KIP Draft: buy cover to protect CVX investment

Hi everyone,

Thanks @hazard and @destroyr for the encouragement in Discord to go ahead with this KIP-draft.

TL;DR

* We’re (early) in DeFi, KeeperDAO massive investment in CVX should be covered.
* With Nexus Mutual, protection is available for less than 1,5%(*) per year.
* For a very small share of expected rewards, the DAO gets to keep its peace of mind.

Congrats! You’ve been one of the very first DAOs to fully recognize the importance of bribes on Curve pools. But more importantly, to act on it!

Your community had a very rich and interesting debate in your governance forum regarding KIP-5.
This will help position ROOK strongly in the Curve ecosystem.

With KIP-5, you are “about to start” investing part of your DAO treasury in CVX.

And, to achieve your objective, a large share of the investment will probably be locked on the Convex protocol as vlCVX.

Convex (v1) is a well-known DeFi protocol, which has mastered the concept of flywheel on top of the Curve ecosystem.
There seems to be a good level of trust within the crypto community.
However, we’re still early in web3. No matter how well audited, there are risks interacting with any protocol. Also, I noticed for Convex that their most recent DeFi-Safety score still lags, at 46% (70% needed for a pass…)

Let’s go through a few key questions together:

Q1: Where should the DAO look to protect this investment and get some peace of mind?

First, some words about Nexus Mutual (I am a member of the Nexus Community).

  • Nexus provides different types of cover on investments in crypto assets.
  • As a pioneer in the space, it is the number one protocol used by investors to insure their holdings (currently above 700 M$, the TVL is 6+ times larger than that of number 2).
  • Nexus has a strong ecosystem of stakers and risk assessors, and is known to pay legitimate claims (cf. recent C.R.E.A.M hack)

One of your members gave Nexus some good praise in your Discord.

Many large investors rely on Nexus to protect their holdings, for example in the Curve or Yearn ecosystems (to name 2 of the largest protocols Nexus offers covers on)

Q2: How (easy is it) to act on it for your DAO?

First, go to the Nexus app.

Have a member of your DAO sign up as a member on Nexus (KYC required)

// Important: this person ultimately should be able to show “Proof of Loss” (i.e. validate a transaction with the treasury wallet, to show a level of control over the wallet affected by the loss).

After that, it’s as simple as 1,2,3

  1. Go to Protocol Cover for Convex
  2. Select the amount you would like to protect (in ETH or DAI) and the duration
  3. Pay the premium of 2,6% per year (or consider wNXM for a 50+% discount)

Q3: Why this possibility to save(*) around 50% on your premium?

It is related to the discount of the market price of wNXM (wrapped NXM).
Nexus marketing lead did a great explainer in this blog post.

As the DAO is currently voting on purchasing wNXM on the market, with the aim to reduce this large discount…
I wouldn’t wait too long.

Q4: So, which amount and duration should you set?

Let’s say KeeperDAO quickly purchases 10 M$ worth of CVX, and vote-lock (or stake…) 100% of these tokens.
You can decide to protect your investment (all of it, or just a percentage) in USD-equivalent (DAI) or in ETH.

You can choose between cover durations of 1 month, 3 months or 1 year.

The premium can be paid in ETH or NXM.
// Remember the option to go down the wNXM avenue and currently pay less than half of the rate, with the benefit of the current wNXM/NXM discount.

Q5: What protection does the Protocol Cover offer?

It “protects assets within a protocol’s smart contract system”.

Nexus has focused on keeping the wording clear and concise.
I recommend going through the 4 pages behind the link above. As for each reputable cover protection, there are exclusions, 2 of which I would like to underline:

  • There is a “rug pull” exclusion…
  • The cover protects an investment which is interacting with a protocol; which means holding CVX tokens is not covered, only tokens staked, locked or invested within a protocol are covered (maybe just stating the obvious here).

Wrap-up:
Based on the large rewards expected on your CVX investment, buying cover NOW to benefit from a discount to protect this investment = no brainer + it's as EASY as 1,2,3

WAGMI
(more links follow in the replies below due to the limitation to 2 links / post)

Additional ressources:

You might have further questions than those addressed above.

Below are some links to good source material about Nexus.

Youtube: 2 good videos on Nexus protocol, how to purchase cover, the NXM token

  • Nexus Gitbook FAQ
  • Nexus Discord (Channels for #KYC, #wNXM, etc.)

2 more links and that’s it for today :upside_down_face: