Nexus Mutual

Insurance

Nexus Mutual is a decentralized insurance marketplace where risk-takers insure DeFi users against smart contract vulnerabilities in return for earning insurance premiums.

Risk Rating
Watch Out
Protocol Code Quality
Protocol Maturity
Protocol Design
Summary
What we like
Offers a decentralized peer-to-peer insurance platform to hedge against smart contract vulnerabilities.
What we like less
Nexus Mutual requires membership via its NXM token to participate in its ecosystem of claims, arbitration, and all risk assessments. NXM can only be purchased through the Nexus platform.
What it means for you
Offers you a way to earn passive yield by taking on the risk of a particular smart contract being hacked.

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Information
Exploit/Hacks
None
Info
  • Website
  • Token: NXM
  • Tags: Insurance
Key Metrics
  • TVL: $231.7M (Rank #52)
  • TVL Ranking by Insurance: #1
  • Blockchain: Ethereum
  • Chain TVL
    • Ethereum: $231.69M
Risk Assessment
Watch Out
Protocol Code Quality
  • Code reviewed by several experienced auditors including Solidified and iosiro
  • Public team promotes accountability
  • No documented protocol hacks since launch
Protocol Maturity
  • Core protocol launched in 2019; maturity over one year minimizes technical risk as smart contracts are well battle-tested
  • Top 5% by total value locked reduces risk
  • Core contracts can be upgraded with just an EOA wallet
  • No timelock exists or no information documented, which mean a malicious actor could approve upgrades without any delay
  • Low voting power concentration reduces risk
Protocol Design
  • No death spiral concerns
  • This protocol is susceptible to risks related to insurance platforms where your principal is always at risk in case of a system deficit
Things to know about Nexus Mutual

How Nexus Mutual works

Nexus Mutual allows its members to buy Cover against a specific smart contract risk. Only existing members may purchase coverage. This requires users to hold NXM token, pay 0.002E and go through the standard KYC/AML processes. All members are reponsible for arbitrating governance proposals, claims and other risk assessments. The memers have to assess the risk level associated with each smart contract. In case of a hack, the members will vote to decide whether the claim is legitmate and thus requires a payout. Nexus Mutual members can also stake their NXM with certain DeFi investments based on how secure they think the smart contract is. The more NXM token staked on a particular smart contract, the cheaper it is for other members to buy coverage. NXM stakers (claims assessors) risk losing a portion of their stack if the smart contract is hacked in exchange for earning the insurance premiums. As such, claims assessors are incentivized to only stake on smart contracts that they deem to be secure. Members act as judges to determine the outcome of a claim, with each claim subject to a yes/no vote by claims assessors. Claims assessors earn rewards for voting with the consensus outcome. If anyone is determined to have voted fraudulently, their stake may be burned via a governance process.

How Nexus Mutual makes money

Nexus Mutual generates revenue from its capital pool which is funded by cover premiums paid by members seeking insurance coverage. When funds flow into the capital pool, 50% is kept in the pool and 50% is used to mint NXM tokens and distributed proportionally among claims assessors.

How you make money on Nexus Mutual

You can hedge against potential smart contract vulnerabilities by purchasing insurance for a specific pool you are invested in. This will lower your overall annualized yield but provides peace of mind against any hacks. NXM stakers in a specific smart contract can also earn a portion of cover premiums (paid in NXM).

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