DeFi coverage protocol Nexus Mutual increased the list of consolidated exchanges liable for event protection. Users traded on Binance, Kraken, Coinbase and Gemini are now in a position to purchase insurance in the event of an exchange hack or extended withdrawal.
The project unveiled new integrations as part of its “custody cover” programme on Monday. Payers who obtain coverage would be liable for recourse if the custodian is hacked and the customer losses more than 10% of their funds. Alternatively, the demand can be honoured if the custodian suspends the removal for longer than 90 days.
The software was introduced at the end of 2020 and initially featured centralised lenders such as BlockFi, Celsius, Nexo, Ledn and Hodlnaut. In order to register for coverage, customers must become members of the Nexus cooperative association and have their client-knowledge checked.
The coverage is very expensive, according to current estimates. For example, a 10 Ether (ETH) coverage claim for a period of 365 days involves payment of a premium of more than 3 ETH or 30 per cent of the coverage number. These can, however, be temporary estimates. For eg, the annual service costs for BlockFi and Celsius are just over 2%, although covering other services is much more costly. Given the overall strong exchange track record added today—with the exception of occasional outage issues—it is likely that their cost of coverage will decline dramatically over time.
It is also worth noting that Nexus is not a distributor of insurance. The distinction is primarily due to the fact that insurance requires contractually specified provisions that spell out how and where a claim can be made. The decision to pay claimants in Nexus Mutual shall be at the absolute discretion of the members and the parties involved. Although this could not be a problem in practise, edge cases may have put the framework to the test.
The founder of Nexus Mutual, Hugh Karp, was recently compromised by a malicious MetaMask extension, with attackers taking a large portion of his NXM tokens. Despite KYC’s obligation to deal with NXM, it appears that the intruder used a false identity for authentication purposes.
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