The famous Nexus Mutual platform, which provides smart contract insurance on the Ethereum blockchain, explained that decentralized finance (DeFi) is advancing faster than expected and this has led to several bugs.
DeFi is developing faster than you can say ‘protect me from the risks in DeFi’. We’ve been working on progressing the mutual to meet the ever-changing demands of the ecosystem, while building a robust system that stands the test of time. Always protecting our members🐢
— Nexus Mutual (@NexusMutual) September 17, 2020
For those who are unfamiliar with this project, it is a kind of full-fledged insurance fund. Nexus is in fact a company licensed by the British government that operates in a decentralized manner.
Nexus offers insurance for smart contracts of different protocols, so if there are losses, then the company would bear the cost and cover the loss.
One detail that should not be forgotten is that in order to participate in this project it is necessary to be a member and pass the KYC (Know Your Customer) procedure, paying an entry fee, which is about $1. Only then will it be possible to take out insurance.
DeFi bugs
With the increase in DeFi projects, the demand for insurance has increased in order to cover contracts. Coverage is done through the NXM token, and there is a mechanism to keep the price of the token balanced so as not to create problems with the guarantee.
Unfortunately, however, several projects have emerged that are exploiting these tokens to circumvent the limit imposed by the platform on the token price.
In detail these are:
- wNXM, a token wrapped around the official NXM tokens, but which follow their market trend. These tokens cannot be used within the Nexus Mutual platform;
- yNFT; they were created by yinsure which, as the name implies, are true NFT (Non Fungible Tokens) tokens that represent a hedge;
- SAFE: this is a token that is received by staking the previous tokens, i.e. mining with insurance companies, but which has nothing to do with the Nexus Mutual project.
Among other things, this has also led to an incredible price increase of over $70. A few hours later, however, the price dropped to around $40.
Now the Nexus Mutual team has no choice but to go ahead with the roadmap and integrate new features, such as the one to offer an option to provide coverage of the entire smart contract with a single purchase, without this contaminating the entire protocol and other projects limiting it.
