Insurance for Smart Contracts
Traditional insurance companies have the data & expertise to handle traditional risks. They are not suited for insuring against smart contract risks like hacks, theft, bugs, etc.
1. Background
Insurance is a trillion-dollar industry. Most of us have one or more of these types of insurance policies - Life, Health, Motor, Home, Fire, Travel, etc.
We pay a regular premium and if something bad happens, like a car accident, the insurance company pays us a claim. The insurance company is the middleman that manages the risks of its policyholders.
Traditional insurance companies have the data & expertise to handle traditional risks. They are not suited for insuring against smart contract risks like hacks, theft, bugs, etc.
That's where decentralized insurance protocols step in. They enable users to pool their funds together to insure against smart contract risks. Users vote on claims and payouts are automatically distributed through smart contracts.
The top 3 decentralized insurance protocols by TVL are:
Nexus Mutual: $226.6m
Unslashed: $29.85m
InsurAce: $12.09m
2. What is Nexus Mutual?
Nexus Mutual is a non-custodial decentralized insurance protocol built on Ethereum.
Anyone can become a member and purchase insurance coverage. Members get economic incentives for participating in risk assessment, claims assessment & governance.
Examples of the types of insurance covers:
1. Protocol Cover
This protects assets, deposited in a single protocol, against hacks, exploits, oracle price manipulation, economic design failure & governance attacks.
2. ETH Staking Cover
This protects validators against penalties & missed rewards.
3. Yield Token Cover
This protects you if a yield-bearing token de-pegs in value by over 10% of its face value for any reason e.g. exploits, oracle failures, economic design failures, governance attacks, etc.
4. Custody Cover
This protects you in the event that a custodian is hacked or withdrawals are halted for over 90 days.
3. NXM Tokens
NXM token-holders own and govern the protocol. They take all the insurance premiums paid by policyholders.
Core metrics of NXM:
Price metrics
Price: $53
ATH: $187.16 (Nov 16, 2021)
ATL: $6.84 (Jul 23, 2020)
MCap & Volume metrics
Market Cap: $351 million
24h Volume: $89 thousand
Market Dominance: NA
Ratios
P/F ratio: 17.20x
P/S ratio: 17.20x
Volume / MCap: 0.0003
Supply metrics
Circulating Supply: 6.6 million NXM
Total Supply: 6.8 million NXM
Maximum Supply: Unlimited
Terms used
All-time-high (ATH) is the highest price a crypto asset has ever reached.
All-time-low (ATL) is the lowest price a crypto asset has ever reached.
Cycle Low is the lowest trading price of the crypto since its ATH.
Percentage down from ATH measures how far down the crypto is currently trading from its ATH.
Market cap = Current Price x Circulating Supply
24h Volume is the fiat value of this crypto traded over the last 24 hours.
Market Dominance measures a crypto's total market capitalization relative to the total market cap of all cryptos.
P/F ratio (Price to Fees) ratio (P/F ratio) is the market capitalization (fully diluted or circulating) divided by annualized fees.
P/S ratio (Price-to-Sales) is the fully diluted market cap divided by annualized total revenue.
Volume / Mcap ratio = 24h Volume / Marketcap
Circulating Supply is the number of coins / tokens in public hands.
Total Supply is the number of coins/tokens created minus the number burned.
Maximum Supply is the maximum amount of this crypto that can ever exist.
Note: Figures are as on 16 Feb 2023 and have been rounded off for convenience.
Sources: Messari, DefiLlama, Tokenterminal, Coinmarketcap