One size doesn’t fit all. Enzyme’s philosophy focuses on delivering financial flexibility and a wide array of options, enabling users to tailor solutions to their unique needs. This approach has enabled us to support the leading on-chain cover provider, offering a good example of how the versatility of our infrastructure enables Enzyme Vaults to seamlessly and precisely put Cover Capital to work as well as the importance of cutting-edge oracles to ensure Price Feeds precision.
Nexus Mutual is the industry leading provider for on-chain cover. Much like traditional insurance companies, Nexus Mutual allocates idle crypto assets held in its Capital Pool to generate returns that offset future claim payouts and increase value for Mutual members. The assets held in Nexus Mutual’s Capital Pool back NXM, its native governance and utility token. Since 2021, Nexus Mutual members have voted to allocate ETH to liquid staking protocols with liquid staking tokens (LSTs) such as Lido’s stETH and Rocket Pool’s rETH.
Both of these LSTs have deep onchain liquidity and are supported by the Chainlink standard for verifiable market data Price Feeds, which the Mutual uses Chainlink Price Feeds to calculate the value of the assets backing the NXM token. Some ETH staking solutions are not LST-based, or the LST doesn’t have a reliable price feed. This poses a significant challenge for Nexus Mutual, and Enzyme has stepped in to help address it.
Diversifying strategy to mitigate risks
To date, ETH staking has been Nexus Mutual’s preferred allocation strategy. While many DeFi protocols like Aave, Curve Finance, Uniswap, and others may provide attractive returns, Nexus Mutual members underwrite these risks by staking their NXM tokens and allowing other members to purchase cover. As more cover is sold, the Mutual takes on increased smart contract risk exposure. A potential hack could result in significant losses for the Mutual. ETH staking has provided the Mutual with a low-risk allocation solution that generates consistent returns over time.
Like any investment, Nexus Mutual’s Capital Pool needed to be diversified to mitigate risks. Enter the Enzyme Vault. Using Enzyme’s on-chain asset management platform — with access to a wide array of DeFi protocols and a deep asset universe — Nexus Mutual launched the Nexus Mutual Treasury Yield. This tokenized solution has enabled them to allocate capital across multiple strategies, including niche opportunities. With top-tier security and customizable parameters, Nexus Mutual has seamlessly built and managed a private vault via the Enzyme App.
The Chainlink advantage
Without reliable pricing data, allocation strategies are limited for nexus mutual’s capital pool assets.
Accurate, reliable price data is a vital requirement for the on-chain economy. Because the NXM token’s value is calculated based on the value of assets held in the Capital Pool, the potential to allocate more crypto assets into ETH staking strategies is limited to LSTs with deep liquidity and supported by reliable Chainlink oracles. Unreliable price data for such assets could cause the NXM token’s price to fluctuate, impacting the Mutual’s capacity calculations, cover quotes, and other internal functions.
- Nexus Mutual needed a reliable, secure oracle solution to expand potential allocation strategies
- Creating bespoke oracles for each new allocation would require significant engineering resources and introduce unnecessary risk
- The oracle solution needed to provide pricing data for crypto assets backed by ETH staking strategies where no LST is available
Instead of squandering engineering resources and hindering development efforts for the Mutual’s core product offering, Nexus Mutual was able to work with Enzyme and Chainlink Labs to integrate Chainlink Proof of Reserve into the Mutual’s Enzyme Vault to calculate the value of the assets within the vault, which allows the Mutual to ensure that pricing data for the vault token (NXMTY) accurately relays the value of allocation strategies in ETH staking platforms. Chainlink Proof of Reserve reflects the value of assets underlying the vault, which allows the Mutual to calculate the asset-backing for ETH allocated to staking providers such as Kiln and Chorus One. Chainlink Proof of Reserve will publish in real-time the aggregate balance of WETH holdings in the Nexus Vault and total unclaimed ETH fees staked in Kiln. This Proof of Reserve feed is then used by the Mutual to calculate the value of assets backing the Nexus Mutual Treasury Yield Share Pricing.
Once the Chainlink Proof of Reserve integration was complete, Nexus Mutual members had a variety of new options for Capital Pool allocations.
“With Enzyme integrating Chainlink Price Feeds, Nexus significantly bolstered its product without the overhead of having to engineer its own proof of reserves solution. The ability to incorporate DeFi strategies into its portfolio significantly opens up the possibilities for asset management strategies, making it possible to include activities where the underlying asset prices are supported by Chainlink.”
Mona El Isa — Founder, Enzyme
“By leveraging Chainlink Proof of Reserve, we can expand ETH staking accessibility for Capital Pool assets allowing us to offset future claims and reliably calculate the asset-backing for the NXM token.”
Hugh Karp — Founder, Nexus Mutual
Business Outcomes
- Enzyme’s protocol provides 24/7 reporting on-chain powered by Chainlink Price Feeds. Chainlink Proof of Reserve then publishes real-time reserves data to the Nexus Mutual protocol.
- Without the combination of Chainlink Proof of Reserve and Enzyme’s protocol, these strategies wouldn’t have been available to members.
- With the reliable data provided by the Chainlink standard, Nexus Mutual can more effectively access superior strategies on the Capital Pool float, while sourcing cover capacity, providing quotes for cover, and accurately calculating the value of the backing of each NXM token. Through this simple integration, an array of options became possible for Mutual members to increase value and offset future claims.
About Nexus Mutual
Nexus Mutual is the industry leading provider for onchain cover. People can join the Mutual as members, purchase cover to protect crypto assets, stake the Mutual’s native token NXM to underwrite risk, and participate in onchain governance. To date, the Mutual has secured $5.1B+ of crypto assets and paid $18M+ in claims to people affected by onchain loss events.
About Chainlink
Chainlink is the standard for onchain finance, verifiable data, and cross-chain interoperability. Chainlink is unifying liquidity across global markets and has enabled over $18 trillion in transaction value across the blockchain economy. Major financial market infrastructures and institutions, such as Swift, Fidelity International, and ANZ Bank, as well as top DeFi protocols including Aave, GMX, and Lido, use Chainlink to power next-generation applications for banking, asset management, and other major sectors. Learn more by visiting https://chain.link/.
