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.
The vulnerability stems as a result of a flash loan attack, owing to the design flaw of UPStkn token, which allowed the hacker to manipulate its price in the liquidity pool.
According to the logic in the _transfer function of the contract, $UPStkn token would be accumulated when transferring, specifically if the receiving address is a pair address.
Step 3:
If the receiver is a UNI pool, the amount of $UPStkn token in the pool will be burned, which will alter the pool pricing and provide the hacker an opportunity to make profit from it.
Step 4:
The attacker utilized about 18 swaps to lift $UPStkn token selling pressure, exchanging 1.31 ETH for 136,299.97 UPStkn tokens.
Step 5:
The attacker transferred 0 UPStkn tokens to himself to trigger the internal function releasePressure, which burned the LP's 573,300.39 UPStkn tokens in order to increase the price of UPStkn.
Step 6:
The attacker then sold the earlier obtained 136,299.97 UPStkn for a profit of 22.589 ETH after manipulating the token price.
The project appears to be dormant since October 2020. The circumstance appears sketchy, with few updates on their Twitter account and limited availability of members on Telegram. There has been no acknowledgement of the incident by the team.
The flash loan attack that unfolded against Upswing Finance underscored the vulnerability that persists within the DeFi landscape. This time, an approximate loss of 22.58 ETH, amounting to $35,800, was sustained due to a design flaw in the UPStkn token, allowing an exploiter to manipulate its price within the liquidity pool.
Unfortunately, the project's lack of presence raises further concerns. With their domain failing to resolve to an IP address and minimal project-specific information on their Twitter account, the circumstances surrounding Upswing Finance appear dubious. Despite this, the attack transaction's execution and the deployment of the exploit contract serve as a stark reminder of the vulnerabilities prevalent in this space.
This breach stemmed from an intricate set of steps. The attacker carefully orchestrated the manipulation of the UPStkn token's price, leading to the accumulation of tokens and subsequent burning. Through multiple swaps and well-calculated moves, the attacker managed to distort the token price to their advantage, ultimately profiting at the expense of the protocol.
To curb the potential for such attacks involving Oracle price manipulation, reliance on robust data providers like ChainLink could be a prudent strategy. This reinforces the need for robust data integrity as a line of defense against price manipulation, thereby enhancing the security landscape of the DeFi sector.
In the aftermath, the project's apparent dormancy raises questions about its responsiveness and accountability. With limited updates and engagement on social platforms, the absence of any acknowledgment of the incident from the team raises concerns about the project's legitimacy and user protection.
Neptune Mutual stands as a beacon of security in the DeFi realm. In scenarios where protocols suffer a loss due to smart contract vulnerabilities, our dedicated cover pool within the Neptune Mutual marketplace could have provided a crucial safety net. Our parametric cover policies enable affected parties to claim payouts efficiently without requiring exhaustive loss evidence once an incident is resolved through our governance system.
Our holistic security evaluation ensures that platforms are fortified against potential threats. While a protocol audit is a vital step, relying solely on one audit partner might not offer a comprehensive review of vulnerabilities. Collaborating with multiple partners ensures a thorough security assessment that bolsters user asset safety and a comprehensive understanding of the protocol's security.
