Initiate Shield Mining on Nexus Mutual

Nexus Mutual now offers protocol cover for BarnBridge. This means that any depositor into any BarnBridge contract on any network would be covered in the case of material losses due to unexpected contract behavior.

Nexus Mutual determines the amount of cover available to be claimed by having Mutual members stake the NXM token in favor of projects they deem to be secure. The distribution of staked NXM is what allocates the Mutual's Ether reserves across supported projects and calculates the cost of insurance.

In order to incentivize Mutual members to stake NXM in favor of BarnBridge over more established incumbents, BOND rewards could be set aside to subsidize the risk of those who do so. This practice is referred to as "shield mining." A number of other protocols have pursued this strategy, including Bancor, Liquity, and BadgerDAO. The topic has been discussed in both the BarnBridge forum and Discord.

This Snapshot vote is two-fold:

1. Are you in favor of rewarding 10,000 BOND total over the next year to Nexus Mutual stakers?
2. If yes, should that 10,000 BOND be bought off the market, or taken from DAO reserves?

The following arguments have been made in favor of shield mining:

Nexus Mutual is by far the largest provider of cover in DeFi

10,000 BOND for a year could unlock 9-figures worth of cover

Insurance could attract interested but risk-averse TVL

The following doubts were cast regarding shield mining:

The best insurance rate possible would still be 2.6%

Other insurance solutions are coming online

My response to the concerns raised is that while protocol cover does not address the issue of insured senior SMART Yield deposits on its own (i.e. it would require subsidization for it to make sense for seniors), it should prove compelling for users of the DAO, the SMART Yield junior tranche, SMART Exposure, SMART Alpha, and SMART Secret over the next year.

The second part of the vote is whether you would like to see these BOND come from an open market purchase with accrued fee revenues or from existing DAO reserves.

The case in favor of an open market purchase:

Caps the cost of the program in $USD terms

Takes BOND off of the secondary market

Preserves DAO BOND reserves

The case against an open market purchase:

Would represent 20 - 25% of current DAO stablecoins

Purchase could be front-run

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Please feel free to discuss the proposal during the vote period on either the #Governance channel or the respective forum thread. Given the potential for split opinions on how to source the BOND, the core team will be participating in this Snapshot.