Nexus Mutual

The business functions as a digital cooperative or discretionary mutual, where members collectively own and govern the platform. To participate—whether buying cover, assessing risk, or voting on claims—users must become members by completing a KYC process and paying a fee. This structure aims to align incentives and reduce the conflicts of interest present in traditional insurance models, where a company's profit motive can clash with policyholders' interests. Revenue is generated from the sale of cover products, with a portion of the fees contributing to the mutual's capital pool and another portion rewarding members who stake capital to underwrite risks. This capital pool, composed of assets like ETH and ERC-20 tokens, is collectively owned by all members and is used to pay out approved claims.

Nexus Mutual provides protection against various risks within the decentralized finance (DeFi) and broader crypto ecosystem. Its core offerings include Protocol Cover, which protects against smart contract exploits, oracle failures, and economic attacks; Custody Cover, for losses from centralized exchange hacks or withdrawal halts; and Yield Token Cover, which insures against the de-pegging of yield-bearing tokens. The process is member-driven from end to end. Risk Assessors, who are members with expertise, stake the native NXM token against protocols they deem secure, which in turn determines the pricing and capacity for coverage. When a claim is filed, it is not decided by a centralized department but is voted on by all members who have staked NXM to participate in claims assessment. This transparent, on-chain process has resulted in over $18 million in claims paid out since inception for events like the FTX withdrawal halt and various DeFi protocol hacks.