Ethereum Insurance

What is NXM token used for?

A simply explanation of how Nexus mutual and the NXM token works. Nexus Mutual is a decentralized insurance platform on Ethereum.

What is NXM token?

NXM is both the governance token and the utility token for Nexus Mutual.

NXM token is used for?

  • Staking for claims assessment
  • Staking for risk assessment
  • Governance
  • Purchasing insurance

Why would value accrue to NXM?

Fees to tokenholders

  • Fees from purchase of insurance
  • Fees from voting according to the majority in the case of a claim.
  • NXM are withdrawn to ETH at 2.5% below the current price.

Locking of tokens

  • Tokens cannot be converted to ETH below a certain price on the bonding curve.
  • Risk and claims assessment both requires staking.

Potential future value generation

  • Insurance has product-market-fit in DeFi.
  • Known brand

Potential cons

  • KYC

What is Nexus Mutual?

Nexus Mutual is an insurance mutual, currently used to mitigate smart contract risk.

Legal framework

  • The mutual is incorporated in the UK and every participant needs to pay £1 to become a member, and link their ETH address to their identity.
  • This means members can trade with each other under one legal personality without adhering to insurance laws and such.

NXM Risk Assessment

NXM holders can stake tokens against a single contract.

  • During staking they are rewarded with NXM for insurance bought against that contract.
  • If there’s an early validated claim against that contract they lose their stake or part of their stake.

NXM Claims

To assess claims token holders can stake their tokens to vote on claims.

  • If they vote with the majority they get rewarded part of insurance fee.
  • If they vote against the consensus their stake is locked for a longer period.

Buying and selling

NXM is bought and sold via a bonding curve.

  • A bonding curve token is basically a derivative of another token in a reserve pool.
  • When tokens are locked in reserve the price of the derivative token goes up along a curve.
  • When tokens are removed the price goes down along the same curve.

The slope of the curve is set beforehand and gives the token different properties.

  • A 100% reserve gives a 1:1 peg.
  • A 1% reserve means price will increase and decrease extensively as more bonding curve tokens are minted.

An extensive article on bonding curves can be found here.

More info on bonding curves in the Bancor whitepaper.

Minimum Capital Requirement

Nexus Mutual sets a Minimum Capital Requirement to ensure that claims always can be paid.

  • The MCR is a value along the bonding curve.
  • When reserve funds are low the price goes down.
  • When reserve funds are high the price goes up.

NXM cannot be converted to ETH below the MCR value. To ensure claims can be funded.

NXM is withdrawn to ETH at 2.5% below the current price.

Bonding curve

  • Ensures claims can be funded.
  • Ensures platform growth equals price growth.

Total Supply

Total supply: 6,631,492

Similar projects

  • Cover
  • Nsure
  • Opyn
  • Bridge
  • Union

NXM Price

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