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.
On February 1, 2023, the BonqDAO protocol was exploited due to price manipulation of AllianceBlock tokens, caused as a result of an Oracle hack, with the estimated losses totaling roughly $120 million.
BonqDAO announced on Twitter that the protocol had been exploited by an Oracle hack, in which an exploiter raised the price of $ALBT tokens and minted a large number of $BEUR tokens.
Step 2:
The $BEUR tokens were then swapped for other tokens on Uniswap, and the price was reduced to almost zero, resulting in the liquidation of $ALBT troves.
The exploiter was able to modify the updatePrice function of the oracle in one of BonqDAO's smart contracts, allowing them to manipulate the $WALBT token's price.
Step 5:
By manipulating the price of $WALBT tokens, the exploiter is able to mint approximately 100 million $BEUR tokens.
Step 6:
This led to the exploitation of the $WALBT and $BEUR tokens. The hacker then swapped around $500,000 worth of $BEUR tokens for $USDC on Uniswap before burning all 113.8 million $WALBT tokens in order to unlock $ALBT tokens.
Step 7:
At the time of this writing, the exploiter's address is holding assets valued $87,765,439, which includes approximately 711 $ETH, 534,481 $DAI, 89.2 million $ABLT, and more than 98 million $BEUR tokens.
Following the incident, the price of $WALBT tokens dropped by more than 50%, while the price of $BEUR tokens plummeted by 34%.
BonqDAO stated that the protocol had been paused and that a fix was being incorporated that would let users withdraw the remaining collateral without having to pay back $BEUR to the troves.
AllianceBlock also reported that the incident is limited to the BonqDAO troves and that none of their smart contracts were compromised. The team is now removing all liquidity from Bonq and has ceased exchange trading. Additionally, they disclosed that they would mint new $ALBT tokens for those affected by the exploit.
The exploit that struck BonqDAO is a stark reminder of the intricate vulnerabilities inherent within decentralized protocols. BonqDAO, designed to offer interest-free financial services, found itself at the mercy of a hacker due to an Oracle hack, a potent vector allowing for manipulation of the price of AllianceBlock's $ALBT token. This led to a cascading impact, with an astronomical loss of $120 million.
The sophisticated nature of Oracle hacks stems from their ability to affect the price feed itself, a foundational element in the DeFi world. By compromising this price feed, the attacker can induce a false sense of market dynamics, leading protocols to operate based on incorrect information. In the BonqDAO incident, the manipulation of the ALBT token price was craftily exploited to mint an inordinate amount of BEUR tokens, resulting in widespread liquidation and a precipitous drop in asset prices.
Such breaches, although technical in nature, can be mitigated to a significant extent by leveraging decentralized Oracle systems like ChainLink. ChainLink, with its decentralized approach to price feeds, can provide a more resilient and tamper-resistant mechanism, ensuring that single points of failure are eliminated and data integrity is maintained.
However, even with the most sophisticated technological solutions in place, there remains an element of risk. This is where Neptune Mutual steps in as a vital safety net. Had the BonqDAO protocol team preemptively established a cover pool within Neptune Mutual's marketplace, the ensuing chaos post-hack could have been substantially attenuated. Neptune Mutual stands at the forefront of offering coverage for smart contract vulnerabilities, providing a cushion to users through its parametric policies.
Our unique offering ensures that affected users are insulated from the tediousness of substantiating their claims. Once an incident concludes its resolution process, it is immediately eligible for compensation. Our platform's versatility, present on Ethereum and Arbitrum, ensures wide accessibility for users.
Furthermore, the importance of a comprehensive security framework can't be overstated. Beyond mere insurance, Neptune Mutual’s dedicated security team brings to the table a holistic approach to platform safety. With assessments ranging from DNS and web-based security to backend fortifications, we strive for a multi-layered defense strategy. Our expertise in intrusion detection and prevention acts as an additional bulwark, aiming to prevent such vulnerabilities from being exploited in the first place.
