PoolTogether Community Podcast #5: BraveNewDeFi of Nexus Mutual

PoolTogether is the world's number one prize-saving lottery, and this is the PoolTogether Community Podcast. Visit pooltogether.com to deposit. Welcome to the PoolTogether Community Podcast. I'm your host, Tim, and we are here today with Brave New DeFi from Nexus Mutual. I want to just start off the whole thing by saying, listen, anything that we say here, it might sound like financial advice, but it's not. No, it's not financial advice. This is all speculation, speculative. We're all just having fun here, and, uh, and just— this is entertainment podcast for your enjoyment. Brave New DeFi, what is going on? Thanks for being on this, on the program.

You know, I'm really excited to join you and talk with the Pull Together community. I'm excited to be the 5th guest, uh, in the Pull Together podcast so far. So yeah, I mean, I'm ready to jump into it. Um, my name is Brave New DeFi. I'm involved in the PoolTogether community. I work as the marketing lead over at Nexus Mutual, and I'm involved within LlamaDAO as well.

That's awesome. If this, if this podcast were an NFT, it'd be like super exclusive, like you'd really want to get to it. Number 5 in a series of, I'm sure, thousands. So that's great. Uh, so you do, you do marketing and for Nexus Mutual, uh, and that in PoolTogether is also— I, my first crypto experience is now in PoolTogether marketing. It's been really interesting to take what I've learned from like, you know, traditional marketing and then try to apply it to this beautiful community that is PoolTogether. Uh, how's it been for you? How's, how has been working in the marketing world and now doing it for

So it's, it's interesting because marketing within DeFi comes with its own unique challenges, one of which is the traditional ways of reaching audiences or individuals, like using Google AdWords, things like that, are not available to us because most of those are unavailable to anyone within the crypto space except for custodians. So a lot of that involves building up a grassroots community, tapping into the talent within your community that exists already, which I know in Nexus Mutual and PoolTogether, we both have very strong communities with a lot of very intelligent people. So it's really nice to connect with the different people in our community over at Nexus. And the same, I'm always really impressed with the community within PoolTogether and the, uh, the show of force on every weekly community call that happens on Friday. So I think one of the major things I've learned within marketing within DeFi is here connection between different protocols, between members within your community is more important than I think any other industry that I've been a part of because the network that you build up from that grassroots foundation can be really powerful and I think we've seen that in a few different examples this year. So the— I think another unique challenge within marketing is there's usually a delineation of responsibilities in the traditional marketing world where You might use a PR firm or you might use a marketing agency to develop a campaign, but a lot of times because we're just going through and figuring out how marketing works for a DAO, we're starting with smaller budgets. We're experimenting with the form across different social media— Twitter, Discord, Telegram. We're usually managing communication across a wide variety of social platforms, and so I think that allows us to be more flexible. I think it allows us to engage with our community in a more direct way, and I think it does one of the most important things that we're doing in DeFi is making things more accessible and really connecting with people on a one-to-one basis make some of the stuff that we're working on less intimidating. Because DeFi is one of the only places and one of the only industries where you can talk with a founder or, you know, a CEO or somebody higher up in an organization, in organizations that really have a relative flat structure. So it's neat to be able to interact with all of these incredibly intelligent and wildly talented people.

Now, this podcast is called the PoolTogether Community Podcast because it's put on by the community. And it— what it's— what you just talked about, it's what makes crypto, what makes these DAOs, what makes these services so strong is the people that care so much about it. And Brave New DeFi, you are part of the PoolTogether community. So it's really cool to have a podcast where we can feature the brainpower of the PoolTogether community or their connections and give some of that alpha, give some of that, you know, unique perspective on what's happening in Web3. So how did you— can you give me your origin story of how you got involved with PoolTogether?

Sure. I really got heavily involved in DeFi starting in like the fall of 2020. I did a lot of research in early 2020. I'm the kind of person that needs to do like a lot of research before jumping into anything. But once I got in, there were a few protocols that really spoke to me. Of course, one of them was Nexus and anything where I could look into risk. But one of them was PoolTogether just because it was, it was fun, and the community here made the experience fun. And whereas, you know, depositing into AAVE or depositing into Yearn It's nice to earn yield, but if you're starting out with a smaller amount, it's fun to deposit into pool together and have a chance to, to win a prize. Right now it's on a daily basis, but when I started, it was on a weekly basis. And so it's a unique way to approach savings and make saving fun. So when I first got involved, I think that was the main appeal for me. And then once I was here, Just seeing all of the talent and all of the people that were involved within the community was just really impressive. And I got more involved here. I got involved within Llama. And then I think the first time I really connected and was active was researching different treasury-based strategies for PoolTogether through a grant from PoolGrants. So that's when I first really got involved, which was roughly around like May 2021.

That's great. And so how did you go from PoolTogether to Nexus Mutual?

I started— I actually started working within Nexus first. Nexus was one of the first protocols that kind of really captured my attention. When I started, I was looking for things that were somewhat of a corollary to traditional finance or traditional markets that I had a better understanding of. And when I got in, I mean, things like MakerDAO were really interesting, but it was a little heady at the beginning. But the one thing that I knew, especially from reading about all of the hacks and exploits that happened in 2020, was that risk was a major aspect of DeFi. And so any solution to mitigate or hedge against that risk was something that was interesting to me. And once I started digging into Nexus Mutual and researching the capital model, how the mutual controls capitalization levels, how they manage risk or correlation risk across different protocols and custodians, All of that really captured my attention. I was very impressed by the design, so I started getting involved. And one thing that I noticed, which is I think commonplace across different protocols, is that the documentation was a little out of sync with some of the developments that have happened over at Nexus. So the first way I actually got involved was working as a technical writer and updating their existing documentation and expanding it. So that's how I first got involved. I have a background in technical writing and I've worked in a variety of jobs, but the last job I had before going full-time in DeFi was working within the municipal bond industry, putting together the actual bond offerings. So the actual documents, putting those together in a digital prepress environment, coordinating with underwriters, attorneys, and financial advisors. And then submitting to MO, which is just a branch of the SEC for municipal bond offerings.

So I think one of the reasons why they, they, uh, they gave me the hosting opportunity for this, uh, podcast is because I'm a noob. I'm new to the crypto space. I've been around for a couple months. I mean, I dabbled a couple years ago, dabbled a couple years before that, but But I'm new to all this, and so when I encounter people like you, Brave New DeFi, I just think you've like been around PoolTogether forever, and like you founded it with everybody, and like you're part of the with this the the Last Supper mural or whatever. But no, that's good to know that you were that Nexus Mutual first. You saw a need in the PoolTogether platform, and you filled that need as a technical writer with your skills. So so with the noob mentality, like such as me, can you— and I, and I would assume, I think the PoolTogether audience, we are going after onboarding people to crypto, uh, along with making it fun and along with making it a no-loss environment. Well, how would you explain Nexus Mutual and the need for it to somebody who is new to

crypto? I think, I think that depends on audience, right? And so a lot of people in the existing space have been around for a while They're more risk-on, but a lot of people who want to get into crypto, people that I've talked to in my day-to-day, some of my friends I've talked to about this because they've asked, they really is what they want is exposure to higher yield on stablecoins. They don't want to deal with the speculative nature of Bitcoin or Ether or any of the other DeFi tokens. But what they do want is a way to outperform savings in a bank. And these are traditionally people who don't have a sizable amount of money where they could maybe start a portfolio in a traditional market. So they want exposure to this, but they don't have a lot of money to start. And so the hurdle is, how do I get money on-chain and how do I get exposure to these yields? And one of the most frightening things for a lot of people I've talked to is, what happens if I lose my money? There's no FDIC in crypto. There's no guarantee that if your money is lost that you'll get it back. And this is one of the things that initially drew me to Nexus. So when newer people are coming on and they want to allocate capital, but they're afraid of that risk, Within Nexus, we provide a solution for that because Nexus Mutual is a decentralized alternative to insurance. And what that means is that we are a discretionary mutual. And there's a distinction here. A lot of people always ask about the fact that we're not insurance. And much like PoolTogether is not a lottery, but a gamified savings account for individuals who want to save in a fun way. Nexus Mutual is a discretionary mutual which allows people to join as members, and then members share risk among one another and are active within the mutual. So it's a group of people who participate in different roles. People can buy cover to protect themselves against risk within DeFi. People can act as a risk assessor and stake capital in the form of NXM to open up available cover. And to drive down the cost of price. And members can use their NXM to participate in governance, and members can use their NXM to act as a claims assessor in the claims assessment process. So through these different ways, we have a community that essentially does most of the operation within the mutual to ensure that we can offer cover to members. That members are sharing risk with one another. So if there is a loss event, that for risk assessors, that loss is shared among risk assessors. And so historically, for payouts that we've had, like the Yearn yDAI vault payout that we had, I think the— was roughly like 9.6%, um, across all risk assessors. Their NXM was burned, um, 9.6%. of their stake on Yearn. So instead of losing 100% across the board, risk assessors balance that risk versus reward. They earn a share of premiums from COVID sales, and they run the risk of having their NXM burned if the protocol custodian or yield token cover product they're staked against results in a claim being paid out. So as a risk assessor, you stake capital because you think that a protocol or a custodian is trustworthy and that their code is bug-free, and you run the risk that if you're wrong and a claim payout happens, that some of your capital will be burned. But because we share risk across risk assessors, that risk itself is minimized unless there's, you know, a catastrophic loss event. So it really fills a need within the space Given that, you know, in the last year I think we saw, um, $2 billion in exploits that weren't rugs or anything like that. I think that number is always fluid too, depending on what report you read, but I think the last I saw it was between $2 and $3 billion.

Okay, and I noticed that you, you, uh, tweeted about this. There was the first pool-together, uh, contract, is it called, that you that you sold recently?

Yeah, it was the first cover buy for PoolTogether V4. So historically, Nexus has listed PoolTogether, I believe, from the start of the protocol. So we had PoolTogether V2, PoolTogether V3, and now PoolTogether V4. I believe we had the original PoolTogether, but I'm sure that was phased out once we got to PoolTogether V3. But now we have PoolTogether V4, and as risk assessors stake NXM against PoolTogether V4, the protocol cover, that will drive down the cost of coverage. And the more NXM that's staked, the more available cover up to the global capacity limit. Which would be 20% of the minimum capital requirement. And I can talk about the capacity limits and some of the mechanics behind the mutual in a little bit more detail too.

Yeah, so what I saw was somebody basically covered like $70,000 to $80,000 for the next year, and that, and that cover cost them 1% of it, right? It was around $800. Is that, is that typical coverage for PoolTogether buys?

You know, I think it, it depends. I know in PoolTogether V3 we saw varying amounts of COVID buys. Um, I'll look on the Nexus tracker to kind of give you an idea, but I know that I saw, um, like 7-figure cover buys for PoolTogether In the past. Let me see here.

While you're doing that, the reason I'm thinking about this is because I'm using— I use— I'm a freelancer, I do consulting, and so I get paid and, and I need to keep my tax money in a place that is, is, you know, that I, that I feel is safe and, and I want it to earn interest. I don't want to, you know, I would love to get some sort of yield from that. And so PoolTogether provides me that. It's a really fun way to do that. I support the product that I'm working with. I really care about PoolTogether. I'm part of the community. But then I'm like, oh wait, so then if I, if I cover that, it's really just— I mean, it's a couple prizes really in PoolTogether compared to a year of, of, of just feeling safe and snuggly knowing that I'm covered by Nexus Mutual. So I thought that was an interesting— I thought that was a fair price for what I saw from that one cover that, that you tweeted about.

Yeah, so currently the annual cost of coverage is 13.76%, which is still on the higher side. The minimum cost is 2.6%. One way that you can reduce the cost of COVID is by taking advantage of the WNXM discount, because WNXM trades at a discount to NXM, but you can pay for cover premiums with NXM So you can essentially reduce the annual cost by 50% by paying with NXM when you buy WNXM and unwrapped NXM. But I think it would be helpful to talk a little bit about the protections that are offered with protocol cover. And what I can do before I get into that is just talk a little bit about the, the way the mutual operates and talk a little bit about capacity limits and then jump into the protections that protocol cover offers because those 2 are somewhat related. When members are getting involved and they're buying cover or they're contributing capital to the capital pool, it's important to talk about the flow of funds within the mutual. So whenever someone buys cover, whenever someone buys NXM through the bonding curve, or when our capital pool investments grow, that adds capital to the pool. And there is our minimum capital requirement, which right now is 162,425 ETH. And the minimum capital requirement is the minimum amount of funds to be very sure that we can pay claims should a loss event occur. The bonding curve itself controls the capitalization levels within the mutual. So if there were a loss event and 20% of capital flowed out of the pool, the price of NXM in terms of ETH would move down the bonding curve and the price would reduce, which would incentivize capital to flow back in to recapitalize the pool back up to that MCR level of the MCR ratio of capital in the pool over the minimum capital requirement in terms of ETH. So that would get us back to that 100% level. And as more premiums flow in, as investment earnings grow, as people buy NXM to the bonding curve, the capitalization level can rise above the minimum capital requirement. And at that point, members would be able to swap their NXM for ETH. But when the minimum capital requirement ratio is at or below 100%, the bonding curve prevents people from swapping NXM for ETH. So again, we can be very sure that there's enough capital to pay claims. This is important from a cover holder's point of view because you want to know that if there is a loss event and you file a claim, that there's enough capital backing your covered policy. And the way the mutual is designed, we have controls over the capitalization levels so that we can ensure and maintain adequate levels of capital. So that's an important thing to remember. Another one would be the capacity limits within the mutual, and you can think of this as the way the mutual compartmentalizes risk from any one Protocol custodian or yield token cover product. So there's 2 limits. One is the specific risk limit, which is the capacity factor times the amount of NXM staked, and that's what determines the cost of COVID and the available cover. So we can only underwrite so much cover depending on the amount of NXM that's staked. The other one, the global capacity limit, again, is that 20% of the MCR. Which is, I want to say, 32,420-something, but I could be wrong, so I'll do that calculation real quick so I'm not just guessing. Yeah, 32,485 ETH worth of coverage. That's the max amount if the maximum amount of NXM is staked against a protocol. that the mutual can underwrite. So this limits the amount of risk any one protocol or custodian or yield token cover product poses to the mutual. So those are the things that underlie the actual COVID policies to give users the confidence that should a claim event happen, we have adequate capital and means to pay out claims. With that being said, I can dive into protocol cover, but let me know if you have any questions.

I do. What's your main— what's your largest cover or like protocol that you cover right now? The most covers per protocol?

Oh, that's a great question. There's a few that are really high in demand. Curve historically has always been high in demand. We usually have the maximum amount of NXM staked against Curve, and a lot of times there's not a lot of additional capacity. But lately we've seen a lot of demand for Anchor protocol cover, and we've seen a lot of demand for Convex protocol cover because those are 2 places where people can get exposure to attractive yields. So those are very popular. And then our yield token cover products for Convex, specifically the MIM-Curve pool on Convex, is also very popular.

Do you happen to cover OHM for when somebody sells $11 million of their stake?

No, so we don't cover market risk, and that would be something where derivatives would come into play. I won't speak to derivatives because I think that that's a dangerous thing for a novice to get into, but I can say that market risk is separate from smart contract and technical risk.

That was my, that was my technical joke. But, but okay, so, so really you're just going for hacks, right? So like, so Curve, if Curve, somebody, some malicious actor infiltrates and is able to like pull some sort of hack, I'm not, I'm not a hacker, I don't know what that would be, but it would have to be at the protocol itself. And it wouldn't be at any sort of like, you know, handing your seed phrase to somebody, like, you know, uh, any, any sort of like, oops, I sent it to the wrong ETH address, things like that. It's just protocol specific, correct?

Protocol Cover is, yes. Um, Yield Token Cover does provide protection along the full stack, and I can talk about that in a little bit. But first, let me outline what is covered by Protocol Cover, and then I can cover some of the things that aren't covered, and then give an explanation as to why we can't cover those kinds of risk. So with Protocol Cover, this was an improvement upon our flagship product that we offered, which was Smart Contract Cover, but some of the wording was a little narrow. And so when we moved to Protocol Cover, we widened this to cover use, uh, different use cases or different case studies of loss events that weren't covered under the previous cover wording but were risks that we wanted to cover to adapt to the market to best serve the members of the mutual. So if code is used in an unintended way that leads to a loss of funds, that's a covered event. So this would cover any kind of logic error, a missing sanity check, the major bugs that can exist within a protocol that can lead to a loss. It could be a missing protection or reentrancy attack. And what's unique about this one is in our previous cover wording, it was a hack that took advantage of code within a protocol smart contract system. But when we widen it to unintended use of code, right, code being used in an unintended way, We allow for other things like reentrancy attacks on a token that's deposited within a protocol. So if there's an ERC-777 token that's deposited into something like Cream, which we saw there was the reentrancy attack earlier in 2021, I think it was in August, and that was covered under protocol cover, we just didn't have anyone that filed claims. And I just dropped in the protocol cover wording too, if anyone wants to look at that along with me. So we widened that language to cover different kinds of code being used in unintended ways within one smart contract system. The other one that we did was economic design failure, and this is economic design failure resulting in the unintended confiscation or seizure of funds deposited into the designated protocol for either collateral, liquidity provision, or staking purposes only. And what this says is if there is an event like the MakerDAO Black Thursday event, which was the case study for this specific provision, and this is designed to cover those edge cases where there's a loss, but it's not directly due in part to code being exploited, but more of an economic exploit. So with the MakerDAO Black Thursday event, it was kind of a perfect storm. Prices were dropping very quickly, the Chainlink oracles were doing their jobs, but there was a little delay because gas fees were incredibly high on the network at the time. But that's not what led to the loss. What led to the loss was gas costs were prohibitively high, so the keepers, or the people that liquidate Lots within Maker were disincentivized from participating, so there were only 1 or 2 liquidators that were operating, and they were able to submit 0 DAI bids on ETH lots, and they were winning, which means they were able to win ETH and providing no capital in return. And this created a situation where there was bad debt within MakerDAO, and this was something that was talked about pretty widely, but this was something that wasn't covered because there was really— there was no unintended use of code, there was no hack, this was just an economic design failure within MakerDAO. They've since addressed that and made protections for that, but when unique things like that happen, we have that protection, and that's the protection that ended up covering the Cream V1 economic exploit that happened in October as well. And the other one is severe oracle failure, where the oracle price is deliberately manipulated so that it's outside the observed market rates or materially different from the intended data source. Oracle risk is another big one. There were so many flash loan attacks that happened in 2020 and even early 2021 that resulted in a loss of funds. What someone can do, like with the, um, yDAI vault hack is they can create an imbalance in another system where funds are routed through, and they can use arbitrage to drain out funds. Now, this was covered under smart contract cover because there was a protection that was on, um, that was supposed to be within the Yearn yDAI vault, but they had changed some parameters to incentivize people to move to the V2 vaults. But there are other things like the Harvest flash loan that happened in 2020 And really a variety of different attacks where there was a centralized oracle source for that protocol. So in this case, Curve was an oracle source for Harvest, and the flash loan was used to create an imbalance in the 3Pool so that, I believe it was DAI that was devalued. So then now somebody can go through, swap USDT, get an outsized amount of DAI, and then use their flash loan to bring everything back into balance within Curve, but by that time they've drained out a significant amount of funds from the affected protocol. So we cover this as well. So either someone manipulating the price of an asset from a centralized oracle source, or another thing like a TWAP attack, or just latency from an oracle where it's not updating when it should be, which creates an arbitrage situation for users. And then a governance attack. Now, there hasn't been a governance attack that's led to a loss of funds that I'm aware of yet, but that is also a risk in the space since governance dictates so much of what's happening, especially if you look at Curve and, and Convex and the voting weights there. So those are the main protections. There's some other language there that just defines what a designated protocol is, um, and then talks about the cryptographic evidence or proof of loss that somebody has to submit. So those are the main provisions of what is protected, and that represents the major risks within DeFi that lead to losses.

I wanted to know about the governance attack. Is a governance attack then, um, basically— I, I, this is my first time hearing that term, so I would just assume it would be that somebody gets enough, um, gets enough stake, you know, or whatever, uh, governance power, voting power by, by, uh, token, and then they're able to propose and vote on and pass something that would affect the protocol. Is that, is that what that is? That's my guess.

Yes. So in theory, let's say that a group of people that had a enough of a majority of UNI tokens that wanted to put a proposal up, pass that proposal through the different stages in governance, and that proposal allowed for that group of people to remove funds from within Uniswap smart contract system. So it could be that, it could be a variety of things, but basically any small centralized minority that gets a majority of governance tokens that can push through a malicious proposal that results in a loss of funds for users within that protocol. So if you look in the COVID wording that I've included, exclusion under the point number 6: any events or losses due to phishing, private key security breaches, malware, or exchange hacks, or any other activity where the designated protocol continues to act as intended. This essentially means that if you have a wallet that's compromised because somebody got a hold of your seed phrase or somebody tricked you into providing an approval and they were able to drain funds from your wallet, that, that's not covered. And the reason that's not covered is it's impossible to verify who has removed funds from that wallet because there's no KYC and we're all operating on an individual basis. with nothing that really ties us to anyone's wallet, it is possible for, for someone to say that their wallet was drained when they just moved funds to a different wallet, and there's no way for us to verify that. So that would lead to a situation where if that was covered, somebody could essentially bankrupt the Mutual, and we couldn't fulfill our mission to protect more users in DeFi against the major risks that are present within this space. So that's not covered just because we can't verify whether or not a claim is valid. The next one is any events or losses where the designated protocol was deployed primarily for the purpose of claiming on its protocol cover and not for real usage by customers. This would be if someone deployed a protocol, put funds in it, and then basically rugged themselves just to get a claim payout. And that's just in there because, you know, we wouldn't cover those kinds of things. But it's, again, it's impossible to determine if someone has rugged themselves. And there is one later, which would be number 11. It says any events or losses resulting from the owners or controllers of the designated protocol confiscating or stealing funds from users in line with the permissions of the designated protocol, irrespective of the individual or entity that has access to the private keys. of the owner or controller accounts, which is our rug pull exclusion. We can't cover rug pulls for the same reason that we can't cover wallet hacks, because it's impossible for us to verify who rugged a protocol, if it was a rug, if it was, um, somebody within the protocol that no longer worked there. It's not possible for us to verify the source of a rug and who actually pulled it off, because a lot of times there's people pointing fingers at each other. So that's something, again, we can't verify who rugged something. And in essence, somebody could rug a protocol and take out a large amount of COVID on it and then file a claim. And again, we can't protect against that. So that's not something we can cover. And then we have a provision in here Any events or losses that occur during the COVID period if it occurred before the COVID period began, which just means that you need to hold cover at the time of an exploit. So you can't lose money and then buy a COVID policy and file a claim. The next one would be if there is a known vulnerability, right? A public bug disclosure or warnings that were related to an event that were made before the COVID period began. So if there's a known vulnerability that leads to a loss, that's not something that we can cover because it's a known vulnerability. Somebody could exploit that. And that's something specifically, um, with protocol cover for Rari Capital for the Fuse markets. We can't cover oracle risk because it's not uniform across the Fuse market. Somebody can set up a weak oracle source and then there could be a TWAP attack on a Uniswap pool That ends up resulting in the funds within that Fuse pool being drained. Because it's not the protocol setting up the oracle source for individual Fuse markets, but individuals who set up those themselves because they're permissionless markets, that's a known vulnerability. There's a disclosure about that in Rari's Fuse market documentation. And so that falls in line with our exclusion here. We can't cover that because it's a known weakness. And then the other one is where a protocol is a fork of a parent protocol that has a known vulnerability in it, which is essentially the, the same exclusion as above. So we can't cover those kinds of things. Number 6 kind of falls in line with front-end attacks because anyone can deploy a front end and have a malicious contract or a malicious EOA that somebody approves infinite approval for. You can look in your wallet and verify the contract that you're signing against. MetaMask has the capability. I use Grid+ and tag the contracts that I'm interacting with for that purpose. So you can catch that, but if you don't and you approve a contract or an EOA to have infinite approval over the DAI or ETH in your wallet, somebody can drain your wallet. This doesn't directly impact the smart contracts. In fact, it has nothing to do with the smart contract system, but instead this is a vulnerability from the front end, which is separate from the protocol. Most, like with PoolTogether, the front end that, that users interact with, it makes it easier to access the smart contract system, but a user could go in at the smart contract level and deposit into PoolTogether without ever interacting with the front end. People can spin up multiple front ends. There's multiple front ends for Uniswap, and if somebody creates a malicious one that's not really a part of the project at all, that's not something we can protect because somebody could put up a malicious front end for the purposes of filing a claim. So it falls in line with we can't verify who created it and who actually established a malicious front end. And somebody could abuse the system, which again could lead to insolvency within the mutual. So most of the risks that we can't cover are because we can't verify whether or not a claim is valid or if one's fraudulent. And if we allowed those risks to be covered, it would likely lead to the insolvency of the mutual. And, you know, that would prevent us again from being able to protect more users in DeFi.

I'm learning so much. This is the PoolTogether Community Podcast subtitle: I'm learning so much. Um, so Brave New DeFi, I would love for you to walk us through getting coverage for a protocol like PoolTogether. What would it be? What is it like for somebody like me to go through and get coverage for that? And, and I've also noticed that you also do, um, custodians like Coinbase and like Kraken and, and, you know, those sorts of things as well. So that's, that's interesting. Very cool.

Yeah, so I— we offer custody cover, which protects your deposits when they're in a custodial account. I can include the types of COVID section from our documentation here. But I also dropped in the how to buy cover walkthrough that we have in our documentation. So currently, to become a member of the Mutual, you have to go through KYC. That is something that we're, that we're currently in talks about, so not quite removing KYC at this point, but Operation Wartortle is an ongoing exploration of transitioning to a stateless DAO. We currently have a bunch of AMAs about that and discussions about having— transitioning to the next step, which is an intermediate step. And then once we transition and do that, then we can have a conversation about whether or not we want to keep or remove KYC. So that provision might not always be there, but currently you have to go through KYC to become a member. When you do that, your Ethereum address is not connected to your name. Your name is kept on a publicly available membership list, but it's not associated with your address. The default address, physical address, is the Nexus Mutual office in London, and the only way somebody could get that list would be going through the proper legal channels, which aren't advertised, and then paying $5 million for a list of names. To date, no one's ever done that. So you wouldn't be doxxing yourself by becoming a member, but if you're a member and you buy cover from the Mutual, you would go into the dApp and then you would go under the COVID menu, and then you can see the protocols, custodians, and yield token cover products, and you can filter between those. You can also search for the protocol you're looking for. So if I go into the dApp and I look for PoolTogether, I'll be able to see it. I'll link the dApp in here too if anyone wants to jump in there and look. But when I see PoolTogether V4, I see the chains that are covered, so Ethereum, Polygon, and Avalanche. Protocol cover provides protection for assets deployed in a protocol regardless of chain that it's deployed on. So if you have a deposit in PoolTogether V4 on Ethereum, Polygon, and Avalanche, that would be covered with one COVID policy so long as you have the right covered amount, or you can have one in any individual chain and that one COVID policy will protect you. You'll pay the annual cost, which again is dependent on the amount of NXM that's staked. Currently the yearly cost is 13.76%. There is 1.5k ETH in capacity, or 4.7 million DAI, and if you click on get quote, you can go in and look at your options for buying cover. Here we've got a disclaimer that you can save 54% if you take advantage of the WNXM discount, and there's some instructions about that, but you would go in and change your quote details. So The turtle is kind of our icon because, yeah, slow and steady wins the race. We are very deliberate when it comes to looking at security, making sure everything's safe. But along with some of the updates that we're looking at, Nexus V2 is gonna be a really comprehensive update. And again, I can get into that once we talk about some of the COVID products. But yeah, so once you become a member, you can go and buy cover through the mutual. Filing claims is relatively simple. I will drop that section of the docs in too for anyone that wants to check that out. But essentially, you provide proof of loss. Providing proof of loss for a loss— like, let's say that's on Polygon, because you would file your claim on Ethereum— you would just connect to your affected wallet, and it doesn't necessarily have to be your whitelisted membership wallet. It could be another wallet. When you go to provide proof of loss, you can connect a separate wallet and then provide proof of loss by sending a zero-value transaction or signing a transaction to prove ownership over your wallet. But yeah, so the steps for how to file a claim are included in the chat there. And well, I can talk a little bit about Nexus V2 and what we're working on. So currently with Nexus V1, the way it works is members go in and they can buy cover for themselves, but we're looking to solve for better efficiency within the mutual, and we're looking to solve for better distribution models. So what we're going to do instead, because we know that a lot of members aren't technically proficient, and assessing risk can be really intimidating. So within V2, we'll allow for syndicates to form, and the syndicate on a very simple level is a pooled fund of NXM. And so anyone can delegate their NXM to one of the syndicates that's available. Each syndicate will have different different staking allocations. So they'll determine risk and they'll stake against different protocols. They'll determine the staking weight and allocation. And these will be people who are subject matter experts and know more about smart contract security. So on a basic level, you have a syndicate, which is someone managing StakeDexM. On another level, you could have somebody that's acting as a broker for the mutual. So someone like an ArmorFi or an iTrust Finance, and they can have their own front end, be separate from the mutual, but build on top of the mutual's infrastructure. And then the third one would be a protocol-run syndicate where a protocol manages NXM and stakes against underlying yield sources or risk. And then they would have an integration, so they would earn a management fee for managing That's staked in XM, and they would earn a commission on cover sold. Because in V2 pricing will be brought on-chain, it'll be a lot easier to integrate with the mutual because you can call a contract to buy cover. So you can have an integration and run a syndicate, or you can have an integration and not run a syndicate. You would still get the benefit of a commission from COVID sales. But one of the coolest things about V2, in my opinion, is that Nexus Mutual becomes a marketplace for risk on-chain. Syndicates can price cover and reflect the amount of risk they think any one protocol presents. So PoolTogether could price cover for AAVE on the lower side, whereas somebody else could think it's risky and they could price cover on the higher side. But there could be 2 different allocations. So PoolTogether could provide $50 million in cover at a lower price, and this person who thinks it's a higher risk might only have $5 million worth of COVID at a higher price. So you're creating a market that reflects the amount of risk that is perceived among syndicates, who could be auditors or other people that are subject matter experts. So that is one of the core innovations It is a better experience from a UI perspective for users, will optimize for gas. So there's a lot of cool stuff and we'll be talking a little bit more about that soon too. So there's your alpha for the call.

No, I love that. How do I as a single investor person get to get some of that juicy yield of that? Like some, can I, I don't, in V2, What's— how can I get a piece of that action?

So what's cool in V2, and some of the specifics are still being finalized, so I don't have accurate numbers, but I can talk a little bit about the mechanics. So the best bet to do if you're a new member or somebody that's looking into the mutual is buying WNXM since it trades at a discount to NXM. WNXM is priced by the market, whereas NXM is priced by the bonding curve, and that bonding curve is really important for controlling capitalization levels within the mutual so that we can back our COVID policies with trust from our established payouts, because to date we've paid out 1,426.43 ETH and 254,760 DAI in successful claims for past exploits. So we have that track record that creates trust among members, and we have that capital that backs our COVID policy. So that's really important. But you can get WNXM, and in V2, these syndicates will have a little bit of a different structure than we currently have now. So now, when risk assessments are acting, when someone buys cover, 50% of the COVID premium is shared proportionally among risk assessors at that time. But in V2, if someone buys cover for a year, their premium will be streamed over the course of a year. So we'll actually be able to display APY within the different syndicates. So you can allocate based on risk, or you can allocate based on returns. And again, that comes down to your individual risk profile as a member.

That's really encouraging. It's very cool. Okay, so if we could, is there anything else? Because I want to move on to just a couple of the whole entire space questions. But anything else that you, that you wanted to talk about Nexus Mutual that you haven't mentioned yet that you think is pretty key to PoolTogether community members?

I mean, I think there's an opportunity when V2 comes out for PoolTogether and Nexus to work together and be a little bit more closely aligned, and it would be beneficial for both our protocols. But I do think when V2 comes out, that it'll be a lot easier for members within the PoolTogether community to access Cover. So there could be a direct integration where PoolTogether earns commission on Cover sales and people can buy Cover at the point of sale when they're depositing into one of PoolTogether's prize pools. So that's really exciting.

What are some trends that you're seeing in 2022 being, being on the side of the table that you're sitting and seeing all these protocols and evaluating risk and such? What, what should we be looking out for as a community?

So on the risk perspective, um, I'm very— and Torgan can talk about this too sometime, but Torgan has talked a lot about oracles, and oracles are something that I think about a lot too. And on the other side of oracles would be market risk, or the amount of liquidity that is available on-chain for any one asset. So PoolTogether is using Ondo and Fei's liquidity as a service program to boost up our liquidity for the POOL token, and this is really important. I think protocol-owned liquidity is an interesting concept that emerged in 2021, and we're still figuring out how that benefits protocols in 2022. So Tokimak Ondo. There's a few different services that are looking to solve for that, and I think that's something that's really interesting. I think that on-chain options are something I'm very interested in, just on a technical level. Like, Ribbon Finance's oracle solution that they have for tracking volatility on-chain is just really fascinating. There's a lot of stuff from a technical level that I just find really interesting. Another one would be notional finance because of my background looking at bond markets. I think a lot about building a very simplistic bond market where people can trade in and out of FCash positions for longer maturities between like 1 and 2 years. Um, but that's just kind of me geeking out on that. But I, I think, yeah, some of the biggest trends in 2022 will be— and I think one thing that I'm going to keep my eye on is bridging solutions and some of the risk That, that poses.

So Brave New DeFi, you are the, you are the, um, you know, the epitome of safety and security in crypto, but I would love to hear where you went astray. Where, uh, what are some of your biggest fails in your experience thus far?

Oh, I think thus far in crypto it would be not seeing the inherent value in something and selling before before it really rose up in price. So I'm one of those people that sold UNI on the early side. I was still in profit, but I definitely didn't catch it when it, you know, bumped all the way up past $30. I think missing some of those upward trends, I would say, is probably my biggest failure, but I'm a pretty risk-averse investor, so I've kind of been very diligent and careful in, in the stuff that I'm looking at. I'm not somebody who is a short-term trader for the most part. Um, part of that is just doing part because I, I am busy doing so many things, so I don't have enough time to, to track the market and set myself up for success. Though I have identified a lot of things that I haven't capitalized on, and, um, opportunity cost is a, is a horrible thing. I would say though, while the NFT market has really interested me and I think that there's a lot of really interesting use cases, for the most part I just don't have the head for NFTs. Like, I haven't been able to catch trends there because I think I'm a little— yeah, I'm very fixated on DeFi and some of the creative endeavors I wasn't able to And still, I'm kind of confounded at what ends up becoming a valuable trend in the NFT space.

I noticed that Nexus Mutual, they don't cover the NFT space, right?

So there's not much for us to cover at the moment. I think when NFTs can be used to collateralize loans or something like You know, NFTX, once there's enough demand there, that could be something that we list. But because most users are holding NFTs in their wallet, there's not really much for us to cover given that we can't cover self-custody within a user's wallet. We cover against smart contract and technical risk within DeFi, but not custody risk for, you know, custodying your own funds.

Gotcha. I'm, I'm pretty overexposed in the whole ice poker, decentralized games area, so I was wondering if I could get a little, a little safety and security, but that's not gonna happen. Got it. Um, hey, so I, I noticed you had this post in the PoolTogether Discord. I, I did a little research on you and you talked about how marketing budgets could use PoolTogether for no-loss marketing. Would you, would you— I'm really interested in that as a marketer. What was that idea?

Oh yeah, so when there was the delegated chance to win feature in V4, I got really excited Once we have the capability to delegate funds to multiple people from one wallet, that'll unlock a lot of benefits for us. From a marketing perspective, a lot of times people do engagement mining campaigns where they'll give someone a financial incentive to post or write a blog post about the protocol in question or a product that the protocol offers. But imagine taking $100,000 from your marketing budget and giving folks who provide, um, thought pieces or promote your protocol on Twitter, get the word out through grassroots marketing. Instead of giving them a token that might be speculative in nature and go up and down, you can delegate funds to them and give them a chance to win maybe over the course of a week, 2 weeks, a month. And you yourself don't have to spend money, but we know that with the right delegation over the right course period, it's very likely that somebody will win a prize and they'll win it in a stablecoin, which is likely in the long run more beneficial for them if they're just doing something to earn money through engagement mining. So I think there's a lot of possibility there. I also think that it's fun, right? writing up a blog post or putting something up on Twitter to support a protocol that you care about and then having the delegated chance to win. I think for me, PoolTogether has more than anything just been incredibly fun. It's fun to go and check every day to see if you won. I think the dApp itself makes the experience fun where you're waiting for the treasure chest to open and then, oh, you didn't win one day, and then one day when you do win, it's like fireworks go off, you know. It's just really exciting. So I think that experience itself would be something really powerful to use from a marketing perspective while minimizing your own marketing costs.

Let's finish out this episode 5 of the PoolTogether Community Podcast with what is your biggest win in crypto? What have you— what is like written— what will be written in your biography in the chapter on crypto as the key event for you, or the biggest win, the biggest rake that you've had?

You know, my biggest win in crypto isn't anything from a financial point of view, in my opinion. My biggest win is that I get to work here full-time, and I get to work with some of the smartest and most talented people I've ever met in my entire life. And I get to do this from the comfort of my home, uh, which just means I can justify working longer hours. But I mean, for me, that's my biggest win. When my family— I was kind of in a transition period and my family asked what I was doing and I told them, well, I think I'm going to take advantage of this opportunity and see where it goes. And most people get their start by proving themselves within DeFi before actually getting hired and getting paid. So demonstrating value and then getting hired. And yeah, my immediate family was not super happy about it and I was like, You're just going to trust me. I know what I'm doing. And I ended up turning, you know, this passion and my intellectual curiosity into a full-time job. And I love it. Some days might be stressful, but I'm just very grateful to be a part of all these communities and get to hang out with cool people like yourself, everyone in PoolTogether, everyone in Nexus, and everyone in Llama. So DeFi is just a really incredible space to be in. I know that's a hokey answer, but that's my answer.

No, and that's, that's what we're all about. I mean, that was the thing that drew me in, was, was, uh, it wasn't the get-rich-quick shilling and crypto Twitter. It was like coming to a Discord like PoolTogether and seeing people being like really nice to each other and generous with one another. That kind of counteracts that, that, you know, predatory nature of like, how can I get the fastest yield possible? Now, uh, the community is, is, is what sticks. It's what keeps you here. So Brave New DeFi, thank you so much. I learned a ton. I'm gonna have to go back and look at my notes. I'm gonna have to go back and listen to this a couple more times. I'm excited to edit it so I get to listen to it again. It really, uh, I wasn't thinking in this space.

It was really great to be on this podcast. Uh, wonderful talking with you, wonderful sharing information with folks in the PoolTogether community. You know, I'm always around if you have any question. If you have any questions, tag me in general, tag me in the Treasury Workgroup channel, ask me anything. Feel free to send me a message. I'm always available if folks have questions. So again, thank you so much for having me. I enjoyed this immensely.

Thanks for joining us on episode 5. Again, this is the PoolTogether Community Podcast. None of this was financial information. Okay, it wasn't. We're not giving you advice. It's— we're just learning together in this crazy space we call crypto. Thanks for listening. Thanks for listening to the PoolTogether Community Podcast. You can visit pooltogether.com to deposit, and we'd love to hear what you thought about today's episode, so visit the PoolTogether Discord and let us know.