Members Vote to Upgrade Nexus Mutual Protocol's Token Model


Members Vote to Upgrade Nexus Mutual Protocol's Token Model

Earlier today, the Bonding Curve was replaced with the Ratcheting AMM (RAMM) and the Minimum Capital Requirement Floor (MCR Floor) was removed following the approval of NMPIP-209, where members voted with more than 1.18m NXM to approve the proposal. Over the last year, the Nexus Mutual community has worked together to develop a scalable solution that will allow members to freely mint and redeem NXM and overcome the MCR lock problem. 

NMPIP-209's execution is the culmination of that hard work.

Introducing the RAMM

The Ratcheting Automated Market Maker (RAMM) is a two-pool system built on top of the Capital Pool that allows members to mint and redeem NXM

The Nexus Mutual protocol has an updated mechanism that manages capitalisation and ensures all claims can be confidently paid should a major loss event occur. This mechanism is referred to as the Ratcheting Automated Market Maker (RAMM), a two-pool system built on top of the Capital Pool that allows members to mint and redeem NXM.

The Above Pool and Below Pool are the pools present in the system. These pools contain a defined amount of ETH liquidity paired with “virtual” NXM. This creates two internal pools, which have the same ETH liquidity: the NXM reserves in each pool are represented by a virtual NXM balance. The ETH and NXM balances change over time as NXM is minted and redeemed.

Learn more about the RAMM in the Nexus Mutual documentation.

Redeeming NXM for ETH

Members can mint and redeem NXM in the Nexus Mutual UI

With the RAMM's launch, members are once again able to redeem NXM for ETH in the Nexus Mutual UI. After launch, the ratchet will move the redemption spot price towards book value in just over a day, assuming there are no redemptions during that time.

Note: Only Nexus Mutual members can redeem NXM for ETH in the UI.

Initial State vs. Long-Term State Parameters

The RAMM launched with initial state parameters that provide an initial budget of 43,835 ETH, of which a maximum of 1,500 ETH is added to the RAMM pools every day to allow members to redeem NXM for ETH. When members redeem NXM for ETH during the initial state, the price of NXM will decrease but will move up toward the ratchet target at a speed of 50% of the ratchet target on a daily basis.

Once the initial budget is completely redeemed, the RAMM will transition from the initial state parameters to the long-term state parameters, which will change the maximum amount of ETH added to the RAMM pools every day from 1,500 ETH to 100 ETH and the ratchet speed from 50% of the ratchet target to 4% of the ratchet target.

To learn more about the initial state vs. long-term state parameters, read the Ratcheting AMM Whitepaper. You can find the current parameters outlined in the Nexus Mutual documentation.

Unwrapping to NXM

Members have the option to unwrap to NXM directly in the UI once they review and acknowledge the disclaimer

For the safety and security of Nexus Mutual Members, an option to unwrap WNXM to NXM is available in the UI. Before accessing the unwrap feature, members must review and acknowledge the associated disclaimer. To learn more about WNXM and the NXM Wrapper, members can review the information available on the Nexus Mutual DAO website.

RAMM Audits & Security

Before NMPIP-209 was posted on the Nexus Mutual governance forum, the RAMM smart contracts were audited by iosiro, the Mutual's long-term auditing partner. The iosiro team has worked with top projects such as Synthetix, 1inch, and Set Protocol; they have historically reported valid bugs found on Optimism, Polygon, Nethermind, Ondo Finance, Across, Alchemix, and others.

The RAMM mechanism also underwent an economic audit, which Chaos Labs conducted. Chaos Labs is an economic security auditing firm that provides services to leading DeFi protocols such as Aave, Compound, Curve, and Uniswap.

The following security measures were put in place before the RAMM was launched, and the Foundation Engineering team will closely monitor the smart contracts now that the RAMM is live.

  1. Circuit breakers in RAMM contract. The RAMM contract has been deployed with circuit breakers in the code, which limit the maximum amount of ETH that can be withdrawn and the maximum amount of NXM that can be minted via capital contributions over a defined period of time. The limits will be progressively raised over time, after careful monitoring of the system.
  2. Active smart contract monitoring with Tenderly alerts. The Foundation Engineering team uses Tenderly alerts to monitor for certain events within the protocol. Enhanced monitoring is in place for the RAMM contracts and any associated events within the protocol to ensure the Engineering team can closely monitor the smart contracts.
  3. Emergency pause functionality for RAMM contract. The Advisory Board has the power to enact an emergency pause on the RAMM contract should any malicious activity take place, which will prevent any minting or redeeming from occurring that would result in a loss of value for members. This power would only be used in an extreme situation and serves as a critical measure.

To review Nexus Mutual's complete auditing history and security measures, see the Audits and Security section in the Nexus Mutual documentation.

A Special Thank You to Our Members

Nexus Mutual is fully owned and governed by its members, and through their collective action, a discussion that started on our governance forum turned into a DAO-owned project with the following goals:

  • Bring the price of NXM used by the system and the open market price together again;
  • Allow members who wish to exit to do so directly from the protocol at a reasonable price;
  • Allow the protocol to capture capital when members wish to provide it; and
  • Create positive value for long-term aligned members.

We thank everyone who contributed to the discussion on Discord and the governance forum. A special thank you to the DAO R&D team, the Foundation Engineering team, iosiro, and Chaos Labs.

RAMM Resources