Nexus Mutual Joins Over 30 DAOs Using Bancor’s DAO Treasury Management Solution

Nexus Mutual, an Ethereum-based decentralized insurance service provider, has executed what’s thus far the single largest DAO deposit on Bancor’s Safe Staking system, an update on March 8 reveals.

Nexus Mutual locks over $2.2 million xNXM in Bancor

The distributed insurance provider deposited over $2.2 million in wNXM—the wrapped version of Nexus Mutual’s native token, NXM. It subsequently joins a growing list of DAO operators, including UMA, Paraswap, KeeperDAO, Harvest Finance, Request Network, and more who are increasingly opting for Bancor’s battle-tested DAO Treasury Management solution. This solution shields liquidity providers against the dreaded impermanent loss—an Achilles heel in automated market maker protocols.

Through Bancor’s Self Staking system, liquidity providers, including Nexus Mutual and other DAOs, can earn an above-rate yield on over 150 supported tokens through a single-sided liquidity system that’s cushioned against impermanent loss.

By early March 2022, Bancor was one of DeFi’s portals with the deepest liquidity on assets like Chainlink’s LINK, Synthetix (SNX), and other top DeFi tokens. By locking assets under the Self Staking program, liquidity providers earn a high yield of between five to 60 percent. In 2021, over $200 million were distributed to liquidity providers as rewards.

Nexus Mutual DAO to Earn High Yields

According to Hugh Karp, the decision to stake liquidity in Bancor is also part of their strategy to attract long-term NXM holders. In this arrangement, holders would earn high yields without necessarily liquidating their assets or participating in other DeFi activities, exposing them to impermanent losses.

Moreover, because there are no losses, the DAO will generate more revenue for its community, who also don’t have to worry about security blips since the network is regulated by the UK’s Financial Conduct Authority (FCA) and has no history of hacks or losses.

Bancor doesn’t require any maintenance, is battle-tested, and will ultimately drive higher income to our DAO and community due to there being no Impermanent Loss. We’re able to fund our pool with wNXM-only liquidity and attract loyal token holders as long-term liquidity providers without needing to sell tokens or issue incentives.

Tackling DeFi’ Achilles’ Heel: Impermanent Loss

In DeFi and crypto circles, impermanent loss is when the AMM’s rebalancing formula creates a divergence between the price of the same asset outside the pool and that locked by the liquidity provider.

Typical of a liquidity pool in an AMM setup, providers have to pair their assets to form a position. However, the ratio is dictated by the AMM’s price curve, which changes as the spot rate of the asset moves. Often described as an opportunity cost loss, impermanent loss can turn permanent and be realized regardless of the market trend.

Bancor is resolving the impermanent loss problem and increasing capital efficiency by allowing liquidity providers, including DAOs and token holders, to provide liquidity in a single-sided pool, all while earning a yield. At the same time, liquidity providers have full-price exposure to the native token.

Securing DeFi’s Future

Insurance is vital in DeFi and other crypto-powered solutions where billions of dollars remain locked. Nexus Mutual is a leading provider of decentralized insurance called “mutuals” that can cover against smart contract flaws, rug pulls, and other unforeseen losses. On February 21, 1.2 million Nexus Mutual members voted to transition to a DAO after the decisive Operation Wartortle Special Resolution Poll.