What is Nexus Mutual?
Nexus Mutual is a decentralized insurance protocol built on the Ethereum blockchain that offers an innovative alternative to traditional insurance by leveraging blockchain technology. Unlike conventional insurance companies, Nexus Mutual operates as a mutual, meaning it is owned and governed by its members. These members can purchase coverage for various risks specific to the cryptocurrency and DeFi space, such as smart contract failures, exchange hacks, and more.
The protocol allows users to pool their funds to underwrite insurance policies collectively, removing the need for traditional intermediaries. Members participate in the ecosystem by staking the platform's native token, NXM, which serves multiple purposes, including voting on claims, assessing risks, and earning rewards for participating in governance.
One of Nexus Mutual's key features is its focus on covering risks unique to the blockchain ecosystem, such as vulnerabilities in smart contracts—a significant concern in the rapidly evolving DeFi sector. When a member purchases coverage, the decision to pay out on a claim is made collectively by other members, who vote based on the validity of the claim. This decentralized approach helps ensure transparency and reduces the potential for fraudulent claims.