Welcome to The Hedge!
In this edition, we are thrilled to share groundbreaking news and highlights from the past week. We have successfully expanded into the realm of real-world risk. Additionally, we are launching an awareness and education campaign for all our members to learn more about how the new tokenomics system works ahead of the parameter setting talks, so everyone can participate in those upcoming forum discussions. We will also talk about recent hacks and review the protections offered by Nexus Mutual's Protocol Cover.
Let's dive in.
Nexus Mutual underwriting real-world risk for The Retail Mutual
We are excited to announce an industry first — The Retail Mutual, a UK-based discretionary mutual comprising of over 5,000 independent business owners, has purchased Excess Cover and passed more than $2.3m of risk onto Nexus Mutual. This is the first time on-chain capital has been used to cover excess losses for a discretionary mutual operating within traditional markets. The Retail Mutual’s Excess Cover provides protection against excess losses for fire, theft, and accidental damage.
Next week, we’ll share more details and highlight the potential to expand into new markets with the infrastructure that’s available with the Nexus Mutual V2 protocol. After all, the first real world cover product has launched just four (4) months after V2 launched!
Nexus Mutual Protocol Cover: comprehensive protection against DeFi risks
Immunefi reports that losses from DeFi hacks have exceeded $220m in Q2 2023. Just last week, Conic Finance was hacked due to a reentrancy vulnerability, which an attacker exploited and stole $3.2m worth of assets from Conic’s liquidity pools. The attacker was able to use the reentrancy vulnerability—flawed code that allows an attack to repeatedly withdrawal funds within one transaction—to manipulate the pricing information Conic’s oracle relied on.
By taking advantage of this flawed code, the attacker was able to withdraw 1700 ETH from Conic’s smart contracts.
Reentrancy vulnerabilities have been common attack vectors for many years. More than 50 hacks have resulted from reentrancy vulnerabilities since 2016. Over $16m has been lost due to reentrancy attacks within DeFi since January 2023. Nexus Mutual’s Protocol Cover protected members against reentrancy attacks for the following loss events:
When you deposit into a DeFi protocol, you are exposed to potential smart contract flaws that can be exploited by would-be blackhat hackers. When you use a DeFi protocol, are you confident your funds are safe from potential price manipulation, reentrancy attacks, or other attacks?
For those who want peace of mind, there’s Protocol Cover offered by Nexus Mutual. Users can purchase coverage for the listed protocols. With Protocol Cover, users' funds are protected against:
Smart contract code bugs or errors resulting in the unintended use of the protocol (i.e., hacks/exploits)
Sudden and severe economic events, such as **oracle manipulation, severe liquidation failure, and governance attacks
For more details, you can find the full Protocol Cover wording here. You can browse the most recent list of covered protocols and purchase cover through the Nexus Mutual user interface.
Tokenomics Pre-Discussion Phase ▶️ Call for questions
Ahead of the tokenomics parameter discussions, the R&D and Community teams have outlined the timeline for the upcoming forum discussions. They have also provided an educational guide for the Ratcheting AMM—the new mechanism that is proposed to replace the bonding curve. This Pre-Discussion & Education Phase will be held over the next three (3) weeks.
The R&D and Community teams want to ensure that all members understand the fundamental workings of the newly proposed system before starting parameter discussions. To achieve this, we have implemented two measures:
On the Nexus Mutual governance forum, BraveNewDeFi has provided a comprehensive overview of how the system parameters affect the mechanism's operation, along with an illustration of how liquidity is managed and how NXM is priced based on the system. You can find it here: ⏩ Pre-Discussion Phase: RAMM Education Guide, Call for Questions.
Members can directly reply with any questions they may have on the forum post.
Between July 24 and August 14, Rei and BraveNewDeFi will be available during Office Hours, held in the Community Calls channel on the Nexus Mutual Discord every Tuesday and Thursday from 3:00 pm UTC to 3:30 pm UTC.
Members are encouraged to join and ask any questions they have!
The aim is to foster understanding and engagement from all members for the upcoming parameter discussions as the Engineering team continues to work on the implementation process in parallel.
You can stay up to date on the high-level progress on the new tokenomics project by:
📚 Reading the New Tokenomics Project entry in the docs
📰 Weekly tokenomics updates on the forum
Capital Pool funds invested in rETH and Kiln per recent NMPIPs
You can access the latest updates by watching the video recording of BraveNewDeFi from the most recent Community Call held on 25 July.
📃⛓️ NMPIP #197: Allocate 14,400 ETH to Rocket Pool Protocol rETH
The rETH investment has been executed. The CowSwap integration was used to directly mint the majority of the rETH. This investment has been featured on The Block on July 21, 2023.
📃⛓️ NMPIP #196: Restart Enzyme vault & start staking through Kiln (6,624 WETH)
The Avantgarde team has completed the reconfiguration for the Nexus Mutual Enzyme vault, and they’ve deployed the 6,624 WETH into Kiln. The staking queue within Kiln is currently 33 days—the Nexus Mutual deposit will start earning staking rewards on 29 August.
To review the mutual’s Kiln staking position, see the Nexus Mutual Enzyme vault dashboard.
An update from the Nexus Foundation Team
From the Community Call on 25 July in the Nexus Mutual Discord, Community Calls Voice Channel
Hugh first provided an update on the progress of the Tokenomics project. The Foundation Engineering team is currently working on the initial Solidity runs of the implementation. So far, there haven't been any major issues, but during the next phases, the DAO R&D team will focus on thorough testing of the model with simulations.
Apart from their work on new tokenomics, part of the Engineering team worked on setting up the technical infrastructure for members' Rocket Pool investment from the Capital Pool.
The Foundation Business Development team is actively engaged in handling numerous inbound deals for slashing cover. Hugh is optimistic about ETH staking's potential to attract more interest from institutional investors in the long term.
The Retail Mutual (TRM) excess cover is a significant development for Nexus Mutual and more announcements about it will be released soon. As the mutual further expands to cover real-world risks, it moves closer to achieving its mission of providing risk infrastructure for a wider range of scenarios compared to traditional finance.
If you couldn’t join us on this week’s community call, you can listen to the recording on the Nexus Mutual YouTube channel.
The Latest in Nexus Mutual Governance
Below are the summarized next steps of the community discussions on the Nexus Mutual Governance Forum:
Tokenomics
Rei shared the most recent update on new tokenomics progress in his 24 July update on the forum. As shared above, please find the Pre-Discussion Phase: RAMM Education Guide, Call for Questions post from BraveNewDeFi on the forum.
Weekly Analysis
Find this week’s analysis here.
Note: As we shared in the last issue of The Hedge, we’ve moved our weekly reports on Cover Sold, Active Cover by Type, and Active Cover by Staking Pool to the Nexus Mutual governance forum in the Updates category and the Weekly Analysis subcategory.
Up Next
Don’t forget to follow the Nexus Mutual Twitter account and Nexus Mutual Lens account for regular updates and announcements from the mutual.
Join us for our next community call on Tuesday (8 August) in the Nexus Mutual Discord! We’ll share the latest updates and provide an open forum for members.
Have a great week!
Resources
Nexus Mutual is fully transparent. You can verify the information within this newsletter and learn more about the mutual through the resources below.
Nexus Mutual’s community is most active on Discord. You may reach our team with any questions through LinkedIn and Discord.