When you deposit crypto assets into a single protocol, your funds are exposed to a variety of risks within that protocol.
When you have crypto assets deposited in a protocol that is deployed on Ethereum, an EVM-compatible network, or an Ethereum Layer 2, Protocol Cover protects against the following risks:
- Code being used in an unintended way (e.g., exploits, hacks)
- Economic design failure
- Severe oracle failure
- Governance attacks
In 2021, the previously offered Smart Contract Cover was deprecated in favor of the more comprehensive Protocol Cover, which was updated and designed to protect people against the most prevalent risks.
The major risks associated with DeFi protocols are caused by vulnerabilities in a protocol's codebase or vulnerabilities in a protocol's external infrastructure such as oracle failure or oracle price manipulation. Below is a list of the most common causes of protocol loss events.
Source: Igor Igamberdiev, The Block Research
For more information, read the full terms and conditions of Nexus Mutual's Protocol Cover.
Nexus Mutual's claims assessors use this cover wording as a reference when considering any claim.
Proof of loss
When you hold Protocol Cover and suffer a loss of funds, you can file a claim, as outlined below, and claims assessors will review the claim submission to determine whether the claim is valid.
For Protocol Cover claims, on-chain proof of loss is required. You will file a claim and either sign a transaction using your affected address or send a 0 value transaction with your affected address to prove you own and control that address.
Once you prove that you own and control the affected address, claims assessors can review the on-chain history associated with the address to determine:
- If funds were deposited when the loss event occurred
- If the cover was active when the loss event occurred
- If you suffered a loss of funds and, if so, the amount of funds that were lost
After an exploit occurs, you will need to wait 72 hours for the cool-down period to pass. The cool-down period applies for Protocol Cover claims.
- If you hold Protocol Cover at the time the exploit occurs, you can submit a claim with supporting evidence, otherwise referred to as proof of loss.
- You will choose to either sign a message from the affected address or send a 0 value transaction from the affected address to prove you own and control the affected address.
- You will be able to include written details, links to supporting documentation, and/or upload screenshots or other files in the Incident Details portion of the claim submission process.
- Claims assessors will review, discuss, and vote to approve claims where proof of loss shows that you have indeed suffered a loss of funds.
- If the claim is approved, you will be able to redeem your claim payout.
- If the claim is denied, you will be able to file another claim with more supporting evidence.
For a review of the claims assessment process, see the Claims Assessment section.
Protocol Cover claim payouts
Members have paid $8.24m to cover holders who suffered a loss due to past exploits and technical failures.
To review Nexus Mutual's past claims record and individual case studies, you can see the Claims History section.