AMA - Hugh Karp of Nexus Mutual

September 21, 2020 ----- Tools from our sponsors to go bankless: 🌐 UNSTOPPABLE DOMAINS https://bankless.cc/unstoppable - GET A HUMAN READABLE CRYPTO DOMAIN https://bankless.cc/unstoppable 🌈 ZAPPER - ULTIMATE HUB FOR DEFI http://bankless.cc/zapper - ZAP INTO DEFI 💳 MONOLITH - GET THE HOLY GRAIL OF BANKLESS VISA CARDS https://bankless.cc/monolith 💸 AAVE - LEND AND BORROW DEFI ASSETS https://aave.com/ ----- AMA with Hugh Karp the Founder of Nexus Mutual Hugh Karp returns to the Bankless Nation to answer some of the question the community has from listening to his recent podcast! ------ Resources: Bankless Podcast with Hugh: http://podcast.banklesshq.com/31-nexus-mutual-to-billion-hugh-karp Read: How to assess the risks of a lending protocol? https://bankless.substack.com/p/how-to-assess-the-risk-of-lending Read: how to protect against hacks with Nexus https://bankless.substack.com/p/how-to-protect-against-hacks-with Nexus Metrics Tracker: https://nexustracker.io/ DeFi Dad Explainer Video: https://www.youtube.com/watch?v=rnzInsKPLR0 Rate the Podcast 5 Stars ----- Subscribe to podcast on iTunes https://podcasts.apple.com/us/podcast/bankless/id1499409058 | Spotify https://open.spotify.com/show/41TNnXSv5ExcQSzEGLlGhy | YouTube https://www.youtube.com/c/bankless | RSS Feed http://podcast.banklesshq.com/ Leave a review on iTunes https://podcasts.apple.com/us/podcast/bankless/id1499409058 Share the episode with someone you know! ----- Don't stop at the podcast! Subscribe to the Bankless newsletter program http://bankless.substack.com/ Watch Bankless shows and tutorials on YouTube https://www.youtube.com/c/bankless Visit official Bankless website http://banklesshq.com/ for resources Follow Bankless on Twitter https://twitter.com/BanklessHQ Follow Ryan on Twitter https://twitter.com/ryansadams Follow David on Twitter https://twitter.com/TrustlessState ----- Not financial or tax advice. This podcast is strictly educational and is not investment advice or a solicitation to buy or sell any assets or to make any financial decisions. Do your own research.

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00David Hoffman?

  The.

• 3:41David Hoffman?

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• 5:27David Hoffman?

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• 6:08Ryan Sean Adams?

  Bankless Nation, welcome to another Ask Me Anything. These episodes are for you to get your questions in. We've got Hugh Karp today, who is the founder of Nexus Mutual. Hugh, how are you doing?

• 6:22Speaker 02

  Very well. Great to be here again.

• 6:25Ryan Sean Adams?

  Awesome. Well, great. Great to talk to you twice in about a week's period of time. We had a fantastic podcast conversation with you that that came out on Monday. This conversation is really for the bankless community. So to ask you questions, we do these AMAs twice a month. So the second Thursday and the fourth Thursday of the month, they are broadcast live on YouTube. So you can ask questions on YouTube. Of course, if you are a member of the bankless inner circle in Discord, we will prioritize the questions you ask there as well. But this is our opportunity, really, as a community, to to come to Hugh and other protocol builders and interesting people in crypto

• 7:06Ryan Sean Adams?

  and ask the questions that no one else asks of them. So this isn't ask me anything. There are there are no rules, no questions you can't ask. We will do our best to to filter and moderate and get the best ones into Hugh in an order. And we do have about an hour time slot. So this will probably end about five minutes or so after the hour. We'll check in with you every so often with with a time update. Okay, those are the ground rules. Hugh, you ready for this?

• 7:37Speaker 02

  Go ahead. Let's go.

• 7:38Ryan Sean Adams?

  All right. First question, I thought this was an interesting one to start with. So this came from a bankless community member. Wants to know how you feel about the current yield farming craze.

• 7:51Speaker 02

  Yeah, good one. I mean, to me, it's it's temporary. But, well, I like there's some good stuff underlying it, but it's obviously a bit too crazy in some sections for my for my liking. I mean,

• 8:07Ryan Sean Adams?

  What's the good stuff and what's the bad stuff?

• 8:10Speaker 02

  Yeah, I mean, like, it's hard to draw that line. That's the problem, I think. I think I think fundamentally, it's cool because there's some experimentation going on, and especially about bootstrapping communities and giving ownership to communities and stuff like that. And I think that's really cool. So there's fundamentally some good stuff there. But I also think it's obviously going too far in in some places. And, you know, there's Obviously, potential for scams and rug pulls and all of that type of stuff. Everyone has to keep an eye out on. Um, so, you know, fundamental experimentation is really cool. Um, I think it will lead to some value, but it's obviously getting a bit too exuberant and crazy in some places. And I, I guess I'm more from a fundamental, um, economic perspective.

• 8:54Speaker 02

  So, um, and so, you know, it kind of jars a bit in some places with me, but I, I do acknowledge that there's some, there is some really cool experimentation going on underneath.

• 9:04David Hoffman?

  So in, in my mind, the, this whole yield farming craze is kind of like, it, it taps into that same energy of the ICO mania, right? But it's like a new, new and improved upgraded ICO 2.0, which I know is like, maybe, maybe that hits the wrong way. Because ICOs, the ICO industry or ICO, uh, phenomenon kind of has this bad rap. But as an, as an upgrade to the primitive of the ICO, how do you feel about it?

• 9:30Speaker 02

  Oh, it's definitely a lot better, but I still, you know, is, is that any good? Cause ICOs were pretty rubbish. Um, so, uh, so, you know, it, it, it, you're making something that was not so great, better. Okay, cool. But, um, then look, I mean, I, I do think there's fundamentally some really cool stuff with blockchain communities and giving ownership to communities. And I think if we can learn from it and take the best out of that, then great. Um, let's just not go too far and too crazy. And I, I think it's up to everyone that, um, is kind of in this community for the longer term to help point out where it's hopefully going a bit too far or, you know, to try and help people avoid some of the most stuff of it.

• 10:11Speaker 02

  So, yeah, um, anyway, that's, that's my view. Hard to draw a line exactly. I think some of it has value, some of it doesn't.

• 10:17David Hoffman?

  So here, the same community member asked a, a follow-up question about how you feel about shield mining. So I actually didn't recognize the term shield mining. I guess, you know, unless that's a misspelling of yield. Um, do you know what shield mining is? And if you do, could you tell us about it?

• 10:35Speaker 02

  Yeah, so well, I guess there's a few things going on, and maybe there's a few stuff, bits and pieces happening. Nexus is actually releasing something quite soon, next week, where basically other protocols can provide additional bonuses to Nexus stakeholders that stake on their projects. Contracts, so basically to bootstrap cover for a new project or something like that. So like the keep network with TBTC is gonna probably be one of the first ones similar to that, which is really great. So that's sort of-

• 11:08Ryan Sean Adams?

  You said keep with TBTC?

• 11:10Speaker 02

  Yeah, that's right.

• 11:11Ryan Sean Adams?

  Wow.

• 11:12Speaker 02

  So we're really looking forward to that. So basically, the idea is that Nexus stakeholders that stake on the TBTC contracts will be able to earn some bonus keep rewards. And so we think that's really kind of fundamentally, like it's actually doing something for the protocol, rather than just here stake some tokens and earn some random other governance token that you dump on the market, and maybe it has some value at a future point in time, you know, which is kind of a lot of what the yield farming stuff is. Not all, but some of it. And so anyway, so that's our version of shield mining. I guess that it may be confused with some of the like safe or cover stuff that's going on at the moment,

• 11:56Speaker 02

  which I'm not as close to exactly what's going on, but that's also, that's also a thing. So yeah, it can be a bit confusing, but the shield mining stuff we're launching, we're actually really looking forward to it.

• 12:11Ryan Sean Adams?

  Alright, so I just want to make sure I understand what shield mining is then. So basically, it's where Nexus would work with another protocol to provide some protocol rewards to incentivize insurance being taken out on those specific protocols. So with keep, what shield mining is doing is it's incenting additional coverage, cover for the keep TBTC protocol, is that right?

• 12:38Speaker 02

  Yeah, that's right. So like when when there's a new protocol that launches, like we can add it on Nexus, but to kind of bootstrap cover or in some capacity to start within a decent price, people have to stake against it. And so this is kind of a good way of kind of bootstrapping that initial staking, so that provides some additional incentives from the project team, which will open up some cover and allow people to buy some cover at reasonable prices. And then that helps the project because hopefully that gives them more users, because more users are happy to do it if they can buy cover on Nexus. So we think it's a very symbiotic way of working together. And it's a, to me, it's, there's actually a fundamental,

• 13:20Speaker 02

  it's actually doing something to help the actual projects rather than just, oh, here's another token that could be worth it.

• 13:26Ryan Sean Adams?

  Yeah, for sure.

• 13:27David Hoffman?

  So this seems like a mechanism to help projects like Keep to really solve the problem of like, the fact that no one kind of wants to be the first through the door, right? Like especially with tokenized Bitcoin and especially with Keep, which had some problems like getting out the gate previously, right? And like, and you know, tip of the hat to the Keep team. They're, the reason why they've, they've, you know, started and stopped and started and stopped and had trouble, like really getting that engine going is because of how conservative they are with their ethos, with their ethos and with their principles, right? Like they're trying to retain as much Bitcoin maximalist culture as possible in the code of Keep, right? And so that, and Bitcoiners are very conservative and probably don't really want to be ready to jump out the gate

• 14:10David Hoffman?

  with getting their Bitcoin onto Ethereum with TBTC. But it seems like this new incentive mechanism, which is a cross-protocol collaboration between, between Nexus and the Keep project, really allows to have more security for people who are willing to like be ventures, right? Who are really to go and go westward first ahead of everyone else. And Nexus is offering this early insurance, this early cover to people that are doing that, right? Which can really help TBTC get a lot of TBTC onto Ethereum quickly, which is really kind of what they need, right? Like especially projects in their early days, they really need that, that early success to generate that flywheel effect, right? Am I getting everything right here?

• 14:54Speaker 02

  Yeah, exactly. I mean, a lot of new projects will need early liquidity, whether that's early users in terms of TPC, or maybe you need a liquidity pool in whatever you define protocol you're building. And so to help attract that, it's often helpful to have some cover on Nexus, but you have to bootstrap that cover to start with. So it's kind of a good way of symbiotically working well with everything else. So hopefully, we're hoping for some decent success out of that on the Nexus protocol, but also helping define more widely, I guess, throughout this.

• 15:24Ryan Sean Adams?

  Want to ask another question. This one's coming in from Dap Lion, and this is maybe more fundamentals type question. But the question to you, Hugh, is Nexus Mutual fully solvent? So if all the claims are claimed at the same time, can the system respond? I bet you'll have a good answer for that and kind of clarify how Nexus works and how insurance works in general. What's your take?

• 15:48Speaker 02

  So the answer is no. And otherwise, you're effectively running a fully collateralized British market. And so basically, that doesn't work from an economic perspective. Insurance companies work because they massively under collateralize, and they basically rely on the law of large numbers that not everything's going to claim at once. So the probability of lots of low probability events happening at the same time is very small. And so the idea being that, I mean, the example I kind of always give is if you have an event which has a 1% probability of happening, if you fully collateralize that, the most the person on the other side of the bet can make is 1%. And the most I can lose is 100. And so it's very hard to make that.

• 16:33Speaker 02

  So you can only do that, make it work economically if you under collateralize, spread the risk, get diversification, and essentially Nexus is operating on that basis. So right now, we are under collateralized. And that may sound bad, but I actually think it's cool because it's actually how insurance is supposed to work.

• 16:54Ryan Sean Adams?

  Okay, a question from Gabber is about the theoretical risk. Okay, so let me, let me make sure I get this question right. So he's asking about the theoretical risk that someone or a group purchases a sufficient amount of NXM. That's the Nexus token, of course, to approve unreasonable claims for the benefit, for their benefit. Is there anything Nexus is doing against that? Did you understand the question here? Put, put to you is insiders kind of purchase NXM in order to start approving unreasonable claims?

• 17:29Speaker 02

  Yeah, yeah, no, we've, that's a definite attack factor. We've considered a lot. So, so right now, that's one of the, the way we're handling that is one of the more, more centralized aspects of the system. And we have ways to actually decentralize this. So, so right now, they're to actually voting claims, you have to lock or stake NXM to vote. And so what they're saying here is you can just buy a chunk of the NXM and then approve any claim you want to attack the system.

• 17:58Speaker 02

  And so the way we're dealing with that is there's actually five members of the mutual called the advisory board members. They have the power to slash the claims assessors bonds. And so they can get in there and slash the bonds before kind of same payouts or enough clear payouts will be made. And so that's, that's the, the prevention, the reason, but that just to be clear, those advisory board members don't decide on claim payments, but they decide on the punishments of, they can decide on the punishments of the, the claims assessors. And the idea here is to prevent malicious attacks. The, the real idea is that they don't actually ever have to do this, but there's a threat. And that threat is good enough to deter it, that attack from happening.

• 18:42Speaker 02

  We, we're working on ways that we can actually decentralize that into a large group of people. But we just have to work our way through that and it's kind of a, we're taking.

• 18:50Ryan Sean Adams?

  You go back and, and tell us, Hugh, what, with that specific attack, what does the attacker benefit from that? Like, what's the incentive to do it?

• 18:59Speaker 02

  Yeah, so essentially, the idea here is that you you buy some, I guess you buy some cover. Then you submit claims even though nothing's happened. And then you buy enough tokens and X M tokens to kind of approve the claims and perhaps prove and try to prove a lot of them. And then and then essentially you just take money out of the nexus.

• 19:21Ryan Sean Adams?

  But isn't that going to, isn't that going to affect the value of your N X M? Wouldn't you say like if you have N X M, you own a whole bunch of it. And then you're mucking up the system in in a pretty severe way. You'd have to think that a lot of N X M would get sold and, you know, decrease the the value of your holdings, right?

• 19:40Speaker 02

  Yeah, exactly right. So you're essentially sacrificing those N X M tokens. So you have to get to the point where you have to think that the cover that you've taken. And that you can approve is going to be greater than the N X M tokens.

• 19:54Ryan Sean Adams?

  So then maybe you also short, you also short the N X M simultaneously or something to make that attack. I'm not thinking of doing that attack. Don't worry. I just, I was just wondering how it works.

• 20:04Speaker 02

  But we do, yeah, we do require like many multiples of claim value in stake and X M tokens to actually approve the claim. So it is like we've, we've kind of got, we did a lot of work on this one. Because it's, it's clearly, it's a good question. It needs to be dealt with and it's how the system actually works. But yeah.

• 20:23David Hoffman?

  And I don't think this is any different from like many, many protocols have the same sort of like security assurance where like the because you own the tokens, you're incentivized to not attack the system, right? And so like, this is mainly a proof of state type system and Ethereum and Proof of Stake 2.0 has kind of the same security assurances where like, you know, you could attack the system. But the only way that you attack the system is you have a lot of capital locked up in the system that you're trying to attack. Right? So this isn't, this isn't unique to Nexus, right?

• 20:54Speaker 02

  Yeah, that's correct. And I guess, yeah, one of the things that we have to be aware of is that derivative attack where you don't care because you're taking out a short position elsewhere. And sorry, like, that's, that's the thing we have to be, be careful of. And we, the slashing mechanism, and there are numerous other ways that we believe we've moved up with that. I mean, you know, it has to be double tested. I'm not saying it's perfect. We have to work through it over time, and we're willing to adjust it if we need to.

• 21:20David Hoffman?

  So here, here's an attack vector that I've, I've been thinking about. So like, what happens when, you know, inevitably, some contract is going to have a bug? Because like, if, if that didn't, then like, you guys wouldn't need to exist. So like, we're running on the assumption that there will be contracts that Nexus provides cover for, that there will be bugs, right? So like, say someone sees this bug, and then they see that Nexus covers it, and then they buy a boatload of cover for that bug, and then they go and exploit that bug, right? Like, have you guys thought about this?

• 21:53Speaker 02

  Yeah, yeah, we have. So.

• 21:57David Hoffman?

  I'm, it's good to hear.

• 22:00Speaker 02

  So, like, so right now, it is actually possible. We, like, effectively, the cover that Nexus provides is like a credit default swap right now. Like, you don't actually have to have interest in the underlying to buy the cover. So it's kind of like a prediction, like a good false swap. So that, that attack is, is possible. We do have KYC, so that does provide some soft little benefit.

• 22:27David Hoffman?

  Right, but are they even doing anything bad?

• 22:30Speaker 02

  Well, no, like, necessarily. They're not necessarily doing anything bad. I guess, from my point of view, and this is one of the things we're discussing as a community right now, is we're, we're looking to introduce a, like, a proof of loss requirement into the, the claims. So that would mean that you have to kind of hit here, show that you control an account, or that has actually lost money as a result of this. And then that, that takes away the, the potential attack. And I, generally, I think, I have always thought that we needed some type of structure like that to make a sustainable product in the long term. But we definitely release with something simpler, just because, you know, got to get out there, got to test the market, see how it works, and then you can adjust from there.

• 23:14David Hoffman?

  Well, so you seem, if you do that, where like the user has to prove that they actually lost something in the exploit, you're kind of taking away what I think is a pretty interesting feature where you don't actually need to have a loss in order to express an opinion about a, the security of a particular contract. So i- is what I'm hearing from you, just like, okay, well, we have these two products and like, one is the, the fact that you don't need to have loss. And then the other one is like, well, we also need to make sure that we're safe from exploitation attack. And you're just choosing one over the other. Is that right?

• 23:46Speaker 02

  Yeah, so there's definitely a balance. I mean, if you don't have this proof of loss, then it definitely should be priced higher, um, in my mind. So, um, there's definitely a, a balance between, um, like, what, what are we trying to achieve? Which customer are you really aiming for here? Um, and so in my mind, it sent to make more sense to offer a lower price product and be able to make it more useful for people. But, um, but you know, that's definitely something that the community is still discussing. So, um, it could go either way.

• 24:15Ryan Sean Adams?

  All right. The bankless community just keeps firing away. Awesome questions. This one is from Joseph I T. Um, about how is the risk of loss, the assessment calculated? So for something like death liability, he says they use actuarial tables and that sort of thing. It's, it's very well known. It's a, you know, actuarial science. Uh, how about the risk of loss on a smart contract? How do you even figure that out? Um, how are the stakers calculating that at the moment?

• 24:45Speaker 02

  That's a good question. I'm not sure how they're calculating it. We're, we're basic, we're, that's the, that's, I guess that's one of the things we're doing quite differently, where we're basically saying, look, put your money where your mouth is. This is prediction market-esque type of approach. Um, you can use whatever tools or, um, analysis that you want, uh, to do to analyze how secure or not something is. And then you can stake against it. And so I think, um, I think that's been done like pretty roughly right now, but it, we are seeing like more that some, the more secure contracts or the contracts that you may think maybe most secure are actually attracting most. So.

• 25:24Ryan Sean Adams?

  So, okay, so this is so fascinating, right? So the the the actuarial risk assessment is not really part of the Nexus Protocol itself, right? You provide the incentive layer to make that risk assessment actually happen, but the risk assessment itself is completely decentralized. And that is such a fascinating answer to that question. Like, you're like, I don't know how it happens. That's not up to Nexus of the Protocol. That's up to the stakers, which is super fascinating. So first, I want to just dive in on there. Does that ever happen in traditional insurance companies? Like, all of traditional insurance companies, from the limited knowledge that I have, my my dad used to be a programmer at one of them, like a State Farm in the US. And

• 26:08Ryan Sean Adams?

  they have, you know, offices full of actuarial scientists and, you know, data tracking, like car insurance, every type of insurance imaginable, to like, a very precise degree, but it's all internal. They don't outsource that to a decentralized community of, like, stakers. Yeah, maybe, can you comment on that?

• 26:28Speaker 02

  Yeah, I think it's one of the fascinating things. I used to be a lawyer in actuary. I used to do that stuff myself for for life insurance and stuff. So, you know, I don't feel well how it's kind of done. But I think the, yeah, that's, that is one of the fundamental differences of what we're doing. We're kind of saying, look, here's a protocol, here's an incentive layer, do whatever analysis you want to do. We'll just take, we'll just follow the money about how much to stake. And I that that has, I mean, it's to be proven how well that actually works, that's for sure. But it seems to be worth getting in the right direction right now. The the benefit, the big benefit that it has, is you can actually enter new markets really,

• 27:08Speaker 02

  really quickly. So insurance companies will often wait until, oh, hold on, we need, we need multiple years of data to do this thing. You know, I want, I want a time series, I want statistically significant information, I want to like, over many years, and then, and then we'll learn. But here, we can go, we don't know, but we'll just put it out there. And if there's not enough staking, then there's no cover offered. But but it allows the market To kind of get an early indication into new markets really quickly. So I think that's a massive benefit that we have over um over a traditional insurance approach.

• 27:43Ryan Sean Adams?

  So so does that mean there's a world where there's these independent actuaries who essentially like quit their job at, you know, State Farm, but they're really good at life insurance and they come and they start staking and make money via Nexus?

• 27:59Speaker 02

  I mean, yeah, I actually see it happening more like, um, it's what's called MGAs or managing general agents. They're they're kind of like, um, there's a group that's an expert in a particular risk type, whether that's crypto or whether that's um, something else, you know, it doesn't really matter. And they apply their expertise and they have their models and then they they kind of uh their own little business that they sell that particular um product, they distribute it, they also price it and they can use the Nexus platform um to provide the risk um uh like the risk capital. Um and so essentially what you end up with is a backend of Nexus, which is like this um capital coordination layer, risk underwriting coordination layer, and you have multiple businesses on top

• 28:44Speaker 02

  that distribute and price their own products. Uh and so it's kind of how it works. So kind of like a Lloyd's or something like that.

• 28:52Ryan Sean Adams?

  And then and then back to that question. So first of all, that's fascinating and I wanted to dive deeper on that. I didn't even think we we fully dove into that in our initial podcast. So that's just a another just fascinating point about Nexus. But but going back to like how smart contract risk is actually um is is actually calculated. Do you have any other insight into that here, right? So like if I were to just use my, you know, model, I feel better about something like Maker Dow, right? Um because it's been formally verified, because it's protecting a large amount of money, because it's been out in the wild for a while. Then I do something like um BZX, which has had like, you know, a couple of hacks, right?

• 29:34Ryan Sean Adams?

  Um so like, how how are these things calculated? Is it primarily Lindy effect, really? Like, you know, amount of value in and duration, and then maybe there's some side things, but the bulk of it is just is just simply that?

• 29:51Speaker 02

  Yeah, I mean, we've, we had a bit more of a complicated formula to kind of take account of those types of things in our pricing, but we actually just shifted it all to just say staking. That's all we care about.

• 30:01Ryan Sean Adams?

  Wow.

• 30:02Speaker 02

  And, and because, I mean, there was a few technical challenges with the formula, but, um, like it sometimes didn't quite work properly. But the, the point being that now that we have staking, we don't care, like effectively, all of those factors are kind of condensed and analyzed, just pulled into one number. Um, and, and so if, if you actually have a look at our pricing right now, you will see something like Maker Now is kind of at the minimum price, but something like BZX is at a lot higher than that. Um, and so, you know, it intuitively, it's, it's kind of working, um, how you might think it, it should work right now.

• 30:35Ryan Sean Adams?

  So, speaking of BZX, uh, we have a, a listener asking about, uh, the recent, most recent BZX, um, attack. Was, did claims go through for that? Were there any claims outstanding on that? Is that a governance decision that's pending? Any update?

• 30:51Speaker 02

  Um, no, so, um, I personally think we would have paid a claim, but there was no one with any cover. Um, oh, over that period. So, um, you know, there was actually two covers taken out three hours or so after the attack happened. Um, so that they wouldn't have, you know, different cover periods. So they, they went there, um, during the, the attack. So, um, so basically no, no claims that I would just cause no one had cover.

• 31:16Ryan Sean Adams?

  People buying cover after it was hacked, did they just not understand the system? They were trying to like sneak, sneak some cover in?

• 31:23Speaker 02

  Yeah, maybe. I don't know. But that's, yeah, that's, no, no one had cover for the period of the attack. So we haven't, um, paid any claims.

• 31:30Ryan Sean Adams?

  So what, tell us more about like the timing on that. Like what if somebody had bought cover like five minutes before the attack?

• 31:38Speaker 02

  Well, I mean, in theory, that should be paid. I mean, that's always, it's always going to come down to people deciding, uh, what the, if it's a legitimate claim or not. But I guess one of the beauties of the bot type world is you can just look at the, the chain and go, when, when did this happen? Um, but the cover was bought here, the, the attack happened here. Um, I mean, I cover the regular insurance wealth and there was, there's, there's. Many cases where, oh, this person, um, really sadly committed suicide five minutes of before or after their policy expired, like, and like, you know, so what do you do? Like, and you had to work out, like, did it actually happen then or did it happen? Before or after? And there's like, it goes to real legal cases and stuff like that. So, you know, this stuff, um, n- now we have actual

• 32:22Speaker 02

  data to really determine exactly what happened. That's, that's a really powerful position to be in.

• 32:27David Hoffman?

  So with Nexus, is it, may- maybe there isn't any formalized rules because it's up to the NXM holders to determine this, but like, is it, and maybe in your opinion, is it like, okay, you've purchased insurance on this block, therefore the next block that insurance is therefore activated? Is that kind of how you think it works?

• 32:44Speaker 02

  Yeah, I mean, look, if, if the cover's purchased before the attack or event started happening or before the bug disclosure was made, um, then, um, then it should be, it should be, um, legit.

• 32:56David Hoffman?

  That's, that's kind of nice because I recently had to buy healthcare and I bought it at like noon and it didn't activate until like 12:00 PM that night, 12 hours later. So I had like 12 hours where I was like, well, I'm going to be real drive real slow on my way home. Anyways, little bit of a, little bit of a tangent.

• 33:14Ryan Sean Adams?

  Well, you kept safe, dude.

• 33:18Ryan Sean Adams?

  It is not fun to be with a hospital bill, um, when you don't have health insurance in the US, that is for sure. Okay, so a question coming in, Hugh from Above Average Joe. So he's asking, when will the current expansion phase start to wrap up? When do you expect the NXM price appreciation to start growing faster than the network size?

• 33:41Speaker 02

  I, I'm not going to comment on price. I have no idea. Um, I don't really know. But, but, but going back to the underlying question, I guess. We, we do have this, um, like floor value on our, what's called our MCR, minimum requirement, which is kind of like an arbitrary, somewhat arbitrary, like expansion phase that we're kind of driving to get more cover and stuff like that. And quite recently, we shifted, um, a bit earlier than we were thinking it would happen, um, into kind of like the full long-term growth phase where the actual cover amounts that we're driving, uh, that we're writing, drive the, the MCR valley. And so, um, I definitely think, um, that probably happens. I know six months earlier than I was expecting it to happen.

• 34:24Speaker 02

  So we've had quite a lot of growth recently, and I think that's definitely a point that we're talking about in the community and working out how we transition into that longer term. So we're kind of, we're kind of moving out of the artificial bootstrapping phase and into the more longer term phase. And, you know, it's definitely a spectrum of

• 34:43Speaker 02

  ways to go there and there's like, like clear answer about this is definitely true. It's definitely a judgment call. And so I, I think we're definitely in the process of working out what, what the best approach there is. But for now, we, we have both the artificial scaling and the cover

• 35:00Speaker 02

  driven calculation going at the same time. We just pick whichever one's the biggest one. So they're kind of both going right now, you know, unless, unless the community decides we should change that.

• 35:10Ryan Sean Adams?

  Very good. Okay. We are at the halfway point here. So you, you, you've hung with us so far, doing a great job. We've got more questions for you and this one might be related. This is from Matt seven. So when will the current, oh no, I just asked that one. I've heard the gearing factor has replaced the 1% daily increase in the MCR calculation. For some people, you might have to explain what that means gearing factor. What is the trigger for the change?

• 35:39Speaker 02

  Yeah. So, so basically the gearing factor is kind of what I was just saying before. It really is cover amount divided by gearing factor. The gearing factor is 4.8. So basically our minimum capital requirement is the maximum of either this floor value, which is increasing at 1% per day, or a cover amount divided by 4.8. And so we just picked the biggest number. And so right now, both of those numbers are really close and the gearing factor was ahead. I think yesterday the floor value was ahead and so they're really quite close right now. And so what we want to be in the long term is having the gearing factor driving everything. But it's actually useful to have this floor value in there in the short term. So we can keep selling cover on

• 36:24Speaker 02

  protocols that are, that where there's a lot of demand like wire or a compound or balancer, et cetera. So, so it is kind of the, I guess that's what I was alluding to before is kind of have to work out how to, we, we should be switching the MCR floor increment off at some point. But do we do that now or do we do it in three months' time or like, when do we do it? And so that's definitely the discussion to have.

• 36:49Ryan Sean Adams?

  Okay, here is a question coming in from our Discord room from Emozilla. And this is, I think, a question that is being asked in the context of other staking protocols, particularly in ETH 2.0. It's sort of similar. The question is, how is the mutual planning to further incentivize staking on contracts? The comment is, it seems in the current yield farming craze, it's hard to track capital with such a long lockup time, 60 days, if I recall correctly. This is also a question I think people have asked about ETH 2 staking, basically, with all of the attractive other ways to leverage ETH outside of the core Ethereum protocol.

• 37:33Ryan Sean Adams?

  Are we going to have enough ETH to actually launch ETH 2 is kind of the question. So I guess, what's your answer for Nexus and NXM? How are you planning to incent staking?

• 37:46Speaker 02

  Yeah, so I think, short term, the shield mining thing, I think, is a big change. And I think that would help a lot. We do hear the feedback on this stuff. We're taking it on board, that's for sure. We are actually looking at potentially changing some of the design. And hopefully, with the goal of hopefully removing the long lockup. So it is currently 90 days, which is, we recognize is an age in DeFi.

• 38:19Ryan Sean Adams?

  Yeah, I think yield farming is barely like 90 days old.

• 38:22Speaker 02

  Yeah, exactly. So, you know, I mean, the challenge is you need staking for someone that buys a cover for a year. So you need to kind of, but if you have to have the staking disappear and the cover sits there for a long period of time, then you kind of got this mismatch. But so we have to work out a way of allowing more fluidity into the staking process, but also dealing with what the mutual needs from an economic perspective in terms of backing the risk. And so working out those two things is going to be the challenge. And I think we definitely can get there. And I think we can, we can remove that 90 day lockup and provide more flexibility with things like tokenized staking positions and other stuff. So we're definitely looking at it and we're considering options.

• 39:07Speaker 02

  So, you know, we're definitely taking the pragmatic iterate, learn, change it if we need to, and release again. That's the approach we're taking.

• 39:17Ryan Sean Adams?

  This is another in the weeds question here, coming from someone, but I think it is pretty thoughtful. I don't, I don't know if this is kind of the fall on your own sword option here, but the question goes like this. Since NXM insurance is discretionary in paying claims, hypothetical, would NXM holders ever vote for their own insolvency? So if there was ever a large magnitude claim or multiple claims on different protocols, would they ever vote to burn their own NXM stake to maintain the credibility of the system? Interesting thought exercise there.

• 39:52Speaker 02

  Yeah, I mean, it is, it is interesting. I've, um, so discretionary mutuals in the real world have done this. And so they, I know of facts where that, you know, they've got, they come in and all of a sudden they've just got massive claims. And so what, what do they do? And they sit and, and the key here is you have a strong community that is aligned with each other. And you can work out, you have to work out the best solution. It's not a good situation to be in, but you have to work out the best solution for the community. And, and so often that may be a trade off of things, like maybe you don't pay the absolute full claim value. Or maybe you look at other, other options or what you need to do in, in the future. But, but basically it's about the community coming together and working out the best way forward.

• 40:37Speaker 02

  So look, I mean, there's definitely the selfish option of just going, no, we're not going to pay the claims. We're just going to dissolve the whole thing and just split the money between the distinct holders. That would be a terrible outcome in my opinion, but it could, it could be done. I actually think that if that were to happen,

• 40:57Speaker 02

  Nexus would have, by paying the claims in that situation, Nexus would have built a massive amount of trust for the long term. Like insurance companies essentially there when everything, the shit is the thing, right? That's, that's when you want them to be there. You want them to be, and that you, you, you build that trust and it will pay the whole mutual back like tenfold in the, in the coming period. So that's, I would hope that that's what the members would come to, to agree on. Obviously I'm just one member, but that's, I think we have to design the incentive mechanisms so that that is the favorable option. And that's what we'd be aiming for.

• 41:41David Hoffman?

  There's a, there's a reference to Moloch here, where, and maybe a lot of the listeners aren't familiar with the, the meditations on Moloch piece, but like, if you keep on listening to Bankless, you will be. Moloch is the god of human coordination failure, right? And so like, if Nexus Mutual decided to like defect and say like, you know what? F it, we're not paying the, we're not paying the, the claims, we're just taking our treasury and we're running because we can't do this. Right? And then, you know, maybe that's a rational thing to do, at least in the short-term game. But here, what you're saying is like, well, you could take that short-term hit, but like, the signal to the community would pay dividends down the line, right? So, law, if the community, if the Nexus, if the NXM

• 42:23David Hoffman?

  holding community can think long-term and not defect from each other, well, then the, the value over the long-term, what you think is, is that will be just orders of magnitude larger than like, the short-term game of saying like, F it, well, let's take the treasury and run.

• 42:38Speaker 02

  Exactly. And like, if you actually get into the details of Nexus, every single mechanism is designed to push alignment of interest as a long-term, because that's the only way this whole thing works. And so, because, because basically, it never makes any sense to pay any claim if you just focus on the short-term. You have to, you have to align interest long-term. And like, it's all going to be about trading off short-term pain for long-term benefit. And that, that's really what this is, this is actually about. So, yeah, if you have a look at, if you get into the details of the mechanisms, it's all pushing alignment of interest long-term. And if, you know, it's still up for debate if we've got that right, but that's, that's definitely what we're trying to do.

• 43:21David Hoffman?

  So we've got a question from Juan from, from the YouTube. "Are there plans to implement easy insurance contracts in popular DeFi projects like Uniswap or Zapper?" And so Juan says, "Thinking of a simple button or warning when adding liquidity, for example." And so, what I think he means is like, you're on the Aave site, or you're on like, the Zapper site, you're on the Uniswap site, and like, you have the option to like, deposit assets. And then there's another option saying like, deposit insured assets, right? And like, that, I think what he's saying is You buy cover insurance from Nexus when you are also doing that action, right? And so rather than, and it's a little bit cumbersome when you like go to Ave and then you deposit your assets. And then you go to Nexus to buy cover.

• 44:05David Hoffman?

  So like, maybe you guys are, are you guys working on like a business development team? Or some sort of like way to like, just have the Nexus insure with Nexus button like everywhere across DeFi?

• 44:15Speaker 02

  Yeah, exactly. That's what we're doing. Basically, we want no one to buy cover on our application. That's our goal. That everyone, basically everyone's buying cover on our app right now. But that's not where we want to be long term. So we haven't, we haven't prioritized that right now because we're in this situation where we've got massive demand and not quite enough supply. So it's not like the top requirement, but, but that's definitely where we're, where we're moving longer term. Yeah, basically, you know, flight insurance, click the button at the bottom, add it on. That's, that's the type of thing we're aiming for.

• 44:48Ryan Sean Adams?

  Is that easier to do in, in like on Ethereum and DeFi? Because everything is, you know, composable money Legos, as we've called them.

• 44:56Speaker 02

  Yeah, exactly. It's, you know, it's really simple compared to, compared to like the traditional world. So, yeah, I mean, obviously you need to get the people running the partner sites to add it on. But, but it's definitely a lot easier.

• 45:10David Hoffman?

  There's a very strong protocol sync thesis comment in there somewhere, right? Like just make Nexus invisible, but still ensuring all of DeFi, right?

• 45:19Speaker 02

  Yep, that's exactly it. We don't, we don't, we're insurance or Nexus, Nexus isn't insurance. We've said that a few times, but yeah, but basically it's always a secondary purchase. You want to do something else and then you like, you know, have a car, you get it insured. You know, it's always, you're always doing it for something else. So we want to be there all the time, but we're not the lead sale, we're definitely a secondary purchase.

• 45:45David Hoffman?

  That kind of solves your problem of, you know, selling cover to people that aren't actually like, have loss available to them, right? And so like, if you are only able to purchase cover when you are doing something on Ave or doing something on Maker, then like you kind of get, it's a little bit easier to ensure that, you know, everyone who's purchasing cover always ha, also has loss, a loss event.

• 46:10Speaker 02

  Yeah, exactly. I mean, if you want to take that one step further, I mean, that's just a simple, that's like an integration, like just a point of purchase, right? But what we really want to get to is like bundled products. Um, so like he he's an interest-bearing token that's natively covered. Um, and so you just, you just buy that token instead, and then you've got it bundled up. Um, so that's the type, I mean, obviously, there's a bit to do to get to that point, but um, but the whole thing is that you, that's what composability really gives you. Um, that's, that's the real benefit of Ethereum.

• 46:43David Hoffman?

  Nice. So, so with all these interest-bearing tokens out there, there's the possibility of like the the Nexus version of that, which bears a little bit less interest, but you know, is natively insured. So like when you buy this token on Uniswap, like you don't have to worry about like, is the, do I, you know, do I now need to go to Nexus and get insurance because like you're buying and buying it pre-bundled? It's making it super easy for the, for the consumer. That's fantastic.

• 47:07Speaker 02

  Yeah, that's what, that's what I want to get to.

• 47:10Ryan Sean Adams?

  Yeah, I think everything that you guys were talking about, about Nexus being sort of in a, a long-term game, essentially with multiple iterations, right? David, you were talking about like slaying Moloch. It just occurs to me like so much of what we depend on for human civilization are these institutions that we trust, right? The court system is an institution, the government is an institution. What, what we can start to do with Ethereum and some of these, these money Legos, as we've called them, is create new institutions that are less centralized and less dependent on a company and instead of like, say shareholders in a big corporate office to, to kind of set the institutional boundaries.

• 47:52Ryan Sean Adams?

  So the idea of Nexus becoming an institution for, I guess, safety and risk mitigation across DeFi protocols is super appealing. I want to ask a question that comes from, that's coming from Lucas. And this is about, I think, riff and riff off the idea of everything that we're talking about, all the advantages of composability here are, I think, pretty clear to, to people who are watching this. But there are some disadvantages too, right? So for example, Lucas is asking the question.

• 48:24Ryan Sean Adams?

  Ensuring one, we, I use the word insurance, his words, right? So we know what you're really doing, not insurance, but ensuring one single contract is simple. You've already proven that out. But what if something happens that affects many different protocols simultaneously? Because again, they're all woven together. So something like affecting AVE, Compound, Urin all at the same time, maybe because they all have one single point of failure. Maybe there's a chain link oracle problem. Chain link, great in everything it's doing and price feed across all these protocols, but almost the oversaturation of chain link creates a single point of failure for DeFi. That's kind of scary. So what do you do if there's kind of a single point of failure cascading event like this?

• 49:09Ryan Sean Adams?

  How does Nexus react?

• 49:10Speaker 02

  Yeah, I mean, there's obviously two sides to this. Nexus has to manage its own risk itself, like which risks it takes on and make sure it doesn't accumulate too much in one spot because diversification is what will make it work the best. But obviously it wants to cover as much risk as possible to provide safety to the wider DeFi space. So I think with oracle failure and stuff, I think you can, we can, we can segment it and stuff like that. Obviously within limits. The, probably the biggest risk that Nexus is probably also exposed to itself is like a solidity compiler bug that no one knows about yet that basically hits multiple contracts at once. And then maybe Nexus goes down as well.

• 49:55Speaker 02

  And so, you know, that's kind of a DeFi extinction, extinction level event. I think, yeah, I don't know. Yeah, it's, it's kind of hard to.

• 50:04Ryan Sean Adams?

  I like those words.

• 50:05Speaker 02

  No, but I, I mean, it's theoretically impossible, right? And I guess from, from my perspective, I think Nexus is taking on that risk anyway because it's actually building on Ethereum. So unfortunately, we have to kind of just assume that that doesn't happen. The, the, the best mitigant, I'm going to be completely open and honest here, the best mitigant for that type of thing is actually having an entirely different protocol. If it's traditional insurance, totally outside the system, because you can't cover something within the system that's like at the base level. So that's, that's the challenge that, like, we are exposed to that risk.

• 50:42Ryan Sean Adams?

  So you're exposed to all of the systemic kind of risk that's inherent in Ethereum inherent across DeFi, right? You can't get away from that without escaping to a different system. But I want to ask you about that extinction level event, right? So, because I think this is somewhat of an interesting topic. Maybe David was about to do that.

• 50:59David Hoffman?

  No, I'm just shivering from the words extinction level.

• 51:03Ryan Sean Adams?

  All right. So, you know, it's interesting because for a system like Bitcoin or even Ethereum, the backstop to an extinction level bug is actually the social layer underneath it, right? So like for Bitcoin, Bitcoiners will constantly argue, will always argue that, hey, even if there was some sort of zero day bug uncovered in Bitcoin that allowed somebody to inflate another 10 million Bitcoin above the 21 million, for instance, the community would adhere to the social contract and fork that out. And, you know, they wouldn't gain enough support to actually be a critical threat to Bitcoin. An extinction level event to Ethereum, I would think, would still be backstopped by

• 51:45Ryan Sean Adams?

  the social layer, where it's all of, essentially, the money protocols, all of the users, all of the validators, all of the miners, all of the core devs, everyone with a vested interest would essentially say, oh, oops, that was not the intent of the social contract of Ethereum. Yeah, there might be a contingent who wants to pump this, this, you know, pre-fork. But it would essentially be a DAO type scenario where you can recover from such an event. I just wanted you to put your risk hat on for a minute and maybe talk about that, because extinction level event is kind of a scary thing to say, but could the social layer be a backstop?

• 52:24Speaker 02

  Yeah, I think we've thought about this a fair bit. I mean, the way we're designing NEXUS is we want, I mean, it's not going to work in absolutely all circumstances, but the idea is that if something is big enough, then it gets multiple, multiple protocols at once that takes down NEXUS, that's at least in hard fork discussion territory. Like, so basically, if something's big enough to take down NEXUS as a whole, we, hopefully, we're designing the system so that there is a decent chance that the social contracts kicks in and, and makes everything whole again.

• 53:00Ryan Sean Adams?

  Do you mean, do you mean for NEXUS? Or do you mean for Ethereum?

• 53:03Speaker 02

  I mean for Ethereum. Yeah, so, so I guess what I'm saying is, anything that's big enough to take down NEXUS in one go. We should, we should be managing Nexus from a risk perspective, so that if there's anything that's big enough, an event that's big enough to take down Nexus from a like multiple claims happening at once, then that should be a, an event which Ethereum as a whole should consider hardworking.

• 53:29Ryan Sean Adams?

  Can I raise the controversial phrase, too big to fail? Because that's what kind of comes to mind, and maybe not in a bad way, right? Some things, like some failures would cascade across the system that the failure of a core system, maybe like Nexus gets to that level. I've often wondered if Maker or Dye is at that level right now, where contracts, core contracts become too big to fail? Is that, you think there's a possibility there?

• 53:55Speaker 02

  Yeah, I mean, I don't, I think it's gonna be interesting, like, if one of the really big ones, like Maker or something, goes down. If it was just one, I, I don't think that's gonna be a hard fork, my, my personal point of view, but, you know, obviously, there's a bunch of other different opinions out there. But I think if multiples go down at once, then it's likely that it's due to some lower level bug. And therefore, to me, that there's a, there should be an active discussion about, oh, this, this seems, this doesn't seem right, maybe we should be hardworking this. So, you know, obviously, there's no guarantees on any of that stuff at all, but the idea

• 54:36Speaker 02

  with Nexus is to, to manage our risks, so that if the, the occasion where we failed due to that, it's at least a discussion of a hard fork might, might happen.

• 54:47David Hoffman?

  Yeah, we're starting to get into pretty existential in conversation territory, and it's a good conversation to have, and hopefully, hopefully it remains existential. So we have a question from, from Gonzalo on, on YouTube. Are there any plans to ensure investors in crypto funds, like managers running a fund could steal, like abscond with the funds, so investors in that fund would benefit from having insurance covering that event? Any thoughts on this?

• 55:16Speaker 02

  Um, yes, I mean, to be honest, we've built the protocol to be able to cover any type of risk. So as long as we can design a product that, one, you can reasonably determine when a claim should be paid. Um, it's not gameable, um, but by someone else, you know, they could just clearly go, oh, we have full control over this. So we'll just, um, make a claim. Um, so as long as you have a couple of things like that, then yeah, we can, we can design. Um, it's inside a product that works. And so we've had quite a few people that are coming to us on, on different, um, products. Related to that, um, it's a little bit different, um, but, um, but those types of things were definitely considered.

• 55:53Ryan Sean Adams?

  Who, who does that work here to expand into a new market? Is that, um, somehow governance or is that, you know, kind of Nexus as a, as an entity itself, as kind of a meat-based entity?

• 56:05Speaker 02

  Yeah. So, I mean, essentially it's governance. Um, the idea being that we, someone has to come up with the terms and conditions. Like this is when a claim will be paid. Um, and, and then it's up to the stakers to stake on it. It's basically how it works. Um, and so it's, it's really relatively as simple like that. So it should, like ideally, we're not quite there yet, but ideally we get to a point where adding a new product should be as easy as adding a new pool on Uniswap. You go, here's a new product, just add it, bootstrap some cover, you know, add some liquidity, kind of, that's the comparison. Um, and so that's the idea we're wanting to get to. But, you know, there, there is obviously a bit more work in coming up with the terms and conditions document. That actually just provided a new pool of Uniswap, but that conceptually, that's what we're aiming for.

• 56:50Ryan Sean Adams?

  So this is another, I think, great question from Joseph IT. Um, he says, first, great answers. Uh, thanks you for that. One of the core components of Nexus right now is this dispute resolution mechanism, right? Which claim should we cover? Which claim should we not? Have you ever looked at alternative dispute resolution mechanisms like Aragon Experts or Celeros? These kind of DAO type court systems. Uh, is there any appeal to, to those or are they too early? Your general thoughts there?

• 57:22Speaker 02

  Yeah, I mean, we have to, we have to be able to have a scalable solution for the claims on an ongoing basis. So you don't want to be pushing all claims to an our own court or a clerals or something like that. But there could be potential options for like having a like a higher level up dispute resolution in the process there somewhere. We haven't done that now for various reasons. One of the important things is that the members have discretion over which claims are paid rather than outsourcing it outside the mutual. That is one important aspect. Doesn't mean we can't do it, but it is, it is an important conceptual thing.

• 58:03Speaker 02

  So, yeah, there are various options. The core, the core claims should happen within the mutual, but we could do higher level disputes outside.

• 58:12Ryan Sean Adams?

  So a question came in about memes and this is crypto, so we can't get away from memes. So Synthetix has their Spartans, Link has their Marines, apparently Nexus has mutants? Is, can you confirm or deny that?

• 58:29Speaker 02

  No, we do. We've had it for a little while, so that's, that's kind of growing. Yeah, it's organic and it's pretty fun, actually. So it's, I love it.

• 58:38Ryan Sean Adams?

  How did that come about?

• 58:41Speaker 02

  Community members just came in there.

• 58:43Ryan Sean Adams?

  Okay, so what is a mutant?

• 58:45Speaker 02

  I think it's, I think it's like, I think it's coming from today's mutant ninja turtles.

• 58:48Ryan Sean Adams?

  Right, for the turtle, right?

• 58:50Speaker 02

  Yeah, yeah.

• 58:50Ryan Sean Adams?

  So we're not talking like X-Men? We're not talking X-Men style mutants?

• 58:54Speaker 02

  It's mainly, it's mainly, well, I think it's, it's opening up, obviously. These things change and morph all the time, right? So, you know, but I think that's where it's coming from, the turtle thing.

• 59:07Ryan Sean Adams?

  Great. So what, have you seen, are there some good memes we should look up after, after this AMA here? Should I maybe plug Nexus mutants into Twitter? Anything fun that you've seen?

• 59:17Speaker 02

  Oh, yeah, there is a few of me floating around, which, you know.

• 59:20Ryan Sean Adams?

  Oh, boy.

• 59:22Speaker 02

  Kind of, kind of amusing. But, I mean, like, you know, it's a thing, I guess. But I think the one thing that is cool is that it, it kind of, it's the long-term focus. And they're kind of in there with the, it fits very well with the nature of what we're trying to do. And so, you know, it's a bit of fun, obviously, but it is pretty cool.

• 59:43Ryan Sean Adams?

  Okay, so I think we've got about three or four more minutes until the conclusion of this AMA. When I ask you, while we're talking about the community, are you like, did you think the community would grow in the way that it did? Are you, are you, are you proud of it? Is there anything you would, you would change? And how do you think it's going to grow into the future?

• 1:00:04Speaker 02

  Yeah, it's a, it's a good, good question. Um, like it's definitely around faster than we thought it was going to grow. And, you know, kind of all happened all of a sudden, especially over the last few months with, with things going. I'm surprised by the memes. I'm surprised by just how people just get stuck in and have so much passion for things like, you know, we've clearly got a bunch of really solid community members, like, you know, getting into the Discord, answering questions, like clearly experts about what's going on. And it's like, it's, I don't know, it's, it's really amazing to see that, you know, I've personally spent so much time building this thing and designing something, building in the dark for a while and then, and then putting it out there in the community and letting them take control that I, I, yeah, I find it amazing to be honest. So yeah, really happy with it.

• 1:00:48Speaker 02

  I think our challenge is always going to be we're a relatively complex system. And because of this long-term nature and trade-offs and stuff like that, we have to attract the right type of people. And so being able to design incentive mechanisms and also foster our community in the right place is going to be an interesting challenge, especially as we grow. But yeah, that's, that's, it's definitely cool and looking forward to it.

• 1:01:11Ryan Sean Adams?

  Very cool. All right, we've got time for, I think, one last question here. And so this is maybe harkening back to the podcast that we just had you on, where you talked about surviving the bear market. And that's really where, where I think both David and I learned that you guys were kind of on the brink, you know, of, of saying like, this thing's not going to work back in 2018, 2019. We have just had a 40% drawdown in DeFi tokens after an exceptional summer of growth, right?

• 1:01:42Ryan Sean Adams?

  You've been a bear market builder. Are we headed back to the bear market? Are you feeling the bear market again? Or is this just, you know, we dust our shoulders off and this is just a mere scratch?

• 1:01:55Speaker 02

  I have no idea. Don't ask me about that stuff. I really don't know. I hope that honestly, the best case for us is just stability and just steady growth. But obviously, that's not how crypto markets work. We just have to go have to go with the extremes in both directions. So managing that's the biggest challenge from a from, you know, a product team's point of view. And, you know, we I guess we've done it before, so we're confident we can do it again.

• 1:02:22Ryan Sean Adams?

  Awesome. All right. I said that was the last question, but this is the real last question. So Hugh, where are you from in the world?

• 1:02:29Speaker 02

  Yeah, I'm Australian, but I've been in London for about eight, nine years now.

• 1:02:35Ryan Sean Adams?

  So in when you go home to Australia, do they talk about you having sort of an English accent? And when you're obviously in London, I'm sure they hear an Australian one.

• 1:02:44Speaker 02

  Yeah, I'm somewhere in the middle now, depending on who I talk to.

• 1:02:50Ryan Sean Adams?

  That is awesome. Well, Hugh, it has been a pleasure. Thank you so much for being on the hot seat with the Bankless Nation for this Ask Me Anything. David, how is YouTube looking? Did we get all the questions answered?

• 1:03:02David Hoffman?

  We got all of the questions answered and there's a fun comment from Alex I'm going to read. Alex says, keep it up. I love how people are imagining things and Hugh and the team just don't have enough time to execute. It's still early and that's exciting. I've never been interested in insurance until now. So cheers, Alex. Hugh, you got someone interested in insurance.

• 1:03:23Speaker 02

  Yeah, you gotta start somewhere.

• 1:03:27Ryan Sean Adams?

  That's awesome. Well, we really appreciate the work you are doing to get DeFi a little bit safer than it was the day before. So thanks for spending the time with Bankless today.

• 1:03:37Speaker 02

  Great to be on again, guys. Good to talk to you again.

• 1:03:40Ryan Sean Adams?

  All right. Take care, Hugh. Thanks a lot.