After much deliberation and careful thought Neptune Mutual decided to close the cover marketplaces.
After much deliberation and careful thought Neptune Mutual decided to close the cover marketplaces. Below the reasons for the decision as well as what it means for the community.
The marketplaces will be closed using an emergency withdrawal process whereby the liquidity provided to cover pools by LPs will be returned to the wallet addresses from which the liquidity was supplied. In addition to protecting cover pool LPs, there will also be refunds to all cover policy purchasers with an existing and valid policy who have paid over 10 USD in policy fees in one transaction.
For veNPM holders, please fill out this form to receive a refund for your veNPM to NPM conversion penalty.
From the end of June there will no longer be NPM emission incentives for LPs i.e. Epoch 3 of the liquidity gauge emissions will be canceled.
Unused funds raised from financial backers will be returned to those backers; this includes DEX liquidity that has now been removed from SushiSwap and Uniswap. A small amount of liquidity on SushiSwap Arbitrum has been left to enable a minimum amount of NPM trading.
The protocol will be open sourced, and become a true public good. Enabling the community to fork the code developed by the Neptune Mutual team such that others might use the existing resources to further our mission to make the blockchain space better protected against smart contracts and other risks.
There are numerous factors that have led to this difficult decision, some of which are external factors which are uncontrollable or unforeseeable. A few factors summarized below:
“Given Neptune Mutual’s Tier 1 backers, why have you not listed on a top CEX?”
This is perhaps one of the most frequently asked questions. In short, the answer is that for a variety of reasons Neptune Mutual was not able to achieve the diverse set of performance metrics (community size and engagement, marketplace user activity, DEX 24 hour trading volume, TVL growth etc.) required to list on top tier CEX. The CEXs that are prepared to list NPM token do not have the depth of liquidity or breadth of user-base to offer good prospects for NPM tokenholders.
“Why has Neptune Mutual not achieved strong growth?”
It is tempting to take a shortcut to answer this question by pointing a finger at one specific factor, but the reality is that there are many contributing factors. A few summarized below:
Since the outset of engaging with the community we have endeavored to highlight the need for DeFiInsurance; Neptune Mutual built a comprehensive dataset of on-chain hacks available, anywhere, and each week we highlight the many millions of dollars that are stolen as a result of smart contract hacks. Despite this, we have consistently been confronted by projects unwilling to spin up cover pools in our marketplace because of the sentiment that audits of their code are sufficient to persuade their community that their protocol is safe. Less than 0.3% of all digital assets are protected with some form of DeFiInsurance, and yet despite all the media reports of hacks, the conference discussions about the importance of governance or CEX proof-of-reserves, it continues to be the case that it is extremely difficult to get media attention to focus on the need for a fast and efficient means of mitigating smart contract risk.
A variety of approaches have been taken by different DeFiInsurance protocols to address this, from attending multiple conferences throughout the year and significant marketing spend, to the leaner approach that Neptune Mutual took (in part as a result of the bear market in 2023). What can be said is that no DeFiInsurance protocol has managed to achieve significant growth over the last 18 months, sadly the overall TVL of the sector has shrunk a lot.
For all the reasons above, at this moment the best course of action is no longer to double-down on investing in growth, but rather to refund unused capital and close the marketplaces.
The consequences are very tough for the Neptune Mutual team who have spent the past 3 years of their time on the mission to facilitate safer environments within DeFi. The team has delivered products according to the roadmap and the fact that the protocol was never hacked, despite attempts being made on the darkweb, is testament to the expertise, passion and absolute focus on security. The team survived the FTX and UST crisis unscathed, and believed that the continued growth in hacks would lead to growth in the demand for a good solution to mitigate these risks, but sadly, as can be seen right across the DeFiInsurance category, this is not yet in sight. So we would like to thank the team for all the dedication, skill and passion invested into the Neptune Mutual project since the outset.
The team will open source the protocol, including blockchain indexing protocol (subgraph alternative), frontend, middleware, database, and backend code, to make it a true public good. This will allow anyone to fork the code and create covers by defining parameters and premium ranges, potentially leading to innovative covers and organic usage.
The Discord channel will be closed to reduce the risk of phishing and other types of cyber attack, any questions / queries will be responded to in the Telegram channel.
We want to take this final opportunity to thank you all for your support.
Neptune Mutual will contact only its financial backers, with whom a signed agreement exists, in relation to next steps (i.e. holding NPM tokens does not qualify you for any form of refund). Contact will be made only from a neptunemutual.com domain email address so please check the source of any email you may receive very carefully. Please ignore any messages from any other email or social media accounts in relation to token/cash refunds.
Learn how a blockchain protocols can stay prepared and protect themselves from crypto crash.
One of the principal reasons for widespread adoption of Amazon’s marketplace is convenience: fast search and comparison of products, fast purchase (one-click), fast delivery (same-day in many countries), and reliable service (Amazon’s A-to-Z guarantee).
Uber, AirBnB and many other success stories have utilised a similar mix of ingredients that make their solutions convenient.
In the retail banking sector the rise of neobanks, such as Revolut, has re-defined convenience: fast transactions (typically a few seconds, as opposed to days), mobile phone banking meets UI (user interface) design, fast and real online chat help (OMG what? … yes honestly, no more talking with answerphones!).
OK, so how convenient is crypto? (Possibly the subject of another article) For now, let’s stick to how can we make financial protection convenient?
At Neptune Mutual, everything we create follows the four core design principles:
Maximise security
Minimise risk
Maximise scalability
Maximise user experience (UX)
This is our “secret source” to making financial protection convenient and accessible.
This isn’t just a maxim. It is the DNA of Neptune Mutual’s culture. It is our mission to cover, secure, and protect against hacks and exploits. Therefore, it is crucial that we ourselves do everything possible to be as secure as possible.
Security matters to us, and it should matter to you. One of the mantras, and underlying values of blockchain systems, is that they are trustless. So we think that it would be odd for us to say “trust us” that we are doing a good job of securing our application, whilst at the same time hiding the means for users to do their own research. Neptune Mutual is one of the few cover protocols that have a trustless or more precisely, open-source protocol. Anyone can review our bespoke (non-forked) code. We believe this is the standard that blockchain users should expect.
We have gone to great lengths to review every detail of our marketplace design to minimise risks. We have completely removed any token/crypto market price volatility from the marketplace model. Firstly, it shouldn’t be a surprise to anyone that there is significant price volatility in the crypto market.
Crypto Volatility Index Chart | Source: investing.com
Secondly, when protocol APY returns are driven by tokens, the impact of the change in the price of the token can significantly outweigh the APY “returns” of additional tokens; put another way, you can get a 1000% APY whilst at the same time ending up with a lower principal and lower total funds in dollar value than you started with i.e. you made a loss.
At Neptune Mutual, we minimise risk to both liquidity providers and policyholders by insulating both parties from any token/crypto price volatility. This is done through the use of stablecoin liquidity in cover pools and stablecoin payouts to policyholders.
Furthermore, there is a 100% minimum capital requirement for cover pools so that we can, with 100% confidence, guarantee that cover policyholders will receive a payout in the event of an incident. If you would like to know more about this important subject, and how our approach differs from other protocols you might like to read it here.
Of course, there are many other aspects to minimising risk which we will no doubt write further about.
When hacks and exploits occur, the consequences can affect a lot of people or wallets. Convenience means resolving these consequences fast.
So, when designing a cover solution Neptune Mutual adopted a parametric solution.
What does this mean?
It means that by assessing the incident, rather than individual claims, the Neptune Mutual solution is scalable in the sense that it takes the same amount of time (set by the cover creator and usually 7 days) to resolve an incident, irrespective of the number of people or wallets affected.
Imagine a hack where you are one of 20,000 people that have been affected. What does that look like for protocols that need to assess 20,000 individual claim assessments … Well, we drew 20,000 faces to give you an idea of what it looks like. Resolving all these individual assessments would inevitably take a lot of time.
This is why parametric covers are so convenient for CeFi, DeFi, and Metaverse communities because by simply focusing on the event instead of individuals, digital asset protection can scale to cover as many people or wallets as the cover pool liquidity will allow, whilst maintaining a quick (7-day) period for assessing everything that parametric cover needs to resolve the situation.
User experience optimization is critical especially since the blockchain ecosystem is relatively nascent and full of technical jargon. The average potential user does not know what dApp means, nor do they have any clear understanding of how a smart contract works.
But the thing is they shouldn’t have to learn about all the underlying technology just to access the digital asset protection services that they need.
At Neptune Mutual, we’ve made our cover protocol as user-friendly as possible. Whether you’re purchasing a cover policy, providing liquidity to cover pools, or reporting a trigger incident, we’ve made sure every step of the process is straightforward. This means simplifying all terminologies and providing a series of explanatory videos on how stakeholders can interact with the protocol.
Our contact channels and social media communities are always available to answer any inquiries as well. We also provide Ask Me Anything (AMA) sessions on our Discord channel so users can gain more insight into how we operate.
How Much Do You Know About Parametric Cover in Blockchain?#
The basic concept of parametric cover is quite simple — cover the probability of a predefined event happening rather than indemnifying for the actual loss incurred. Put simply, payouts are made according to predefined parameters.
In this way, it offers a means of guaranteeing payouts after a qualifying event has been validated.
There are two foundational elements in any parametric cover model:
Like the discretionary model, parametric cover is designed to mitigate security risks that significantly impact digital assets. The difference here is that parametric cover determines risk using predefined parameters, meaning the specific risk(s) being covered in the policy have been pre-established in the contract.
A threshold level is a parameter that determines the size of the hack or incident that qualifies the security breach as a trigger event.
All the parameters required to trigger an event are predefined in the policy, so it’s a simple matter of validating their occurrence by the NPM community, following which payout is guaranteed for all policyholders.
Deployed for risk mitigation, the convenience that parametric cover protocols provide is immediately clear. For one, it provides certainty — there’s no risk of your claim being denied after the community has validated that the parameters of a policy have been triggered. Policyholders also know how much they will receive once resolution has been reached on the incident.
Because it is the event that is assessed, and not individual loss, the claims process is a lot faster. There’s no lengthy loss adjustment process or time-consuming investigations, as we have seen in the example above about the 20,000 user wallets affected.
In this way, parametric covers can cut down the claims processing time from a few weeks or even months to a few days.
Incident validation is also streamlined and usually follows a simple binary decision rule. NPM token holders report and vote on whether an incident has triggered policy parameters. Once an incident has been validated, all policyholders are guaranteed that their claim will be paid out.
Policyholders can be confident in this guarantee given the low risk 100% minimum stablecoin capital requirement of the cover pools, as already mentioned.
In the Neptune Mutual marketplace, cover pools are created by projects, and therefore tailor-made specifically to match the requirements of the community of that project.
Imagine suffering a loss and expecting compensation from your policy, only to be told that the loss was never covered from the start.
When there is a mismatch in understanding between the policyholder and the insurer as to the scope of the policy, the outcome of the process is likely to be disputed, or at the very least, leave one side feeling aggrieved.
The nature of parametric cover is that it generally covers a much wider range of risks and has a few sets of exclusions.
So armed with the knowledge that understanding precisely which cyber risks are included, and those which are excluded, by a cover policy leads to the question: How do I find the right cover policy for a specific digital asset that I hold in a particular DeFi, CeFi or Metaverse project?
We believe that our marketplace will be a convenient search engine to help users find cover policies tailored by projects for their communities. Neptune Mutual is a community-centric project, and over 20k of our community helped us refine the user interface (UI) of our application following its launch on the Polygon Mumbai testnet: have a look here at the blog we wrote about the winners of our testnet competition.
Neptune Mutual is designed to be a convenient and reliable marketplace for parametric cover policy purchasers.
First, policies are designed by cover creators to meet the needs of their own specific projects. This way, policyholders get the appropriate cover from the project itself. Not only does this save time, but it also solves the problem of having to compare different policies to find one best suited to cover the risks of a specific blockchain project.
Underwriting capital is funded through dedicated liquidity cover pools using stablecoin. This makes the marketplace completely independent and removed from crypto market and token price volatility and also helps ensure that there is always sufficient liquidity to cover validated payouts.
Lastly, where cover creators have integrated Neptune Mutual’s SDK, policy purchasers can access the Neptune Mutual cover marketplace directly from project or exchange applications. Choose the type of cover you need and duration and you’re good to go. It’s really that quick and painless.
Promoting Mainstream Adoption of Digital Asset Protection#
Convenience is equally as important as awareness when it comes to adopting digital asset protection in blockchain, perhaps even more so.
At Neptune Mutual, our aim is to drive the adoption of digital asset protection by making parametric cover solutions reliable, fast, secure, and of course, convenient. We have rigorously employed our four design principles to optimise every aspect of the protocol in terms of security, risk, scalability, and UI.
Finally, we are guided by our Neptune Mutual community, whom we serve. We invite you to join us and contribute to, our mission to cover, protect and secure digital assets.
