The capital pool is jointly owned by all Nexus Mutual members. The crypto assets that back NXM tokens are held in the capital pool contract. These assets are used to underwrite covers, pay out valid claims, and invest and generate revenue for the mutual. Members control the capital pool through on-chain governance.
There are five foundations that define how members share risk with one another. Those foundations represent the flow of funds into and out of the capital pool contract:
- Cover fees. All cover fees are paid into the capital pool in full. Cover can be purchased in either DAI or ETH terms, with the DAI or ETH flowing directly into the pool.
- Claims. All claims are paid from the capital pool in either DAI or ETH terms, as per the covers purchased. To review past claims, review the Claims History section.
- Buy NXM. Members can contribute ETH directly to the mutual to generate new NXM. Members can contribute ETH at any time, and any ETH contributed flows into the capital pool.
- Sell NXM. Members can redeem NXM for ETH directly from the mutual, but only when the minimum capital requirement ratio (MCR%) is above 100%. The "MCR lock" ensures the mutual has enough funds to pay valid claims.
- Investment Earnings. Members discuss, propose, and vote on capital pool investment allocations, which generate a return for the mutual. This is also called earning money on the "float" in traditional terms. All the investment earnings accumulate in the capital pool. Initially, the Nexus Mutual protocol held ETH and DAI in the capital pool, but members have allocated some capital to investment strategies.
For a detailed breakdown of Nexus Mutual's capital pool assets, see the Capital Pool and Ownership Dune Dashboard created by the R&D and Marketing DAO teams.