Nexus Mutual is a decentralized insurance alternative that protects its members against digital risks like software bugs and hacks. In 2020, Nexus integrated Chainlink Price Feeds to ensure its multi-currency capital pool reflects the most accurate, up-to-date market prices. Recently, Nexus expanded its Chainlink integration by using Proof of Reserve (PoR) to transparently and reliably monitor its investments in protocols where liquid secondary markets are not available.
Nexus’ member-driven community owns and invests its capital pool, which the mutual uses to underwrite coverage. The mutual will first deploy PoR to track, verify, and report the price per share of interest-bearing tokens, held in its Enzyme vault, which represent its deposit in the Maple Finance lending protocol.
“Without Chainlink Proof of Reserve, the mutual’s investment in Maven 11’s wETH pool on Maple Finance wouldn’t have been possible,” Nexus Mutual’s founder Hugh Karp told Chainlink Today.
Investment allocations play a fundamental role in traditional insurance. Leveraging various investment opportunities allows Nexus to create a decentralized insurance alternative aimed at overcoming the pitfalls of traditional insurance while generating long-term growth through capital investments. To date, the mutual has paid out $8M in claims.
“Nexus Mutual is able to build tailored solutions that expand access to cover and provide more comprehensive protection that is designed with members in mind,” said Karp. “Our community-driven approach – where anyone can join and share risk with others – materially reduces conflicts of interest. As the protocol scales, we’re able to reduce operational costs by 50% through greater automation at the smart contract level.”
Karp, whose founder’s journey is featured in the premier episode of Chainlink’s new Block Stories docuseries, conceived the idea of taking insurance “back to its roots” with blockchain technology after a decade spent working as an actuary for traditional “shareholder-driven” life insurance companies.
Karp said cryptography enables automated processes that are more efficient, fraud-resistant, and auditable.
“The insurance industry can significantly reduce operating costs by using blockchain technology to automate processes, as well as improve confidence in their offerings by providing greater transparency to customers,” he explained. “Nexus Mutual is fully transparent, which means anyone can verify our claim history, past payouts, the funds held in the capital pool used for underwriting cover, and more.”
Karp said decentralized infrastructure, like Chainlink PoR, that enables systems based on cryptographic truth allows Nexus Mutual to expand access to coverage in crypto-native and real-world markets.
“Cryptographic truth plays a major role within the mutual as we continue to expand our product offerings, move more functions directly on-chain, and further decentralize,” he said.