• Hugh Karp founded Nexus Mutual with the intention of bringing community-driven insurance solutions to the DeFi sector.
• Despite challenges, Karp’s long-term vision and integration with Chainlink helped Nexus Mutual become a leader in decentralized insurance.

Hugh Karp’s journey to the creation of Nexus Mutual was characterized by fortitude, ambition, and a desire to make a difference in both the cryptocurrency and real-world communities.

As an insurance specialist with over 15 years of experience, Karp’s journey from traditional finance to the decentralized sector provides an encouraging glimpse into how blockchain technology might be utilized to address some of DeFi’s most critical concerns.

Finding Inspiration in Community-Driven Insurance and Blockchain Technology 

Hugh Karp held a number of high-level positions prior to entering the blockchain industry, including CFO of a large reinsurer’s UK Life business. Throughout his career, he gained a thorough understanding of insurance and its ability to manage risk.

However, it wasn’t until he took a break from his regular professional path that he saw how blockchain technology might be leveraged to return insurance to its beginnings as a community-driven industry.

Karp’s turning point came when he visited the world and saw firsthand the devastation caused by natural disasters such as earthquakes in areas without insurance.

It was around this period that he considered how blockchain could enable people to manage risks collectively in a decentralized fashion, eliminating the need for a centralized intermediary. This led him to the realization that decentralized financing (DeFi) may revolutionize the insurance industry, and the roots of Nexus Mutual were planted.

The DAO Hack: Sparking the Vision for Decentralized Insurance 

The “lightbulb moment” that prompted Karp to start Nexus Mutual occurred in 2016, when he witnessed the infamous DAO hack. This hack cost millions of dollars owing to flaws in smart contracts, highlighting the fragility of DeFi systems.

Karp recognized that insurance may be a critical tool in protecting people from such hazards. He recognized that his insurance experience may be extremely valuable to the ecosystem, so he set out to create a decentralized insurance solution that would safeguard against smart contract vulnerabilities and other dangers inherent in DeFi.

“I’ve thought about taking insurance back to its roots of that cooperative, community-driven approach,” Karp told me. This concept formed the groundwork for Nexus Mutual, a platform that allows people to collaborate to share and manage risk, guaranteeing that everyone is protected in a transparent and decentralized way.

Taking a Leap of Faith: Presenting Nexus Mutual at DevCon 

Karp took a risk in 2017 by going from Australia to Mexico to attend DevCon, leaving his secure position in traditional insurance behind him. He gave a 20-minute presentation to the Ethereum community about his vision for Nexus Mutual.

This presentation marked the beginning of Nexus Mutual, as it drew attention and support from the quickly expanding DeFi market. Despite the concerns, Karp’s choice to take this risk proved to be one of the most important steps in creating Nexus Mutual as a decentralized insurance leader.

“It was probably a bit of a risky move, but it was one of the best things I did,” Karp later said about his decision to speak at DevCon. His willingness to venture into the unknown and share his vision with the Ethereum community paved the way for Nexus Mutual’s successful debut.

The path to achievement was not without hurdles. Shortly after founding Nexus Mutual, Karp encountered the harsh bear market of 2018 and 2019, which put a considerable financial strain on other blockchain ventures. However, his knowledge as an actuary was useful during this time.

He knew how to make long-term financial estimates and recognized the value of resilience in the face of short-term losses.

Karp focuses on keeping a long-term perspective, which he credits with his success in managing the volatile cryptocurrency market.

“The short-term nature of crypto is very distracting, and being able to have resilience and long-term focus is critical if you’re going to make a success of something,” he told me. This approach enabled him to continue throughout difficult times, and Nexus Mutual grew stronger when the market recovered.

Partnering with Chainlink: Enhancing Security and Efficiency in DeFi Insurance 

The cooperation between Nexus Mutual and Chainlink, the leading decentralized oracle network, is critical to the company’s success. Nexus Mutual began using Chainlink Price Feeds in March 2020 to deliver high-quality, tamper-proof market data for their multi-currency capital pool.

This connection ensures that the platform maintains accurate market prices and meets its capital needs, allowing for the computation of reasonable insurance premiums.

Hugh Karp recognized the value of employing Chainlink’s robust and dependable data streams, adding, “Chainlink was our first and only choice. Chainlink Price Feeds’ high availability and solid security are vital to protecting our decentralized insurance alternative. Security is a crucial component of what we do; it is at the heart of our product and is absolutely necessary to provide the greatest options for our members.”

Nexus Mutual’s integration increased its efficiency and allowed it to provide larger coverage for smart contract risks in the DeFi ecosystem. As of June 2022, Nexus Mutual’s total value locked (TVL) was $278 million, with $28 million in total premiums paid and $8 million in annualized premiums in force.