A Quick Overview of the Nexus On-Chain Risk Market
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A Quick Overview of the Nexus On-Chain Risk Market
Although cryptocurrency insurance is not very popular yet, I believe more and more people will come to realize the importance of insurance.
Navigating Web3 tides with focused insightsWritten by: The DeFi Investor
Translated by: TechFlow intern
Nexus, the largest insurance protocol, has announced the launch of an on-chain risk market. Here we explore why the Nexus Risk Market is a crucial step in their strategic plan.
The on-chain risk market is part of the Nexus V2 upgrade. After launch, each insurance policy will be represented by an NFT. As a result, policyholders can transfer policies between wallets and even edit coverage amounts.
The risk market will allow the creation of micro cover pools—small insurance groups that can set prices for specific risks and choose these risks individually. So how exactly does it work?
Suppose you are a liquidity provider on Uniswap and are concerned about potential exploits. You go to Nexus and see two micro cover pools:
Pool 1 asks for 1.5% per year for Uniswap smart contract risk coverage;
Pool 2 asks for 1.75% per year.
As a Uniswap LP, you might choose the cheaper option from Pool 1. This not only drives down insurance prices but also increases the availability of coverage across different protocols.
Cover pools will be managed exclusively by insurance experts. Nexus users can delegate funds to a cover pool and earn a share of the premiums paid. So if you believe a certain pool manages risk well, you can stake your capital and receive a portion of its premium income.
But as a DeFi investor or yield staker, how can you benefit from this?
Lower premiums (due to competition among multiple pools);
Broader coverage across more protocols;
Investors can earn a share of micro cover pool revenues;
Nexus Mutual was founded back in 2017, and since then, it has performed surprisingly well. While crypto insurance isn't yet mainstream, I believe more people will come to recognize its importance—especially within the DeFi community.
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The DeFi Investor
