Pooled staking is here! 🐢
Our new system was built to encourage more staking, give better rewards to stakers, decrease the knowledge barrier and just make it a bit easier for our members to get involved.
— Nexus Mutual 🐢 (@NexusMutual) July 2, 2020
For those unfamiliar with Nexus Mutual, the project allows users to purchase smart contract covers to protect against unforeseen vulnerabilities in popular protocols like Compound, Aave, and Uniswap. Users can purchase a cover for a fixed amount of ETH or DAI over a predefined cover period in exchange for a premium denominated in ETH or the Nexus’s native token NXM. To brush up on Nexus Mutual, check out our interview with their CEO – Hugh Karp – here.
To date, nearly $10M worth of covers has been purchased, with Nexus currently holding roughly 18,000 ETH (or just over $4M) in its capital pool. However, it’s old model of risk assessment limited the number of NXM holders who staked their tokens as a vote of confidence against various smart contracts.
As the first stepping stone into Nexus Mutual’s transition to the super-efficient Lloyds of London, the project is now offering a new staking system to better incentivize mutual members to participate in risk assessment.
Pooled Staking is @NexusMutual biggest upgrade since we launched one year ago.
Easier to understand, higher rewards.
Help us protect Defi! pic.twitter.com/EXYRnNGRov
— Hugh Karp 🐢 (@HughKarp) July 2, 2020
Introducing Pooled Staking
With the advent of pooled staking, mutual members can stake their NXM with up to 10x leverage on across various contracts of their choosing. NXM can be staked across multiple contracts at once and rewards (earned from others purchasing covers) are shared among all stakers of that contract. For each contract, the max stake is the same amount as the initial deposit.
This model differs from the old form of staking where rewards would sit in a queue, with only 20% of the cover amount being given to risk assessors.
Now, 50% of rewards are earned by stakers of a given contract. The minimum staking amount has been adjusted to 20NXM (currently ~$80 at the time of writing) with a 90-day cooldown. Nexus estimates that pooled staked is set to yield a 10% APY at the time of writing.
While this all sounds great, stakers should note that should a claim be successfully made against a contract which you have staked against, your stake will be burned.
This change also introduces a new interface via the Pooled Staking tab which makes it easy for mutual members to visualize which contracts have received the most support.
Less than 24 hours after launch, the top staked contracts Balancer, Ampleforth Geyser and UniswapV2. We expect prominent DeFi projects like Compound, dYdX, and Set Protocol to quickly catch up relative to the amount of covers being purchased.
DeFi Risk Evolves
As yield farming continues to be all the rage, Nexus Mutual is becoming as important as ever. In fact, the week before pooled staking, Nexus was actually maxed out on cover on newly demanded protocols like Balancer as there simply weren’t enough stakers to meet users demand.
We're currently out of capacity on Compound and Balancer.
So Nexus has enough funds to pay all potential claims.
When ETH is contributed to Nexus for NXM tokens, capacity increases on all protocols.
— Nexus Mutual 🐢 (@NexusMutual) June 22, 2020
Now, with the advent of pooled staked, we expect the cover capacity to increase drastically, allowing more users to purchase the covers they want and in turn rewarded Risk Assessors. In tandem, we expect NXM to be on the radar of more traders as it solidifies itself as one of the more underrated DeFi tokens on the market.
— Nexus Mutual 🐢 (@NexusMutual) July 2, 2020
If one thing is for sure, the bigger DeFi becomes, the larger the honey pot is for black hat attackers. With the mutuals first ever claims being paid out earlier this year in the wake of the bZx flash loan attacks, it’s difficult to foresee exploits until the second they happen.
With this in mind, any yield farmer should become very familiar with Nexus covers, as they may very well become a line of last defense in the event of a DeFi black swan.
Regardless, the advent of pooled staking comes as a very exciting time for mutual members eager to put their NXM to work.
Cooper is the Editor of DeFi Rate and an active contributor to leading DeFi media outlets like The Defiant, DeFi Pulse, and Bankless. He works with early-stage teams through Fire Eyes DAO to incubate governance models and grassroots community development. He is an ambassador to Set Protocol and an author of a weekly publication called Token Tuesdays. To stay up with Cooper, follow him on Twitter.