DeFi Insurance Firm Nexus Mutual Makes Its First Payout Following bZx Attacks

FOR A RAINY DAY: Nexus Mutual members voted to pay out two claims following the bZx flash loan attacks - a first for the DeFi insurance pioneer.

Not many people had insurance on assets locked up in bZx's Fulcrum, but after a bug yielded an exploit of its smart contract, a couple of accounts that did were covered by Nexus Mutual, the London-based crypto insurance company.

Nexus Mutual is an insurance company that works as a cooperative, so there's been lingering doubts that its members would actually pay out against valid claims.

"It's never good that people are losing money because there's a hack, but we are able to prove that the system works," Nexus Mutual founder Hugh Karp told CoinDesk.

In a mutual insurance company, policyholders govern the insurance pool.

The money in the mutual account is actually held by the people who hold the Nexus token, NXM. So the question has been: Will people vote to pay out of what is their pool of money when a valid claim gets filed?

If an exploit occurs on a smart contract that mutual members agree represents a failure of the smart contract, then policies get paid out.

Token stakes only get slashed if the Nexus Mutual board determines malicious behavior.

Mutual fund holders voted those down because at that point it looked like attackers had manipulated the oracles Fulcrum looked at, which didn't count as a failure of the smart contract itself, in Nexus Mutual's documentation.

Correction: The amount paid out by Nexus Mutual was roughly $31,000, not $500,000 as was previously reported.