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.
Minimize risk and take custody of your crypto rather than relying on a 3rd party.
In the last few years, cryptocurrencies have gone from being a niche technology to something far more mainstream. Big brands have experimented with NFTs, Web3 Play2Earn gaming has become more well-known and it's become easier than ever to add coins and tokens to your savings portfolio thanks to centralized exchanges such as Binance and Coinbase. Even mainstream "TradFi" companies such as Revolut offer the option to buy cryptocurrencies. However, that convenience comes at a price.
When you buy coins or tokens on a centralized exchange, those tokens are held in the exchange's wallet. This means you have to trust that the exchange:
has the coins they claim they do,
will allow you to withdraw those coins when you want them,
is storing your holdings securely and won't get hacked.
Those risks aren't just limited to CeFi (Centralized Finance) companies, either. If you're dealing with DeFi (Decentralized Finance) smart contracts that require you to lock up funds for any length of time, there's the risk of the contract being hacked by a malicious third party.
One look at Web3IsGoingGreat, our own blog on The Role of Cover Protocols in Mitigating Risks, is enough to show that custodial risk is too great to ignore. The recent high-profile collapses of platforms and exchanges such as Celsius and FTX highlight how important it is for long-term investors to take ownership of their crypto.
Take custody of your own funds. Not your keys, not your coins.
While it makes sense for day traders to keep their cryptocurrencies on the exchanges they use for trading, if you plan to hold a currency for a long time, it's worth considering self-custody options. The cryptocurrency community has a saying - Not Your Keys, Not Your Crypto (NYKNYC).
Cryptocurrencies use a combination of public keys (shared) and private keys (only the owner of the currency knows). If you are not in possession of the private keys for the wallet in which the coins/tokens are stored, then those assets are not yours - at least in the sense that you cannot access them.
Self-custody begins with withdrawing the assets from the exchange and holding them in a wallet for which you have the the keys. Those wallets can be:
Hot Wallets: Such as Metamask, popular for holders of ERC-20 tokens or Electrumfor Bitcoin.
Cold Wallets: Multi-currency offline wallets as those offered by Ledger, Trezorand Ellipal
Hot wallets are incredibly convenient, but that convenience brings some security risks. Metamask is a browser extension that makes it easy to use DApps and Web3 services and manage multiple tokens and assets all in one place. Electrum is a desktop application that gives you instant access to your Bitcoin. Some other hot wallets run on your mobile phone. What all of these things have in common is that all you need is access to the device and your wallet password, and you can transact using that wallet.
If you're running a hot wallet and the device gets hacked, and the attacker gains access to the wallet's keys, you could lose all funds in the wallet. To combat that risk, many people use cold wallets for long-term storage.
Cold wallets are devices that store the keys offline. It's possible to configure Electrum to work in this way, but most cold wallets are physical devices that look a lot like USB memory sticks. For example, Ledger and Trezor offer apps to view and manage your wallet. However, you can't send cryptocurrencies from the wallet without "signing" the transaction using the physical device. This adds an extra layer of security at the cost of convenience. If you're away from home and want to sell some Ethereum or send some Chainlink to a friend, you can't do so if you aren't carrying your hardware wallet.
It's possible to purchase a Ledger Nano S for around $100. If your cryptocurrency holdings are worth more than a couple of hundred US dollars and you plan on keeping them for a long time, it's well worth making that purchase for peace of mind.
Most modern cryptocurrency wallets use a recovery phrase (typically 12-24 words) rather than a collection of random letters and numbers. If you lose your wallet, you can recover it by entering that phrase into any hardware or software wallet that supports the same standard.
In addition to the recovery phrase, some wallets may use an "extra word" for added security and a password to unlock the wallet. When you go through the wallet creation process, note these details. If you forget them, there's a risk you could lose access to the wallet.
Always keep in mind that anyone who knows the recovery phrase can create a copy of your wallet. Follow these golden rules when storing your coins and transacting with cryptocurrencies:
Keep the wallet and recovery details separate, ideally out of public view.
Do not re-use passwords for exchanges or wallets on other services.
Never store your keys/recovery phrase online or on a computer connected to the internet.
Never enter your wallet's recovery details into a website, or share them with a third party, even if that third party claims to be from "Trezor Support".
If you have the luxury of doing so, keep a spare computer that isn't used for day-to-day browsing to manage your cryptocurrencies.
Do not install untrusted applications on your computer.
Do not connect your Metamask wallet to a website or DApp unless you can trust it.
When sending cryptocurrencies from your wallet, always verify the address you're sending it to by checking several characters at the beginning and end of the address. Don't just trust the address you paste from your clipboard.
If your cryptocurrency holdings are large enough to make it worthwhile, test your wallet recovery procedure by attempting to recover your hardware wallet to a backup wallet while the first wallet is still working.
Never reuse addresses. Most modern wallets automatically generate new addresses for each deposit request. Take advantage of this feature.
Some hardware wallet manufacturers offer steel plates to stamp your recovery phrase onto. The idea of these plates is to create a backup of your keys that will last a lifetime. Ink fades, and notepads can be mistakenly discarded. They're also likely to be destroyed if you experience a fire, flood, or another disaster. Steel plates will survive such events, so if the worst happens, you'd still be able to recover your cryptocurrency and get back on your feet.
If you take a systematic approach to protect your self-custodied cryptocurrencies and invest in protection against custodial risk, you'll be prepared for any eventuality.
