- Nexus Mutual’s first product, “Smart Contract Covers,” helps members of the mutual protect themselves from smart contract vulnerabilities.
- The platform’s native token, NXM, can only be purchased on Nexus Mutual and token holders are also technically members.
- So far, the crypto-based insurance experiment has worked as advertised, as well as made a few NXM holders quite rich.
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Nexus Mutual offers DeFi investors “cover” or “protection” for specific activities within the crypto ecosystem. It’s essentially insurance, but for legal reasons, the team isn’t allowed to call it that. It also differs in many ways from how we think of traditional insurance.
Though large insurance firms serve a critical need, they, like many banks, are incentivized to maximize profits. Sometimes this objective can come at the cost of a client’s needs. With the help of blockchain technology and smart contract development, we may be able to change that for good.
Consider the history of risk protection and its various definitions. In pre-modern times, whether it be a group of hunters in Mesopotamia or merchants in 15th century Europe, it was quickly determined that catastrophe could be mitigated if risk was spread around as many parties as possible. Instead of a single ship carrying a nation’s goods, for example, supplies would be split between various ships. Thus if one sank or were robbed, the losses would be minimal.
As the world has grown and technology has allowed civilization to scale, it became more and more challenging to scale how risk was typically mitigated. We placed our trust in larger and larger entities to ensure our safety. Soon, new mechanisms and products like risk assessment and life insurance emerged.
Eventually, speculation on various insurance products also became popular, for better or worse.
Ultimately, insurance, in all its forms, is critical to our daily life. But as it stands, it can be improved to better…