Nexus mutual have launched with their first product, smart contract cover, this week. Members of the digital cooperative will be able to buy protection against smart contract failure including the key DeFi smart contracts. This is the first of its kind and Nexus says the cover will protect users from losing their funds due to bugs while also allowing developers to deploy contracts with greater confidence.
Nexus Mutual says it is building a decentralised alternative to insurance. Nexus will use blockchain technology to build a mutual (a risk sharing pool) to “return the power of insurance to the people”. The platform will be built on the Ethereum public chain. It will allow anyone to become a member and buy cover. It replaces the idea of a traditional insurance company, because it is wholly owned by the members. The model encourages engagement as members will get economic incentives for participating in Risk Assessment, Claims Assessment and Governance.
One of the challenges Ethereum faces is the ability to trust smart contracts. Since mid-2016 there have been three high profile ‘hacks’ of Ethereum smart contracts as well as many smaller ones. These all involved large volumes of funds being lost against the intention of the code. Blockchain gives us confidence that smart contracts will operate as coded but regular users can’t always be confident they will operate as intended. Nexus Mutual believes that the Ethereum community will benefit from another safety net.
Nexus Mutual says it has developed Smart Contract Cover, a product that is designed to pay-out claims if there is ‘unintended code usage that results in a material financial loss’, to address this need. Members will join Nexus Mutual and once they collectively contribute approximately USD 3m worth of Ether, members can purchase smart contract cover. Tokens will be generated when a member contributes either funds or expertise to the mutual. The initial board members will provide qualified technical guidance to the members of the mutual as well as enact emergency functions should they be required. The members can decide to replace the board if they see fit.
Nexus Mutual is operating as a ‘Digital Cooperative’ which means they have linked the smart contract code to their own legal entity in the UK, fully complying with all regulations.
Hugh Karp, CEO and Founder said, “Ultimately, our goal is to launch a mutual risk sharing entity run entirely on the public chain that allows the Ethereum community to share a critical risk with each other. Long term we hope to expand to more towards standard products, like earthquake cover, where traditional insurance providers are often unable to access underserved markets.”
ICMIF CEO Shaun Tarbuck said, “We are delighted that Hugh Karp has chosen the mutual model to set up this ground-breaking, new insurer which is focused on making crypto currency safer for investors. Mutuality is a natural business model for new groups looking to share risks in the new digital eco-system”.