Nexus Mutual boosts its decentralized ‘Insurance’ to Centralized Exchanges
By MYBRANDBOOK
Nexus Mutual is extending its community-based offering to cover users of well-established cryptocurrency exchanges such as Coinbase, Binance, Kraken and Gemini.
However, centralized exchanges also get hacked on a semi-regular basis, and traditional insurance cover within the crypto industry remains thin on the ground and prohibitively expensive. Indeed, for many large exchanges, the balance sheet is basically the insurance fund, as Kraken CEO Jesse Powell has noted.
Nexus takes a different approach, offering cover to users themselves, rather than relying on an insurance policy held by the exchange – or not, as the case may be.
Nexus Mutual takes a completely decentralized approach to what it calls “discretionary cover.” The firm employs the U.K.’s legal framework of a discretionary mutual, where members have no contractual obligations to pay claims. It applies this to a pool of digital NXM token holders, which uses the Ethereum public blockchain to track proportional ownership of the fund and a governance system to approve or decline payment of claims.
Karp explained that the centralized exchange cover from Nexus will pay a claim if an exchange gets hacked and the user loses more than 10% of their funds, or if withdrawals are halted for more than 90 days.
Nexus members can perform various roles, including being a customer by purchasing cover, assessing claims by voting or assessing risks by staking NXM tokens against specific risks.
Nexus emerged sometime after the infamous DAO hack which rocked the Ethereum community back in mid-2016. The need for additional cover in the nascent DeFi space was underlined with an ironic twist last month, when Nexus founder Karp’s personal account was compromised in a targeted attack resulting in the loss of some $8 million in tokens.
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