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.
In the first week of January 2019, a hacker exploited ETC via a 51% attack, in which they caused a loss of funds
worth 219,500 ETC, roughly amounting to $1.1 million. ETC was also a target of multiple 51% attack during 2020.
Ethereum Classic is a decentralized network made up of an ecosystem of on-chain smart contracts and services, a
native cryptocurrency called ETC, and a blockchain ledger.
Ethereum Classic is a version of the Ethereum network that has not been changed. The original Ethereum network was
released in 2015. But in 2016, due to a Reentrancy Attack on The DAO, the Ethereum
Foundation created a hard fork of the network to try and minimize the loss caused by it. This new hard fork erased the
hack from its history and continued with the Ethereum brand name. After the Ethereum hard fork, the original chain was
thenceforth referred to as Ethereum Classic with a new token ticker “ETC”.
A 51% attack is an attack on a
blockchain that happens when an individual or group is able to gain control of more than 50% of the network's hash
power. Hash power is the computational power used to run and solve complex mathematical problems to create a new
block. Transactions on Ethereum Classic are verified using the Proof of Work (PoW) consensus algorithm. A PoW-based
blockchain can be attacked if the attackers have control over more than 50 percent (51%) of the network's hash
rate.
A successful 51% attack enables , an attacker to use their hash power to exert control over the blockchain,
preventing new transactions from being confirmed, or reversing or modifying past transactions.
ETC was a target of multiple 51% attacks. The root cause of the vulnerability was due to rented hash power for the
attack.
In the initial week of January 2019, the first attack took place in which Coinbase identified a deep chain
reorganization where out of a total of 15 attacks, 12 attacks included double spend of 219,500 ETC.
The attacker extracted a huge number of ETC from the Binance wallet, and then transferred those tokens to the other
wallet addresses they controlled. All of the transactions would normally have been confirmed on the ETC blockchain,
however they were no longer validated due to the rollback of the blockchain.
Attack 2020:
Later, in between July and August 2020, three more attacks were carried out. In the first two, double-spend attacks
took place on crypto trading platform OKEx (now OKX).
Over the course of the first attack, 11 malicious transactions originating from a single address were inserted into
the Ethereum Classic blockchain, resulting in the reorganization of 3,000 blocks allowing more than 807,000 ETC to be
double-spent.
The attacker started mining blocks after buying hash power from a user on the cryptocurrency mining platform
Nicehash.
On July 31, the attacker used private transactions to send money to their own wallet address. They then put the
transactions into the blocks they were mining.
The attacker then wired money back to a cryptocurrency exchange, which Bitquery claimed to belong to OKEx.
By August 1, the attacker published their blocks and initiated the chain reorganization.
The second attack happened within a week following the earlier attack and had a similar reorganization depth (about
more than 4,000 blocks).
The hacker initiated the attack by transferring ETC from a wallet it controlled on an exchange and back again.
The attacker mined 4,280 blocks in four days after renting hash power from Nicehash provider to gain control of
the majority of Ethereum Classic's hash power.
The attacker then constructed private transactions that sent ETC to wallets under its control, before broadcasting
the blocks containing transfers to their wallets in order to reorganize the blockchain.
Across the course of more than 12 hours, transactions between the hacker's exchanges and wallets were carried
out over a non-reorganized chain, providing opportunity for the conversion of the exchange funds taken into smaller
activities meant to prevent detection.
The then third attack of the month came as the final attack resulted in a massive reorganization of 7,000 blocks, but
there were still no indications of a double-spend attempt.
During the first 51% Attack of 2019, the hacker sent 100k USD worth of ETC to Gate.io after a few days of the attack.
However, the major consequences of the attack for ETC was disturbing as it was one of three cryptocurrencies that
Thailand's Securities and Exchange Commission banned from usage in initial coin offerings and as a trading pair in
February 2019.
In the first two double-spend attacks, hackers stole more than $5 million in ETC. With the shock of the awful month
which had three consecutive attacks, ETC urgently used MESS as a network security solution.
MESS was deployed on October 11, 2020 at block height 11,380,000 and was intended to lessen the risk of 51% attacks on
the ETC network. Now attacking the chain would be 31 times more expensive with MESS than it was before.
It is crucial to ensure that no single miner, group of miners, or a mining pool is controlling more than 50% of the
blockchain network's computing power. Thus, hackers wanting to attack a blockchain will likely be unable to
outbuild the longest existing and validated chain.
To avoid the possibility of a 51% attack, a blockchain network can adopt Proof of Stake (PoS), a more secure
consensus algorithm than Proof of Work (PoW). A 51% attack occurs under PoW when one entity controls more than 50% of
the network's hashpower and uses this to alter the blockchain. In PoS, however, a group or individuals must own
51% of the staked cryptocurrency, which is inherently expensive. Mostly, PoS incentives are regulated by the most
affluent users who are unlikely to undertake the hack, as they would have to risk losing their entire staked amount by
doing so.
