Benefits of Governance at Neptune Mutual

6 min read

Discover the benefits of decentralized governance in the Neptune Mutual ecosystem.

Neptune Mutual is a DeFi insurance protocol designed to protect policyholders from unforeseeable crypto hacks and exploits. While this might seem straightforward at first glance, Neptune Mutual is more than just a reimbursement service for the victims. It operates through a sophisticated system that ensures comprehensive protection, participation, and decentralization.

A key aspect of Neptune Mutual's advanced system is its integrated, decentralized governance mechanism. This governance structure is crucial in making decisions and maintaining the protocol's integrity and efficiency.

In this blog, we'll explore the specific benefits of governance at Neptune Mutual and how it enhances our protocol's effectiveness and reliability.

Fair Incident Reporting and Resolution#

Neptune Mutual's governance and voting mechanism play a crucial role in our incident reporting and resolution process. This system ensures that claims are managed fairly and without bias, giving the community a significant role in deciding which cover purchasers receive payouts.

The process begins with community users reporting any incidents that occur, ensuring that no incident goes unnoticed. Once an incident is flagged, users vote in favor or against the occurrence of the event. A vote in favor indicates agreement that the incident did occur, while a vote against suggests that the incident was falsely reported.

However, there can be instances where dishonest individuals or groups attempt to manipulate the vote to unfairly claim rewards. To prevent this, Neptune Mutual has measures in place to identify and discard such dishonest votes. During a designated one-day wait period, the Neptune Mutual Governance admin validates the actual occurrence of the incident to ensure the integrity of the votes.

For more detailed information on how Neptune Mutual prevents dishonest reporters from gaining an unfair advantage, check out our dedicated blog on the topic.

Community Involvement#

As a DeFi protocol, it's essential to involve the community in your protocol's affairs and activities. Community involvement offers several advantages, including maintaining transparency, trust, and credibility. When the community feels informed and engaged, they are more likely to support and invest in the project.

One effective way to involve your community is through governance. Community participation in governance proposals and decision-making processes helps ensure a fair and balanced approach, reducing the risk of centralization and misuse of power.

There's nothing better than having your community involved in the most crucial aspects of your protocol. For Neptune Mutual, this means active participation in incident reporting and resolution, that leads to fair payouts.

As previously mentioned, the process begins with the community reporting incidents. This involvement ensures that no incident goes unnoticed and that cover purchasers receive fair compensation. By empowering the community to take part in these critical decisions, Neptune Mutual fosters a sense of ownership and collective responsibility, which strengthens the overall integrity of our protocol.

Utilization of NPM Tokens#

NPM is the utility token that powers the Neptune Mutual ecosystem. One of the key use cases of the NPM tokens is in the incident reporting process, which is part of the Neptune Mutual governance.

It’s important to note that reporting incidents and voting on them requires users to stake their NPM tokens. If you hold NPM tokens, you can actively participate in reporting incidents and voting on their validity.

One of the crucial benefits of utilizing NPM tokens is that it ensures that they are not stagnant. The more activity and engagement with the token, the more its value is likely to increase. Higher utility often translates to greater demand, as more users will need the token to take part in essential activities like staking.

Rewards to Participants#

To induce participation, the governance process rewards users for correctly voting when resolving incidents. This ensures that incidents are addressed promptly and fairly.

As mentioned earlier, users need to stake their NPM tokens, participating in either validating or disapproving the reported incidents. The same tokens staked by incorrect voters or the losing side will be proportionally awarded to the correct voters or the winning side.

When voting, you can either confirm that the incident occurred or vote against the initial reporter if you believe the incident was falsely reported. After an incident is resolved, those who voted correctly share 60% of the staked tokens with the invalid voters. These rewards are distributed proportionally based on the amount staked by the valid reporters.

Additionally, 30% of the invalid reporters' tokens are burned, helping to maintain the token's value. The remaining 10% is awarded to the final reporter. This final reporter could be the first reporter who reports the incident correctly or the candidate reporter who votes against the incorrectly voted first reporter.

Maintaining the Ethos of DeFi#

One of the inspirations for the origin of DeFi is the need to break away from the traditional financial systems, where power and decision-making are centralized. Thus, governance is a crucial aspect of DeFi, alongside decentralization, transparency, and anonymity.

By integrating governance into the Neptune Mutual ecosystem, Neptune Mutual upholds the core principles of DeFi. Additionally, this makes sure the decision-making power is decentralized, ensuring fairness in insurance payouts.

This means that our protocol doesn’t have complete control over the protocol regarding who receives the payouts and who doesn't. Instead, users are allowed to have their say in the incident resolution, promoting fairness and inclusivity.

Distribution of NPM Emissions#

Another key area where governance is applied is in the liquidity provider (LP) reward system. Neptune Mutual has recently launched an innovative reward system for LPs of its cover pools through NPM emissions.

In this system, NPM emissions are distributed to cover pools within the marketplace. LPs who lock their POD tokens in these cover pools benefit from this distribution.

But how does governance play a role in this process? Let’s understand. 

Users who have NPM tokens are allowed to vote on the Snapshot platform to determine which pools receive what proportion of the emissions. With the vote escrow feature, users can lock their NPM tokens to receive veNPM, which grants them greater voting power compared to standard NPM holders.

This means that veNPM holders have more influence in the Snapshot voting process, allowing them to direct NPM allocations toward the cover pools where they have staked their liquidity.

Check out the YouTube video below to learn how to navigate veNPM and liquidity gauge features.

Final Words#

The governance mechanisms within Neptune Mutual are crucial in maintaining integrity, fairness, and efficiency in incident reporting and payouts. It ensures that the community has the upper hand and that we don’t hold excessive power in payout and emission decisions.

We encourage crypto users in need for protection of their assets to check out Neptune Mutual. We offer users parametric cover policies to ensure quick and transparent payouts to the users affected by hacks and exploits.

As a user of the Neptunite ecosystem, you can also participate in incident reporting to receive rewards. In addition, LPs can add liquidity to our cover pools and yield significant returns.

We offer a marketplace in EthereumArbitrum, and BNB Smart Chain, letting project owners create their own cover pools to protect their communities. Reach out to us through our contact page if you are interested.

Connect with us on X and join our Discord chat to learn more about Neptune Mutual.