A DeFi insurance protocol has raised more than $2 million from the sale of its native tokens to several angel investors.
Nexus, a decentralized project that covers “smart contract failure,” secured $2.7 million in funding to increase the coffers of its foundation, a not-for-profit organization tasked with selling NXM tokens and oversee the core development of the project.
Raising $2.7 million
The strategic round was led by Collider Ventures with support from Blockchain Capital, 1confirmation, Version One, Dialectic, 1kx, and additional angel investors.
Collide Ventures’ founding partner Adam Benayoun regards Nexus Mutual as an important part of the DeFi ecosystem.
“We see Nexus Mutual as an indispensable pillar of DeFi … and decided to take a proactive approach to support the development of the platform,” he said.
Hugh Karp, the CEO of Nexus Mutual said the foundation was allocated tokens to sell to finance operational costs.
“When Nexus launched, it granted a bunch of NXM tokens to our foundation, which has gradually sold them to cover operational costs. We expect to wind down the foundation as the protocol becomes more stable and fully decentralized.”
The $2.7 million-token sale took place in December last year, and the tokens were sold at the market value of that time, said Karp.
Trading at a discount
Wrapped NXM (wNXM) trades at a discount to NXM because the minimum capital requirement (MCR) is under 100%.
NXM tokens are not traded on exchanges and can only be bought on the Nexus Mutual platform where buyers have to complete KYC. Purchasing wNXM does not require KYC.
When the MCR is at 100%, users can no longer sell NXM to the Mutual. This drives them to the secondary market wNXM to sell their NXM tokens.
A growth period
2020 was a good year for the insurer. The protocol’s pool fund increased from $4 million to $100 million within the last five months of 2020.
Karp said that they are planning to sell $1 billion worth of cover to more than 30 protocols.
In mid-December last year, a member of the protocol hacked Karp’s personal address and drained NXM tokens worth more than $8 million.
At 9:40am this morning @HughKarp's personal address was attacked and drained by a member of the mutual. Only Hugh’s address was affected in this targeted attack and there is no subsequent risk to Nexus Mutual or any members.https://t.co/72nrIDpKW6
— Nexus Mutual 🐢 (@NexusMutual) December 14, 2020