HOW IT WORKS
Tokenised membership rights in Nexus Mutual.
Membership rights will be represented by tokens. Tokens can be used to purchase cover as well as participate in claims assessment, risk assessment and governance. All funds raised from token purchases belong to members.
Nexus Mutual uses a Continuous Token Model. NXM price depends on how the mutual is performing financially.
NXM can be purchased and redeemed directly through the platform.
Token price rises when the mutual has adequate funds.
The MCR is the level of funds required to be very confident all claims can be paid.
MCR will have a fixed minimum value that will be set at launch.
It is a major component of the token model, influencing price and redemption conditions.
This is the full formula for calculating the token price in ETH.
A and C are constant values which will be calibrated at launch.
The mutual has adequate funds when the amount of money it holds (known as the "Capital Pool") is greater than the MCR.
The ratio of funds held to funds required is known as MCR%, which directly impacts the token price.
Token price rises when the mutual has adequate funds
When the Capital Pool decreases, so does the token price.
For example, when a claim is paid, the Capital Pool shrinks but the MCR remains almost unchanged, meaning the MCR% decreases, lowering the token price.
If funds are low, the token price lowers to re-capitalise the fund.
If cover is purchased, the size of the Capital Pool increases.
The MCR also increases, but in nearly all cases by less than the Capital Pool. Therefore MCR% increases, raising the token price.
As more cover is purchased, and the fund grows, the token price increases.
Each cover purchased increases the Minimum Capital Requirement (in Ether) by a small amount if the MCR is above a minimum level (set at launch).
As long as the MCR is above the minimum level, the token price increases as new covers are purchased and reduces when covers expire.
While most of the short term price movements will be driven by MCR% changes, the growth in MCRETH from cover purchases will be a long-term driver of the price, reflecting platform adoption.
NXM can be redeemed for Ether from the mutual.
NXM can only be transferred to other Nexus Mutual members.
Only Nexus Mutual members can purchase, hold and use NXM.