“If we can alleviate someone`s fear, that is the greatest gift we can offer them” — Thich Nhat Hanh
Trust. Confidence. Fearless Mind. Imagine numerous investors who are interested in investing large numbers in different crypto projects but do not have the expertise in assessing the risk — Nexus Mutual is a boon for them. It gives them confidence through insurance covers to proceed forward. It not only favours the investors, but also the protocols who are suffering in the Bear Market.
The question is, “Can Pana DAO compete against Nexus Mutual?” We will admit, giving confidence through insurance cover is the common thread that connects Nexus Mutual and Pana DAO. There are several differentiators though.
First, the difference is the target audience. With differing estimates, around 200–300 million people in the world use crypto in one form or the another. And Nexus Mutual focuses on covers for yield bearing tokens, protocols and custodian wallets and tries to serve a portion of this population.
While, on the other hand, according to World Bank estimates, around 9 % of the world population lives with less than $2.15 per day. And none of them can imagine spending blockchain gas costs to invest in any of investment protocols. Having said this, our ultimate aim is to reach even this section of the population. Imagine payment of premiums through SMS; that is the scale of reach we are aiming for in the future.
Having worked in the traditional insurance domain, we know the pros and cons in traditional insurance and the obstacles in reaching this last subset of the population through the traditional route. (Please refer to the carousels in https://panadao.finance/ about issues in traditional insurance and solutions that Pana DAO offers)
Second, the frequency of events. After the first cover was launched by Nexus Mutual in 2019, the first claim event happened in Feb 2020 (bZx flashloan event). Then after a lull, the second reported event was Maker DAO in March 2020 which was ultimately rejected. The third event was in Feb 2021 followed by October 2021 and then two events in 2022. Whereas, in Pana, the community will decide the parametric events and make sure they are frequently occurring events like floods, high rainfall, earthquakes in earthquake prone zones and so on. Without taking any credit from Nexus Mutual, our tokenomics are designed in such a way that the events should be frequently occurring ones, which will incentivize holders to hold.
Third, the “Proof of Loss” (The cover ID#2291 cut-off) concept. In Nexus Mutual, this was introduced in October 2020 such that cover ID#2291 and above require proof of material loss. Claimants must demonstrate a material loss of at least 20% of the cover amount. This takes out the parametric image of the covers — there is nothing parametric about such a policy.
In Pana DAO, if a parametric event happens, then all those who have subscribed to that cover (getting a cover will be a separate workflow through NFT ownership — https://docs.panadao.finance/basics/assurance-nfts) will be enabled to take the parametric payout. For eg., a holder in South Africa can get a payout for Mumbai floods, if he/she has paid the premium in the Mumbai Floods NFT Collection.
Fourth, the Claims Assessment Process. Nexus Mutual faces the challenge of a complicated claims assessment process, as the chosen domain is “Smart Contracts”. First, the conflict of being decentralized and at the same time, involving experts as claims assessors is a challenge Nexus Mutual needs to address. To take for an instance, the very first claim that they faced with bZx flash loan attack, it was rejected by the claims assessors initially. Then, the bZx themselves admitted fault in their code. It was only then that the claim was settled. So, in such cases, there is always a difference of opinion, and objective decision making is difficult due to incentives misalignment.
But all this complexity with claims assessment is avoided within Pana by nature of the events that the protocol will design. So, data oracles, community vote and if needed, off chain event assessors should be sufficient to decide whether to trigger a parametric event.
Lastly, the major differentiator is “premiums being investments or expenses”. This is the USP of Pana DAO, when compared with any other insurance protocols. For the premium that is spent, it will provide not only parametric cover, but also equivalent amount of KARSHA, our rebasing token, so the premium that is paid can be recovered.
We respect the pioneers in the Crypto Insurance space like Nexus Mutual, but we will continue to solve a different set of challenges that we have carved out for ourselves.
Please read through https://docs.panadao.finance/ for the tokenomics and details of the protocol.