Glossary & Appendices
Here you can review the Defined Terms, Multi-sig Participants, and Formulas.
Advisory Board | A five-member board made up of members from the founding team and other technical/industry experts who provide the Nexus community with technical guidance and, in limited circumstances, can enact emergency functions should they be required. See Advisory Board for more detail.
Bonding Curve | A smart contract that allows for a token to be minted at any time (continuous) according to a price set by the smart contract. The price per token increases as more tokens are in circulation. When a token is minted, the amount paid is held in the capital pool.
When the MCR% is above 100%, a token can be sold back to the bonding curve (burned), which reduces the token supply; the token’s proportional share of the capital pool is redeemed.
In the case of Nexus Mutual’s bonding curve, the smart contract has built in parameters that control when tokens can be bought and sold. See Minimum Capital Requirement (MCR) and NXM Token Model for more detail.
Capital Pool | The communal pool where funds flow through and are held. There are five main cash flows:
Capital Flows into Pool | Capital Flows out of Pool |
Cover Buys | Claim Payouts |
NXM Purchases | NXM Redemptions |
Investment Earnings | |
Claim | A member’s request to have their case reviewed and redeem a cover product for funds when a material loss occurs; this is only a request to have a case reviewed and does not guarantee a payout. All claims are subject to the Claims Assessment process.
Claims Assessment | A process between members holding cover that claim a material loss and members acting as Claims Assessors. After an exploit or loss event occurs, a 72-hour cool-down period goes into effect to allow for a protocol or custodian to respond to loss event. After the cool-down period, Claims Assessors discuss a claim and evaluate each claim using a variety of inputs. The Claims Assessors use their discretion in the voting process, and all claim decisions are final, though members can submit a claim for review two times. See Claims Assessment for more detail.
Community Fund | A multi-sig fund with an initial 250,000 NXM to fund grants for community contributions that progress the protocol. This fund is managed and run by the community. See Community Fund for more detail.
Cool-down period | A 72-hour period after a loss event where Claims Assessors can deny claims submitted within this time frame. Instituted to allow a protocol or custodian to respond to a loss event and to allow Claims Assessors to have a complete understanding of the loss event.
Cover Holder | Member with active cover. In the Claims Assessment process, a Cover Holder is the member who files a claim.
Cover Products | Discretionary cover offered by Nexus Mutual, which includes protocol cover and custody cover.
Custody Cover | Cover product designed to protect members with funds held by a centralised exchange and/or custodian. Protects against custodial hacks that incur a loss of 10% or greater OR halted withdrawals for greater than 90 days. See Buying Cover and Custody Cover wording for more detail.
Discretionary Mutual | A mutual fund that provides discretionary cover, which is an insurance-like product that involves only a discretion, not a legal obligation, to pay out on the occurrence of a material loss.
Investments | Assets from the capital pool allocated to investing in ETH and ERC-20 assets. Investments are determined by the members through governance. Consistent with existing insurers, the investment strategy will be conservative with the aim of earning incremental returns without endangering the solvency of the fund. See Assets and Investment for more detail.
Investment Earnings | Positive returns from investments that are added to the capital pool where all of the mutual’s funds are held. See Investment Returns for more detail.
MCR | The Minimum Capital Requirement represents the minimum amount of funds the mutual needs to be very confident it can pay all claims.
MCR Floor | The minimum amount of funds (in ETH) the mutual needs to be very confident it can pay all claims. While the long-term goal of the mutual is to have f(Cover Amount) drive the MCR calculations, the MCR Floor is necessary in the mutual’s early development so that there is a critical mass of capital to enable cover growth. See MCR Floor for more detail.
Protocol | A system of rules that determine how information is exchanged and transferred. In a cryptocurrency ecosystem, this refers to the defined rules that govern actions within and across a certain network.
Protocol Cover | Cover product designed to protect members with funds held within a protocol. Protects against material financial losses due to failures in either the protocol code, economic design, governance set-up or oracles. See Buying Cover for more detail.
Risk Assessment | The process in which members provide capital, in the form of NXM tokens, that is staked against protocols and/or custodians members believe are well-coded and secure in order to create available cover capacity for other members to purchase cover products. Members that stake NXM against protocols and/or custodians earn a portion of cover premiums in the form of NXM rewards. See Risk Assessment for more detail.
Shared Risk | Membership is represented by NXM tokens, and all members own a proportional share of the mutual based on the size of their NXM holdings. The bonding curve determines the price of the NXM token based on the amount of capital in the pool. When successful claims are paid, there is less capital in the pool. When claim payouts impact the capital pool enough, the price of the NXM token is lowered based on the bonding curve mechanism. In this way, all mutual members share risk.
Smart Contract Cover | Nexus Mutual’s first cover product, which was designed to designed to protect members with funds held within a protocol’s smart contract system. Protected members against hacks in the value-storing applications, known as smart contracts. This cover product was transitioned to a cover product that provides more comprehensive protection: Protocol Cover. The transition from Smart Contract Cover to Protocol Cover took place on 26 April 2021 at 9:00:00 UTC. See Buying Cover for more detail.
Smart Contract System | A single smart contract or group of directly related smart contracts running on the public Ethereum network excluding any outside inputs to that system such as oracles, miners, the underlying Ethereum network and individuals or groups of individuals interacting with the system.
Advisory Board multi-sig participants | 3-of-5 multi-sig:
Community Fund multi-sig participants | 5-of-7 multi-sig:
Cover_Price = Risk_Cost x ( 1 + surplus_margin) x cover_period / 365.25 x cover_amountf(Cover Amount) = Active Cover in ETH / Gearing FactorGlobal Capacity Limit = MCReth x 20%MCR = Max (MCR Floor, f(Cover Amount))Risk_Cost = 1 - (net_staked_NXM / low_risk_cost_limit)^(1/7)Subject to the following criteria:
Risk_Cost greater than or equal to staked_risk_cost_low
Risk_Cost less than or equal to staked_risk_cost_high
Specific Risk Limit = capacity factor x net_staked_NXM
TP = A + (MCR / C) × MCR%^4
A = 0.01028
C = 5,800,000
Gearing Factor* = 4.8
MCR Floor (MCReth)* = 162,424.73 ETH
* Subject to change through Governance.
Last modified 12d ago