Announcing Nexus Mutual Cover for FiRM Users
We are pleased to announce availability of Nexus Mutual cover for FiRM and sDOLA users. By purchasing cover, users are "insured" in the event of a smart contract or oracle exploit, as explained in their docs. This partnership is also significant other reasons which are explained later in this post.
Who is Nexus Mutual?
Nexus Mutual is a decentralized insurance alternative built on the Ethereum blockchain. It allows members to join and share risk, offering protection against various types of risks through its cover products. Members can also participate in the protocol governance and earn rewards by underwriting risk, assessing claims, and building risk management businesses. Nexus Mutual aims to provide a decentralized and community-driven alternative to traditional insurance models.
Who is OpenCover?
OpenCover is a blockchain insurance and cover data startup that works with underwriters like NexusMutual to help individuals and institutions protect themselves against onchain risks such as protocol exploits and governance attacks. It raised $4.6m in total funding and is also backed by Nexus Mutual. One benefit of OpenCover is the ability to buy cover without KYC.
How Does It Work
After purchasing cover, it's tokenized and represented as an NFT (ERC-721) that you hold in your wallet. This NFT allows you to renew your cover, file partial claims, and transfer the cover to another address if needed. If you need to edit your cover, such as extending the cover period, you can do so, and any remaining fee from your original purchase can be applied as a credit to the updated period.
When you buy cover, the cover fee is converted to NXM, which is the native token of Nexus Mutual. This NXM is then streamed to stakers within the staking pool(s) where the cover capacity was sourced. If you file a claim and it's approved, you can redeem your claim payment, and the remaining cover amount will still be active for the remaining cover period.
You can also access links to cover from within the FiRM user interface:
It's also worth noting that Nexus Mutual is a decentralized insurance alternative that uses blockchain technology to allow people from all over the world to share insurance risk together without the need for an insurance company.
How Do Claims Work?
Nexus Mutual has paid out against claims against some of DeFi's more notorious incidents including FTX, Rari, and others. Their claims process involves several steps. When a member who holds cover suffers a material loss, they can submit their claim and go through the Claims Assessment process. Members who have staked NXM can participate as claim assessors.
Here is a step-by-step breakdown of the claims process:
Claim submission: Members who held active cover when the loss event took place can submit a claim through the Nexus Mutual user interface. When a claim is submitted, the cover holder will provide details related to the loss incident, the loss amount, and the supporting proof of loss.
Claim assessment: Once a claim is submitted, members can stake NXM and participate as a claim assessor, who reviews the validity of a submitted claim. Claim assessors review submitted claims, discuss claims, and vote on whether or not to accept claims.
Voting and decision: A simple majority (50%+) is required to decide an assessment vote. The assessment will last for a minimum of three days, which starts from the time the first vote to approve is submitted. There is a 24-hour silent period, where no votes should be casted before an assessment vote closes. If a vote is submitted during the last 24 hours of the vote, the voting period is extended with an amount of time proportional to the voter's stake, with 24 hours representing the maximum time increase. This design feature prevents "rush attacks," where someone tries to overturn a claim outcome by submitting a vote at the last minute that moves the majority outcome with no time to appeal the vote.
Claim outcome: If the claim is approved, the claim deposit is refunded in the same transaction as the claim payout. If the claim is denied, the claim deposit will not be refunded.
Payout: Once the claim is approved, the claim payout is processed and the member who submitted the successful claim can redeem their payout after a cool-down period of one day.
Important: remember that Nexus Mutual is a discretionary mutual, which means that the cover products members purchase are not the same as traditional insurance policies. Members vote on claims, and the Mutual has paid out over $18 million in claims to date.
How Much Does It Cost?
At this writing, and for illustrative purposes, $5,000 in cover can be purchased for $5.13 per week. Currently there is $1.5 million in cover available to FiRM and sDOLA users.
Significance Of Cover In Our Risk and Safety Protocols
We believe Inverse today does perhaps more than any other DeFi lending protocol to ensure maximum safety and security for its users. The availability of cover from Nexus Mutual for both FiRM and sDOLA represents an important additional layer in the DAO's safety protocols, in addition to safety innovations like Personal Collateral Escrows, Pessimistic Price Oracles, and more.
