A kind of liquidity mining for insurance – Nexus Mutual is a decentralized insurance that allows DeFi users to protect themselves against smart contract bugs . It has just unveiled “ S hield Mining” , a sort of liquidity mining applied to insurance.
Le staking de NXM sur Nexus Mutual
Before getting to the heart of the matter, let’s briefly go back to Nexus Mutual’s insurance system . This brings together two players: insurers and policyholders.
So far, Nexus works like this: Insurers generate NXM tokens by collateralising ETH. Subsequently, these NXMs are staked on the contract deemed secure, which he wishes to ensure. In exchange, insurers receive a reward from fees paid by policyholders .
For example, Nexus Mutual has a contract dedicated to the protection of Compound. NXMs can be staked there and will be used as compensation in the event of a problem with Compound.
Set up a Shield Mining
However, Nexus Mutual wishes to develop its system with the implementation of Shield Mining . This system was announced on September 29 via a post on the official blog.
Thus, Shield Mining will allow insurers to receive an additional reward in the token of the protocol they insure. Obviously, this will only be available on contracts that have signed an agreement with the Nexus Mutual protocol.
For its launch, Shield Mining was deployed on the Keep Protocol contract, the protocol behind tBTC , a tokenized version of Bitcoin on Ethereum.
In effect, insurers who have provided insurance coverage for tBTC will be rewarded with KEEP tokens on a weekly basis. In total, the KEEP protocol has released 750,000 tokens to encourage insurers to ensure its smart contract .
“From today, Nexus Mutual (insurers) staker will be rewarded not only with the usual rewards in NXM, but also with 2 additional KEEP for each NXM put into play. Rewards are distributed weekly in KEEP and will continue to be distributed until 750,000 KEEP tokens have been distributed. – The announcement.
The insurers‘ response was almost instantaneous. Following the announcement, funds to cover the KEEP protocol poured in, bringing the total coverage capacity to $ 10 million .
Coverage capacity of the tBTC contract on Nexus Mutual – Source: Nexus Mutual.
Thanks to this mechanism, protocols now have a way to encourage insurers to evaluate and cover their smart contract . Hopefully, however, insurers will be able to fully assess the risks of each smart contract and not just be drawn to the lure of gain.