product to cover earthquake risks but shifted direction in late 2017.
There are still challenges regarding public blockchains, with scalability, in terms of transaction throughput, and user-friendliness being the key ones that make mainstream products quite difficult at this time. However, there are a large number of talented people working on solutions to these problems, so we are optimistic that they will be solved within the next few years.
We’ve expanded our cover products to include Custody Cover in addition to upgrading our flagship Smart Contract Cover to a more comprehensive Protocol Cover, and we are working toward expanding our future product offerings to better serve our members.
No. However, we fully understand that due to being a smart contract that protects the community against hacks in other smart contracts, we need to be very secure ourselves.
Therefore, in addition to our ongoing checks and external reviews during the build phase we have had our code reviewed by three independent experts through an audit with Solidified. See the audit report.
This is indeed a risk and it is why we have not only performed extensive internal testing and external audits but we have also launched with some emergency functionality (that is intended to be removed once the contracts have become more battle-tested).
From a cover holder perspective, by purchasing cover with Nexus Mutual you still get significant peace of mind from an additional safety net. As an example, say there is a 1% chance that the chosen smart contract has a bug and also a 1% chance that Nexus Mutual has a bug. By purchasing cover only one contract needs to be secure for you to either suffer no issue or receive a claim payment. Overall, you've increased your safety margin from 1 in 100 to 1 in 10,000.
Yes, absolutely. Please refer to our How to Participate page for further information.
Initially, we have a member token-voting process overseen by an advisory board (comprised of experts from the worlds of insurance, mutual management and smart contract security). Note that any member can replace an Advisory Board member via a vote at any time.
Any member may delegate their vote to any other member with rewards available for participating in governance actions.
We believe that pragmatic trade-offs are OK to start with. Therefore, in the interest of launching a viable product—as well as ensuring the security of the smart contracts —Nexus Mutual will launch with some aspects that are not fully decentralised. These will be reduced over time as the system becomes battle-tested and gains scale.
If you want to offer a premium service to your clients and/or earn more from audit work you have already completed, Nexus Mutual can be used to achieve this.
If your client wants to purchase Protocol Cover with Nexus Mutual, you can earn rewards by staking against that protocol.
How it works:
You audit your client’s contracts as usual.
You stake on Nexus Mutual against your client's protocol.
When your client purchases cover, you earn rewards.
Benefits for You:
You earn additional rewards on the Nexus Mutual platform.
You differentiate yourselves from the competition by putting your money where your mouth is.
Benefits for Your Client:
They have greater confidence in the security of their contracts.
They or their users can buy cover from Nexus Mutual at reduced prices.
They can market the extra steps taken to their community.
Your clients can also show they have skin in the game by taking out Protocol Cover to prove their confidence in the security of their own smart contracts.
If you think a protocol or custodian is secure, you can stake NXM tokens against it. Simply choose a specific protocol or custodian, stake any number of NXM tokens and become a Risk Assessor.
When cover is purchased, that platform’s Risk Assessors share in commission equal to 50% of the cover premium. If there is a claim, Risk Assessors stakes will be burned on a proportional basis up to the claim amount.
Become a member now to get started: https://app.nexusmutual.io/#/Membership