DeFi By Design EP#17: Securing Billions With Nexus Mutual Cover

Transcript

welcome to d5 by design where we talk all things blockchain and cryptocurrency while striving to educate empower and enrich what's up guys it's boy andy real quick just want to tell you about the sponsors that make the d5 by design podcast possible first we have ave ava is a non-custodial money market protocol where you can go and leverage your assets and earn interest so you can go in there and deposit about 10 or 20 assets eth any stable coins rap bitcoin a whole bunch link and you can lend them and you can borrow tokens to go long to go short to earn interest head over to app.avi.com check it out they have v2 is coming soon check out albe next we have diversify

diversify is a layer 2 gasless decentralized exchange on ethereum they use starkware to conduct their trades on layer 2. the token neck nec has a liquidity mining scheme ongoing and they have a bunch of cool stuff coming in so if you want to trade on l2 in order books not just swaps uh check out diversify they're awesome with that being said let's get right back to the show i hope you guys enjoy and again check out ave app.alba.com and diversify diversify.com to lend and borrow and trade on l2 cheers guys [Music] what's going on guys welcome back to the d5 by design podcast as usual we are here with your boy andy and

rob sliding in talking about all things d5 ethereum what's going on in the markets the markets are hot yield farming and the meme coins maybe not so hot anymore but hey you know we're still here we're still building real products and securing d-fi and that's what we're gonna talk about today uh we're also here with roxanna from nexus mutual she's doing great and we are excited to talk about what's going on in d5 yeah robbie how are you doing today what's going on how you feeling yeah man super excited another beautiful day in florida like you said markets are hot i you know i was in the winter a little bit it was cold but now like you said markets are hot temperatures are hot so i'm feeling good uh life is great happy to be here with roxanna from

nexus mutual we talk a lot about you know like you said the meme coins markets pumping uh what what products are getting built well nexus mutual does a lot to kind of make sure everything works in a well-oiled machine fashion the insurance that it offers we'll hear a lot more from roxanna but um i i think this is one of the most important one of the most crucial products that's available in d5 and really going to continue to progress the industry so i'm excited to have roxanne roxanna on and i'll let her take it away and introduce herself hey guys uh it's great to be here i'm the city of nexus mutual i joined a company about a year ago a lot of

things have happened in the last year just a bit of background i'm an engineer by training i studied um well actually i think i'm going on too long so i'll just leave it that you know here oh come on so so you're the chief technical officer so you understand the code you understand all the all the all developing um that goes on kind of behind the scenes yeah i built the engineering team from scratch um and it's been a lot of fun doing so nice and i bet there's kind of a lot going on back there isn't there it's it is yeah for sure nexus is one of the most complex uh systems of smart contracts out there i i could say there are a lot of moving

pieces and we have to be really careful in our processes on top of that we are covering other protocols so as you can imagine security is really really top of mind for us yeah because if the insurance protocol gets hacked itself then that doesn't really help out the other protocols that are being insured we're in big trouble if that happens yeah no i'll just mess around it's all good yeah and uh roxanne you mentioned that you were an engineer by trade did you always have solidity on your mind or was it just anything computer science how did you uh take the leap from development and computer science into ethereum and solidity and smart contracts that's a good question i think like a lot of people in the space uh i went down the bitcoin rabbit

hole um a couple of years ago i was just working in one of the big tech companies at the time having nothing to do with uh you know ethereum wasn't even really around at that point but what really intrigued me about the whole crypto space is how it managed to bring together a couple of different disciplines and you know really innovate in the space and i think i was really attracted by the philosophy behind it and all this like new tooling that would help us coordinate a lot of people uh when ethereum came along i wasn't like i was just following from the side but i didn't really uh learn how to code in solidity until later on i had a couple of attempts and um yeah i made a lot of stupid mistakes at the beginning uh

while i was learning stuff in basically at some point i decided to leave big tech and actually uh start on a more of an entrepreneurial journey and it wasn't crypto at first although i was hanging out with crypto people i was following closely what was going on but i i thought i'd still be doing something closer to my expertise so i started a company in the infrastructure space closer to my previous experience but then i was going out and pitching it to vcs and we would end up uh talking about crypto five minutes in and that was kind of the point that triggered me to actually pursue this uh crypto of full time and yeah i just basically decided to wrap up my previous project and join something exciting in the space and

i kind of learned like solidity on my own to to be able to really dive in nice yeah i mean it's super necessary obviously for any sort of smart contract protocol to you know understand how to write solidity and build it properly and then obviously there's auditors and there's there's a lot of pieces that go into it it's very easy from like the ui perspective just to be like okay like press these few buttons approve a few transactions and i'm good but you know we don't really understand what goes on behind the scenes and i think that's you know it's obviously super crucial for the ecosystem itself um now kind of shifting that to nexus and building nexus for those of our audience most people probably know what nexus is but for those who don't uh a brief explainer of kind of what it is what the vision is would be super

appreciated uh right nexus is a distant we like to call it a decentralized alternative to insurance it's basically a protocol that offers discretionary cover for any smart contract out there and it protects against smart contract bugs in particular this is um yeah and i mean it's a billion dollar industry it is literally in every facet of our lives insurance i think in any new economy insurance is one of the core infrastructure primitives that needs to develop and mature in order for you know more established players to get in and we've seen in particular as you know smart contracts developed and

uh protocols became composable we've seen that risk piling up and you know accumulating and i think it's a very crucial problem to solve in the ecosystem in order to both you know keep the existing users safe but also attract more institutional-like players that can actually like really help drive adoption of uh d5 at the larger scale so you mentioned how it's a pretty important piece of any beginning economy and like how it's going to mature how is the dynamic at nexus mutual between some of the more finance inclined people and then some of the more developer inclined skill set because like you said you're a cto but um you're mentioning kind of the these necessities of beginning economies is that something that a lot of people at

nexus mutual have how's the balance between like the finance people in the development side uh over at nexus mutual right uh so i guess i'll just give you a very brief history of the team and how it evolved the protocol was funded by hugh carp about three years ago and he's a he comes from the insurance industry where he spent about 20 years of his career so he comes with a very solid background when it comes to both insurance primitives but also uh you know financial knowledge and that gets complemented by the engineering team which is fairly small at the moment we have like three engineers uh in myself and then that's kind of how we we balance out we're still kind of a

very very small team and you know e-trading working you know trying to develop this step-by-step so like on purpose we don't want to to grow big yet but i think from that point of view we have a good balance given the expertise of hue and that complements really really well the engineering aspect of it yeah do you think your background has an effect on like the way that you see the vision of d5 right because we were talking about this a few hours ago rob and i just like you've got a few ideas of what people believe to be d5 right it's like there's the fully revolutionized bank list like all the way down that row and then there's kind of like a happy middle in between that

and like the middle and then you got like the straight middle where it's kind of like okay like you know we can use some c5 like some centralized like but you know some d5 and then you've got a little bit to the right of that and then fully just like centralized exchanges like kyc everything so you know where do you think that you align on that spectrum and like how does that apply to nexus or to you know what you believe to be true and like you know where do you see yourself so personally i'm kind of a center person uh as in i i really believe that in order to um really come up with innovation we need to go iteratively it's that we are solving really hard problem in the same problems in this industry and i think it's really really hard to

align incentives in the right way from the very beginning which was why i think you know iterations are uh really important now i also come from a background of uh move fast and break things but you know iteratively that was a very core part of facebook where i used to be previously and nexus itself definitely sits in the middle uh we are we are decentralized protocol we also have a bunch of centralized components and on top of that we have kyc uh maybe this is a good point to touch a little bit on you know the structure of nexus for sure because it kind of alarmed me at first when i went on the platform and it was this whole community kind of membership kyc process

i'm not going to lie it turned me off for a second but i'd love to kind of understand the thought process and behind that as you know insurance in the traditional world is a very regulated industry and one of the core challenges with building a protocol that's you know fully decentralized uh is you have to be able to not get shut down by uh regulators and that can really kill any sort of innovation and i think in order to do that you have to uh pass you know two options you either go full decentralized unit swap style where you sit down you uh build a really what you believe to be a sturdy version of your protocol you launch it you don't change it at all you come back with you know v2 and so on and so forth

so then uh basically the protocol runs in the wild it's fully decentralized but we found that it's really really really hard to fully align incentives and if you ask you know if you think about it insurance really is about coordination in incentive alliance and if you don't do that right we basically will make it now on the other end of the spectrum we believed that like we're definitely closer to you know the synthetics of this industry where we believe in this iterative approach and we thought that having a legal framework behind that we can rely on would give us some clarity and higher chances to actually be able to make it this is why we went with this discretionary mutual which is a community-based legal framework in the

uh uk uh where members uh is like a membership-based organization members pulling their funds together and then you know they uh share the profits and share the losses at the same time if you may it's very similar to the concept of taos in um dao it's gonna say yeah it sounds super simple and so this is like a um this is a registered entity in a sense that like you guys have gone towards regulators or entities of nation states and basically been like look we have this idea it's working it's great it's a part of this new concept and this is how we're doing it and so that's kind of like the route that you all chose to take yeah basically so mutuals the mutuals are entities used

in the traditional insurance world as well that's been the inspiration for them uh and they go quite you know way back in in history as a form um but yeah that's the route we we chose and we're going with for now that doesn't mean we're never going to actually you know uh fully decentralized we are like every day where you know whenever we plan new features we're thinking on how can we make sure we don't make any assumptions based on the fact that today there is kyc uh and we try to design the protocol in such a way that in the future it could evolve to you know a fully decentralized platform yeah and ruxin i don't mean i don't think that we think that's bad by any means like it's not good or bad it just is it's a way of doing things

in d5 that i would feel like almost ensures the community a bit more like strength in the project right because for example uh let's go with you know i guess we do with ave for example right yes ave has been registered in the uk and you know like it's like that they have a company being and all that stuff but like if the regulators just shut them down like there would be so many people who would be screwed right whereas basically you know and i use obviously but there's but there's hundreds of other unaudited ones that would be a better example whereas you guys kind of just like took like the proactive step and we were actually talking to uh to the melon protocol girl about this she was saying like yeah like it's better to take that proactive step and i mean i i think that was probably

the right move robbie what do you think like how do you feel about having like a legal entity and like being able to kind of bring that world into the d5 world yeah yeah i mean partially what roxanna said i think really resonates in terms of having a centralized team if you go full decentralized um that that's something that you really can't ever come back from it's tough to go and then bring some subset of that community into a like a hierarchy uh that's kind of above the rest of the community and and to align incentives that's really uh important and when you're making a step that you can't really come back from it it's going to kind of speed up and accelerate the iterative process that roxanna deems so important um

and i i think there is certain aspects like we talked about with melon they're in asset management roxanna and and their centralized team in insurance these are two aspects of an economy that are way more regulated in the traditional sense and might need them like interest rates are yeah then just like a borrower or lending yeah yeah they might need some sort of centralization in even in a uh more decentralized economy so i i think it's uh like you said proactive but also forward thinking to to understand okay um this industry is still early it's going to be important to have a centralized team

starting out and then maybe you can iterate towards decentralized but you know it is a spectrum and it's not going to fit in every single protocol in the same way so um and the good thing is speculators can i'm sorry i interrupt but speculators can still invest in nexus just by using rap nexus mutual wnxm i don't know if roxanna likes that but it's a profitable trade if you make it a trade you know maybe roxanna you can explain a little bit more about the nexus token and and how um it accrues value and and then maybe in some insight into the wrapped nexus mutual token what your thoughts are out there right uh so the nexus token uh kind of sits on top of uh everything

else like i just step back for for a second uh we have the mutual we have the members that you know pull together capital uh and that's the core component of nexus the capital pool that's currently in it you can contribute east to the pool uh and you get in return nxm uh the native token and nxm is used in various parts of the system to basically align incentives in uh between various participants uh in the protocol now the nxm token is a bit different than many others in the space in the sense that its uh price is actually given by bonding curve and it's designed in

for capital efficiency uh it is designed in such a way that when the mutual needs more funds uh it basically slides the price slides down on the curve and it becomes cheaper to get into the mutual to contribute to the capital of the mutual once we have way too much capital compared to you know the active covers that we have that we would have to pay in case of an event the price goes up on the curve i could say like you know exponentially uh because that's a sign that we have surplus capital we don't actually need that so we want to be efficient and basically at that point give an option to people to exit and cash out on some of the profit nxm can only be traded uh and

transferred among members of the mutual that have been kyc on our platform and uh it's you know yeah and then wrapped in xm is uh is an interesting one it has been by it has been built by some of our community members uh and that's one thing i really love about d5 this whole you know composability aspect of it and the fact that literally anybody can go in and build stuff on top of these uh protocols uh so yeah basically one day we ended up with um someone from the community letting us know that they built this thing they wrapped an exam and it's available publicly available to for anyone to trade um and the rest is history i guess a wrapping exam cannot be used within

the system like you can't natively stake it or anything like you can't really use it in any way inside a system but in a way gives us exposure to outside people um to the core of mixes yeah to basically speculate on the value proposition of the bonding curve without basically participating um yeah but i don't know this might be a little technical but basically if there's a lot of buyers for wnxm on uniswap for example um but the capital allocations aren't representative of that in the nexus has that happened is that a problem like can that happen like i'm just a tad confused there uh so you cannot buy more than it's

wrapped like but like what we've seen happening is that uh there are quite a lot of arbitrage bots that end up equalizing the price you know uh balancing out the price in time okay of course right right right yeah yeah yeah so we haven't quite seen any sort of um big gaps in the price between the two tokens nice yeah that uh mcr curve is just ridiculously complicated like i was reading it one day rob like rob you probably understand it man like i i i bet if i give it to you for an hour i bet you'd be able to like fully explain it but like bro it is it's tough it gets easily very technical yeah what are you saying around yeah i was gonna take it a little bit more in the direction of

um the traditional insurance route oh maybe away from the token a little bit but when i was going through nexus and some of the documents it seemed like the road that you guys have chosen is to kind of start to encroach on the traditional insurance markets i saw something for earthquake insurance and moving away from just smart contract insurance do you guys have plans for that in the near future or is that kind of later down the road and how are you bringing decentralized nature to the traditional insurance market uh interesting question so actually the earthquake insurance that gets mentioned in a couple of places i think even the white paper was the um original version of what we ended up

building uh given that hugh comes from a traditional insurance background he kind of saw more of the opportunity in serving underserved markets from you know the real world um because of the limitations of ethereum at the time even now but especially the time and you know the how difficult it is to use and all that stuff it kind of became clear quite quickly that's not if it wasn't feasible at the time uh so and you know the whole d5 market started developing and it was uh made a lot more sense to kind of build something native to the market uh we are like smart contract uh bugs is the first product we launched we definitely have in mind launching new products um

some of them the first ones are still going to be within the smart contract space because we we still think there are a lot of different types of risks that we are not covering today eventually we would love to be able to get um in you know in the real world so to say uh obviously that doesn't only depend on us there are a bunch of limitations that ethereum has both in terms of you know usability and cost that we need to uh that i think the whole ecosystem needs to mature more in order to be able to serve more real world markets uh now that being said the way the protocol has been designed it literally allows for any type of risk to be covered

as long as there is someone uh willing to take the bet on the other side we can cover any risk you just need someone to actually stake on it and you know basically bet in a way that that risk is uh yeah that event is you know unlikely to happen yeah and i know in traditional insurance it's almost a matter of like time horizon right where like the insurance company knows okay over this amount of time we'll see this amount of car accidents or this amount of earthquakes and they they can just push that time horizon farther is that idea paralleled in uh nexus mutual's model where it's really the mutuals that have a longer time horizon and then maybe people taking more short-term bets on

the other side not really um one of the main consequences with you know in traditional insurance uh in order to cover any risk you just need a lot of upfront data you need data historic data in order to be able to price it accurately and this is one of the main reasons why [Music] it takes time in any you know emerging market it takes time for insurance to kind of emerge we kind of removed that limitation by um pricing the risk based on you know someone taking the other side of it this whole staking mechanism that we designed so from that point of view we don't really need any sort of historical data or not you know how often did

these incidents actually happen if there are people who put their money on the fact that that risk is fairly low then we we can take it to market right away okay it's starting to sound a lot more like a prediction market for risk now that or at least when you don't have that historical data you're you're trusting um that the market is going to determine some likelihood and then that likelihood or that probability is fairly accurate in terms of the insurance model it's definitely closer yeah to a prediction market approach uh from the staking point of view yeah so how does the total value locked in nexus work is that just the amount of of capital in the mutual uh yeah exactly that's the ease that people are

contributing when they uh buy the token or you know the premiums that people are paying right now it's mostly eth there is a part of it in die as well because we offer covering both eat and die and we're actually working on a feature that would allow investing further some of those assets to you know generate extra profits for for the mutual members nice nice yeah this is uh this is certainly a a topic that regulators and people that are have big bank roles that would like to get into d5 would be seriously interested in entertaining almost so much so that um i feel like it could be a business model to try to pitch this

idea to very wealthy people who are uh looking to you know get returns on their money or you know trying to understand a new industry because like though like the one of the big reasons why crypto is still you know just kind of like crypto is just because it's like the wild west there's no backing and what nexus does is it kind of gives a backing almost like it's still not backed by government but but it's at least backed by something that has a on-chain capital allocation that you can see um you know and that kind of gives you peace of mind when you're going to bed well that's also like the capital pool uh is people contribute money there and like the other side of it is that if there is an event that happens and someone actually makes a claim on a cover that they had

purchased before uh the payout goes out from the capital pool and then you know if someone took the other side of the risk their nxm tokens would be burned but the whole point of insurance well the whole point of uh of how we build the system from this point of view is to be under collateralized so you never really have all the assets that you need to pay out all the existing claims uh you just rely on the fact that the events are to a certain extent independent and they won't happen you know all at once if all smart contracts get hacked at the same time then probably we have much bigger issues then we could just kiss yeah we'll just kiss ethereum by and go back to our day jobs if that happens

pretty much ethereum 2.0 oh yeah it filled up yesterday that was crazy whales is it up to 100 quick oh yeah dude like it was crazy it was like every ten minutes like ten thousand aetherium twenty thousand feet it was just like what the heck just happened it's fascinating to see so so i feel like a total noob for not knowing what this means but i know that the beacon chain is now getting started the validators are staking they're earning interest so what's the next step we are it goes towards like the launch on december 1st i think for the genesis of 2.0 or something like that yeah i think they need to launch the mainnet uh blockchain maybe roxanna has some more details on how uh

no uh um now we are we are we are subpar ethereum community members right now yeah jesus ah my goodness i just know that on december 1st like genesis is launching i think it's the genesis of e2.0 but we're still in phase zero but phase one and two already happening at the same time so it's not like we have to finish phase zero and then go to one and then go to two it's like we gotta finish zero and then finish one and finish two and then we're good yeah i i think the the main net launch that you're talking about is december first where they're gonna bring really 2.0 onto mainnet and and be able to facilitate transactions but uh to me 2.0 isn't complete until we see sharding right and then that's where you can start to

split the transactions um across different shards of the blockchain yeah in the and the eip1559 with the burning of the transaction fees to to reduce the supply roxanne is there any um capabilities that nexus is missing out on because of scaling and like not able to handle because of transaction output and also in over the summer like how is that how did you guys handle that like was that just absolutely like crazy wild show or like was it like you know what was it decent uh well i'll just uh take them one at a time i wouldn't say that we have capabilities that are you know

missing because of scaling but definitely a lot of the transactions that happen on on our platform are quite expensive uh costs are supported you know if you buy cover uh the cost is supported by you the user buying cover uh staking is one of the more expensive ones even more expensive than buying cover and we've had a lot of requests from users so you know guys please do something obviously there's not something we can do immediately about it the other side of things is that as i said there are a couple of transactions that you know there are a couple of uh events that happen in the system and there you know the transactions are being triggered by the foundation by the nexus

uh team itself and we covered the cost and last summer it's been this summer it's been a little bit crazy with the uh amount of staking like the whole activity in in the d5 space uh started blowing up with yield farming and all that stuff right at the same time we launched a new staking mechanism that had better rewards more flexibility and all that stuff people started staking and we had this like rewards distribution mechanism that was uh fully unchained but had needed a poke so and we were basically doing the poking and we had crazy fees this summer because we had a lot of people taking a lot of covers being bought which meant

a lot of rewards to actually be distributed uh and we were getting to um the limit of you know the cost we had to to cover uh and we had to basically drop a bunch of the work we had planned and just focus on um some solutions here and yeah we we ended up batching a bunch of the transactions so uh we reduced costs a couple of like significantly but yeah i it's expensive a lot of the transactions on nexus are expensive and we've heard people complaining but like none of the solutions existing out there today can really help us uh i think there's a lot a lot has been done and achieved in the

transfer uh space like if you just transfer tokens then uh you can already get super transfer tweets with solutions that already exist but for the more complex operations that we're doing um there's a bit more until main it yeah when there's like four trans like four transactions or eight transactions within one transaction yeah it's tough yeah you can use rails right now for all sorts of it's super cheap it's on l2 and you can transfer any ethereum token from wall to wall for like basically nothing yeah so basically transfers are yeah pretty well covered right now um does do you guys have any exciting updates coming in the like as far as on

the road map um potentially any like liquidity mining schemes that are appearing um or anything like that um that you can share regarding liquidity mining we did launch a couple of i think it's been 100 months now uh this shield mining program where uh some of the protocols listed on our platform would offer rewards in their native tokens for uh nexus members that would stake on on their protocols and we had two campaign campaigns that went around with one for tbtc and one for hedgic and we're working with the other protocols that are going to be listed on similar campaigns

uh in terms of other updates like i briefly mentioned earlier the investment ability for like investment capabilities for the assets in the pool uh that's getting close to completion uh we're looking at launching new products that we're gonna announce soon there is one coming very very soon um and which is a bit different than you know it's something that i i think it's quite uh innovative and something that hasn't quite been done before in the space uh we are also looking into um full we call it full stack cover but basically right now we only cover bugs in smart

contracts but as uh you've seen lately there's been a lot of attacks around you know oracle failure manipulation of external data sources and all that stuff uh you that expense to governance attacks but also to economic incentive failure is yet another type of risk like the black thursday when i lost the peg and we are working on a product that can be comprehensive and basically cover any sort of event that leads to uh loss of funds to the asset owner and i think that's going to be quite exciting yeah even flash loans those flash loans exploits are insane yep it's like well the thing about flash loans is that

the exploits were possible before flash loans but only available to really large whales while now they suddenly became easy to execute well easy it's not easy it's definitely not easy but a lot more accessible to literally anybody yeah it's crazy so wild and that's been like every big exploit and there's been so much talk about like the ethics of it whether it's legal or not whether it's fair market practice you know how to punish how to like how to change how to fix and i mean like the one thing that i've seen is the chain link communities can't come together big time and basically try to use this as a huge marketing angle for like yo you guys should be using chain link oracles this wouldn't happen well to be honest i think first of all we have to kind of each of us build each other

each of us the builders in the space kind of have to look inside and revise our practices our um after you've seen four exploits around oracle's in the market i think it's time to kind of evaluate am i susceptible to such uh exploits because i think it's kind of the same play every time the attacks are quite similar so that's the first step and kind of design in a way that's defensive and yeah knowing that this is a massive risk just improve on the design practices of the protocol which is why again you know immutability is very tricky while it has a lot of like benefits

when the whole ecosystem develops and something like flashlights comes around out of the blue uh it could potentially lead to unfortunate uh events for the protocol users there is no way for you to kind of take into account in the design this new development yeah that's why slowly entering into decentralization whether it's governance and protocol capabilities and admin keys and such is is key i mean the community might not like it and the crypto community might not like if you free something or pause or revert something but i mean if it saves the users funds i mean you know then that's a step in the right direction at least there's got to be a happy medium you know in there somewhere yeah absolutely and

um roxanna you mentioned that nexus only covers bugs right now so it's not covering flash loans or any of the other attack vectors because that's what we've seen is you know as d5 continues to innovate uh people are continuing to build there there's more attack vectors um just popping up left and right so um it seems like nexus is the front runner to kind of keep pace with all of that um if you guys do offer some sort of full stack is that what it's intended to cover is really top to bottom bugs flash loans yeah yeah literally like a full stack whatever happens and even you know one you have these different types of

um attack vectors let's say or potential risk categories that you get exposed when you use a protocol but then you also get exposed to kind of the composability of defy and it's not like you only get exposed to these risks in one protocol but most likely like a couple um and then we would just uh we would intend to cover full stack whatever incident that uh leads to loss in your i in the assets that you basically um had because composability makes things much more susceptible from the from the risk category and that's why insurance is so important is because you need to

cover your tracks once everything starts building on top of each other it's critical to make sure that base layer and kind of as levels grow as the structure builds that that foundation is really secure so and i think it makes a lot of sense especially in in a world where well it it's not quite the same as last as the summer anymore but in a world driven by high yields and a lot of you know ill farming and liquidity mining and this kind of stuff given that we operate in an under collateralized way and we can drop prices we we can have quite competitive prices it's almost like a shame not to uh like sheamus plan but it's almost

like a shame to not get covered for um for those uh yeah for exposing yourself to those protocols so you would recommend every d5 power user to get covered you would think at least at least some i agree i agree i think that i'm sure the kyc process slows a lot people down but it's a necessity you know it is what guarantees basically the fact that you have insurance you know like in some sense you know it basically gives you that ability to be part of like a legal entity uh now the other interesting stuff is that uh we've seen people building again members of the community i mean the wider ethereum community building on top of nexus and um why in short during the summer madness

they build up a integration on top of nexus that would basically tokenize the cover and then sell the cover as an nfte to any user uh anybody out there yeah so there are interesting developments uh interesting developments in this uh from this point of view as well you obviously have like a have you looked into sorry wait you can finish uh when you do that you obviously have an additional layer of you know intermediation which means exposure to another smart contract that comes with its own risk that's the trade-off uh by the other like alternatives to put it that way have you looked into uh cover protocol they just kind of launched recently

like actually launched i think they had some cover claims on um on the pickle finance hack yeah i think they paid it uh we've been watching uh the space there cover is one of the competitor protocols that came out uh recently there are a bunch of other ones i think that the more players come in the space the more the need for you know good uh let's call it cover slash insurance layer uh is and if you think about it uh at our peak we managed to cover around three percent of the total value locked in d phi uh you do the math on how much more there is to uh for this space to

grow yeah yeah and i saw i saw some tweet back in the day and someone said some guy was bashing nexus like oh this is the insurance platform but guess what they only have 100 million in total value locked and and there's 12 billion in d5 i was like all right dude like could be in a dick like it's a process there's a lot of room is what i'm trying to say with cover i think both cover cool both river price roxanna we're not doing price talk um but i think with cover and a bunch of other protocols coming around one of the main challenges is

pricing like getting to [Music] comparably low prices on on the cover and i'm i'm looking forward to see how they innovate in the space and how they manage to continuously drive their prices down like if you look right now like when i last looked i think a couple of days ago um their cover prices were quite significantly higher than what we can offer right now but yeah it's uh it's exciting to see how it's this plays out what is and does their pricing model does their business like well yeah does their pricing model change is it different than y'alls or is it pretty similar like per claim per per time i wouldn't know the details uh like i imagine that

it's probated based on the amount you ensure and the amount of time you you know cover it for you hold it in there right right but i wouldn't i don't know the details of what uh factors contribute to actually setting their price per unit but that's basically you know how the insurance industry works is basically how much you're insuring how much capital and then how long you'd like to hold the cover yeah in a way as in i guess depends you can price things in various ways uh you can be and honestly i just because i haven't blew deeply into it i have no idea how uh how they would do it in our case the like i can tell you how mixes that's it but like because we have the stakers

taking the other part of the risk basically the more nxm are staked on a given uh contract the lower the price gets and then it has like a low floor of about 2.6 percent annually of you know the cover amount um and it's like purely driven by the amount of uh yeah so basically the amount of people that believe that cover is not going to be needed like the cheaper it gets yeah exactly nice yeah that i mean that makes total sense and you know whenever whatever covers get bought rewards get generated and distribute the people staking on the contract but then in case the claim is good is getting paid um the people's taking would actually get like slashed burned their tokens

would get burnt to cover the laws which is unfortunate but that's kind of like the name of the game you know uh yeah that's why this is why you know aligning incentives in this from this point of view is really important because if people uh end up being burned too much or if claim assessors end up denying claims so they don't get burned because they are staking uh these are all dynamics that are very fragile and like really really really important to to get right is is the whole core of it yeah well that's awesome that is a lot to take in we are about out of time here it's been a short one but it has been solid rob do you have any any questions anything that that you're curious about left yeah i mean this is this has been super interesting kind of opened my eyes to

uh the possibilities of insurance on the blockchain um i think it's really cool the way that different protocols were aligning incentives uh especially the way nexus is doing it kind of the what was going through my head is okay well you know i like to play devil's advocate if i'm a if i'm a hacker um you know is there any opportunity for someone to uh bet you know what once someone has this flash loan figured out um maybe you know we can take the this recent hack on pickle you know once this guy has uh the flashlight figured out he knows he's gonna swap the jar for the jar um you know can can he then go and and bet uh

quite a bit of money on an insurance protocol like nexus or cover say hey i think this this uh protocol is going to get hacked sometime soon and then he goes and deploys a flash loan is that like something that nexus is worried about um have you seen it in the past kind of are there precautions to to prevent that uh so i'm just gonna clarify a few things if the uh attacker like these are definitely things these are definitely things we we think about and this is this comes down to you know aligning incentives and making sure uh participants to the protocol do the right thing but uh so if you're about to if you're preparing a flashlight attack uh you would most

likely want to buy cover not to stake because if you stake the attack goes on and then eventually claim gets paid out then you get yeah you get slashed uh so that's not no good uh if you go and buy a cover you you have that chance you go and buy a cover like two days later you run your evil exploit all good there are a couple of um there is a social layer you have to go through well first of all a more recent change we made was to introduce proof of loss so whenever you make a claim you need to prove that you had an address that was uh that you had like access to an address so you have to give a cryptographic signature from that address to uh that has a history of transactions that prove that you lost funds

so that's the first part the second part the uh attack you're doing has to be covered currently so in this case it would only be currently it would only be covered if it's a smart contract bag and not a flash loan but you know let's say we roll out the comprehensive cover so flashlights are covered as well and your our well the last line of defense of the mutual are the actual claim assessors so when a claim is being submitted there is a group of people who actually stake some tokens so again they have an incentive to do the right thing and then they decide if this is a valid claim to be paid out or not i guess if you're really really

smart you can get away with all of it so in this instance yeah in in this instance yeah you'd have to be a claim assessor and you'd have to buy cover and you've got to be able hopefully hugh's not listening to this one oh boy oh boy i'm kidding i'm kidding well hey that was absolutely awesome it was a pleasure roxanna uh i'm i am about out of questions and topics i mean that was great i i think if the folks that are listening definitely got a lot from that rob and i learned and you know i hope you as well and i'm glad that we can make the time for this thanks for having

me it's definitely been fun and you guys keep doing what you're doing rob absolutely do do you have any questions for us it's been an absolute pleasure like andy mentioned um questions for you oh you caught me i'm prepared how did you get started with a podcast actually like we i'm very curious we actually hit up our first buddy from university of florida he was in like the blockchain kind of club like in the sphere he was always interested in crypto and stuff and um he ended up working at maker dow out in san francisco as an integrations lead so he was like yo you do you want to be on the podcast he's like hell yeah and then i just clicked from there and then yeah it just

it it just went and so we met in school um and then yeah how do you manage to keep up with d5 and actually study and go to school this is a full-time job of it's on i don't know rob's a genius so that he he handles it pretty well i'm like on and off of school so like i kind of just take my time school takes a back seat sometimes to d5 but um we i i mean i i somehow find time to keep it all together so it goes it goes well together with uh my mate i mean my majors and and my uh different uh interests so i i see it as entertainment sometimes but also you know it's a it's a academic hobby so it's always

interesting it's fine does any of you code where have you played with solidity at all i've attempted i i've dipped my toes in but that's about it but if we are looking for a flashlight evil genius to uh hack a protocol we might hit you up we know exactly where to go we're talking about putting nitrates on friends you know yeah here we go we'll buy an island and kick it out and flash alone all day let's go oh man all right guys wait that was fun um i'm about to go play round of golf with the boys actually that is some american things right there i'm not sure if they do that out there in ukraine but hey i'm

gonna go play some golf with the boys and yeah sounds fun roxanna this was fun thanks for coming on thank you guys for having me all right thanks for listening to the d5i design podcast until next time d5 slate team