Nexus Mutual has paid US $5 million due to the bankruptcy of FTX and BlockFi
It is reported that DeFi insurance provider Nexus Mutual has paid about US $5 million in claims due to the bankruptcy of FTX and BlockFi, and is expected to pay another US $2 million. Nexus Mutual is a member-based service, accounting for about 70% of the locked funds of the encryption native insurance agreement.
Interpretation of this information:
The recent news of Nexus Mutual, an insurance provider for DeFi, paying out claims worth US $5 million due to the bankruptcy of FTX and BlockFi has caught the attention of many in the cryptocurrency world. This payout is a reflection of the risks involved in DeFi investments, which are highly volatile, much like traditional stock market investments.
Nexus Mutual is a platform for underwriting smart contracts on Ethereum blockchain. It aims to offer decentralized insurance for smart contract bugs, hacks and downtime. It is a member-driven service, which means that members participate in the governance of the platform, and the platform’s risk assessment and decision-making processes. This self-governance enables members to access cost-effective insurance coverage for DeFi investments.
As reported, Nexus Mutual accounted for about 70% of locked funds in the native insurance agreement of the crypto market in 2021. This is because the platform offers cheaper insurance coverage as compared to traditional insurance providers. Also, as a decentralized finance platform, Nexus Mutual is not subject to the financial regulations that conventional insurance companies are subject to.
Furthermore, Nexus Mutual works on the ‘proof-of-stake’ consensus mechanism, which incentivizes users to hold their NXM tokens for a longer duration. It enables participants to earn more NXM tokens, thereby helping to increase the liquidity of the token. Higher liquidity in the market can make it easier to access insurance coverage.
In conclusion, the rapid growth and adoption of DeFi has paved the way for innovative financial instruments such as Nexus Mutual. As DeFi continues to expand, platforms like Nexus Mutual are poised to become a natural solution for securing DeFi investments. What started as a futuristic concept is now becoming a reality.
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