As we approach the holiday season, the Nexus Mutual Foundation and DAO teams are excited to highlight the protocol’s new token model. We’ve also included an update on NMPIP-212, which members voted to approve in the last week. With NMPIP-212, Hugh proposed entering an agreement with Cover Re, which will diversify the Mutual’s underwriting portfolio.
Join us as we recap the latest developments before we enter the holiday season 👇🌲
The Ratcheting Automated Market Maker (RAMM) has replaced the Bonding Curve mechanism
As some readers might have already seen on the Nexus Mutual Blog, the Mutual’s token model has been upgraded. The Nexus Mutual community led the effort to start this project in 2022. Through collaboration with the DAO and Foundation teams, the community worked to finalise the launch parameters in August and September 2023. In November, members voted to approve the tokenomics upgrade and the initial parameters.
Nexus Mutual Protocol Improvement Proposal (NMPIP) 209: Launch Tokenomics Upgrade
Members voted to approve NMPIP-209 with more than 1.18m NXM and granted the Advisory Board the authorisation to replace the Bonding Curve with the Ratcheting Automated Market Maker (RAMM) and to remove the Minimum Capital Requirement (MCR) Floor, which allowed the MCR calculation to be fully driven by the Mutual’s Total Active Cover Amount.
The RAMM allows members to redeem and mint NXM. Designed by the Nexus Mutual DAO R&D and Foundation Engineering teams, this system was developed in collaboration with the Nexus Mutual community.
The new token model ultimately aims to allow members who wish to exit the Mutual to redeem their NXM, while refocusing the members’ efforts on expansion through cover offerings, new capital provisions, and shared risk management.
For more information, please visit the Nexus Mutual documentation, review the whitepaper, check out the governance forum or the Ratcheting AMM dashboard (maintained by the Nexus Mutual DAO) as well as Rchen’s NXM dashboard on Dune.
Nexus Mutual 🤝 TradFi Insurance: Members vote to approve the investment and retrocession agreement with Cover Re
Unity Cover—the manager of Staking Pool 5, which is run by some of the Nexus Mutual core team members—proposed an investment and retrocession agreement with Cover Re with NMPIP-212.
Members voted to approve this NMPIP with 1.2m NXM cast in favour of the investment and retrocession agreement.
NMPIP-212 asked Mutual members to empower the Advisory Board to:
Negotiate and finalize investment agreements with Cover Re.
Borrow ~$12m of stables (with a cap of $14m) leaving at least $1m of stablecoins in the Capital Pool. Allocate $15m for the deal ($12m for the investment and $3m for collateral).
Set up and manage a trust account and transfer funds appropriately.
Approve USDC and a new Funds Withheld Token for Mutual transactions.
Finalise terms with Cover Re on investment, collateral, and funds withheld.
The deal involves:
An investment into Cover Re SP1: A $12 million commitment with expected returns of 18%-22%, locked for a minimum of one year.
A retrocession deal: Shifting 15% of Cover Re's risk to Nexus Mutual for the 2024 underwriting year, with a gross premium cap of $15 million.
As part of this proposal, the Engineering team will work to create a token that represents the off-chain investment and an oracle that fetches that value of the investment assets, including their performance; a token that represents the funds held off-chain as collateral and an oracle to track their value; and a funds withheld payment token that Re can use to pay cover costs and receive subsequent claim payments until the resulting profit on the deal can flow into the Capital Pool (funds withheld).
This strategic agreement will expand Nexus Mutual's market presence and demonstrate that the Mutual’s on-chain capital can interact with traditional insurance companies. This deal can serve as a blueprint for future deals.
For more information about NMPIP 212, you may review Hugh’s presentation from the Community Call on 5 December.
Resources
You can find the October updates from the Nexus Mutual community below:
Nexus Mutual is fully transparent. You can verify the information within this newsletter and learn more about the mutual through the resources below:
Happy Holidays!
Please be aware that both the Nexus Mutual DAO and Foundation teams will be taking a holiday break in the coming weeks. The DAO and Foundation teams will be less responsive during the holidays, but we will monitor Discord and the governance forum periodically.
From the Nexus Mutual DAO and Foundation teams, we wish all our members a happy holiday season and a prosperous New Year! Stay safe, and we look forward to reconnecting in 2024.