Nexus Mutual – the DeFi discretionary mutual known for its alternative insurance products – released details for the wider vision of the mutual and how it can scale into a “super-efficient Lloyds of London” in less than 12 months.
TLDR 👇 pic.twitter.com/CBp1WYoBM9
— Hugh Karp 🐢 (@HughKarp) May 27, 2020
In the long-term, the mutual’s goal is to provide hardened infrastructure for underwriting and coordinating capital for any type of risk. Yes, literally any type of risk. The core idea is that any member will be allowed to bring any new risk to the mutual, simply add it (like adding a token pair to Uniswap), and be able to take out covers based on the amount staked on the cover.
Potential covers range from earthquake and hurricane insurance, to crop insurance, to even more abstract things like a performer’s voice. For Nexus Mutual, this is nearly identical to a broker bringing all pertinent documentation on a specific risk to Lloyd’s of London and an underwriter can offer a price depending on the perceived risks.
So while Nexus Mutual only provides discretionary covers on smart contract deposits, the mutual’s design will allow it to scale to cover any risks. According to Nexus Mutual Founder, Hugh Karp, the mutual will be able to scale into this “super-efficient Lloyds of London” in less than 12 months. In case you missed it, we had an interview with Hugh about the future of Nexus here.
While this seems like a tall task, there are only a few things that need to be done. The biggest piece to the puzzle is to establish a few layers for cover wording or terms that can apply to any generalized risks. As highlighted in the official forum post, the three levels of cover wording terms include:
- Global Terms: “Boilerplate” terms that apply to all risks the mutual offers. Global Terms should be set by governance and only be changed on rare occasions.
- Product Terms: Specific cover wording document for each product like smart contract covers or crop insurance, that anyone can design and bring to the mutual
- Risk Specific Terms: Specific risks within a product line that may require clarifications or adjustments. The example given is with Curve Pools which are released regularly as users would be required to know which pools are covered and which aren’t.
By establishing a robust set of terms for Nexus Mutual, anyone will be able to bring a new form of risk to the mutual and receive coverage on it – assuming members are willing to stake NXM. With this design, the discretionary mutual will be able to scale into much broader areas beyond smart contracts.
Outside of setting the multi-layered term agreements, Nexus Mutual also has a few other features necessary to make this envisionment happen. This includes:
- Pooled Staking – An update to the Mutual’s staking dynamics to streamline rewards and participation for all members. The pooled staking upgrade is set to be released soon.
- Simplified Pricing – A pricing model that only works with one input, the amount of NXM staked. Update to be released soon.
- Partial Claims – Allow the mutual to execute on partial payouts on covers. By doing so, the Mutual can drastically expand on the design space for new products. Research for partial claims is ongoing.
- Cover Wording Architecture: As outline above, the wording architecture will allow Nexus Mutual to expand its product offering where details are stored on-chain and all terms are clear for the users. This is just entering the early stages of development.
In closing, with Nexus Mutual succeeding at its first claims payout as well as actively covering over $3M in smart contract deposits within its first year of launch, the discretionary mutual is on a path to scale its underlying protocol. The coming year for Nexus Mutual should be rather exciting as the Mutual scales its product offering, hopefully bringing a new range of users to the DeFi ecosystem.
Analyst at Bankless – one of the leading resources for open finance. Lucas is an active contributor to the DeFi ecosystem with appearances in other notable DeFi outlets including The Defiant and Our Network. He has years of experience working with dozens blockchain and token startups where he focused on token economics, marketing, and growth.