Cover Product Spotlight: Compound Finance
A spotlight article on Compound Finance with its features, financials, & security record.
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AMA with the community where we discussed about the project and answered the questions from public.
Date: May 25, 2022, 9:30PM HKT
Place: AVStar Telegram https://t.me/AvstarCapital
We’d like to thank everyone who participated in the AMA Session. We appreciate all of your assistance. In case you missed it, here’s a recap of the entire session!
Edward: Binod is co-founder and CEO of Neptune Mutual. He has been involved in the blockchain industry from its outset and has extensive experience of writing and auditing smart contracts, exposing hacks and exploits, and developing a range of blockchain applications. He was previously the CTO of InvestaX.
Gillian is a co-founder of Neptune Mutual and the founder of Mulana Capital, a crypto VC fund. Prior to this, she was the CEO of Huobi Asset Management. She built that business line from scratch and managed to get the SFC virtual asset manager license in Hong Kong. Prior to Huobi, she has a decade-long working experience in the insurance industry and is well-connected within the Asian crypto community.
I am an adjunct Professor of Entrepreneurship at KEDGE business school. I am also a startup investor and mentor, and I manage a quantum materials deeptech startup. At Neptune Mutual, I manage operations and finance.
I have very happy memories of working on a project in Jakarta for a couple of years where I still keep in touch with some of my friends.
Gillian: Neptune Mutual safeguards Ethereum community and the wider crypto user base from cyber threats. Our protocol provides a marketplace for DeFi and CeFi projects to create their own cover pools, for liquidity providers to pool risk capital, and for community members to purchase cover.
Neptune Mutual cover pools provide guaranteed payouts upon triggering a set of the predefined event(s), or cover parameters. Cover parameters consist of rules and exclusions. Payouts can only occur when all cover conditions are met, no exclusions are present, and the incident is successfully resolved by the community. The term cover incident refers to a state in which all cover rules and exclusions have been met.
You can use our application in the Mumbai test network.
Watch our YouTube videos to learn more about the project.
Binod: Among our many peers are Nexus Mutual, Unslashed, InsureAce, and Risk Harbor. With Neptune Mutual’s parametric cover model, which assures a payout after the incident is resolved by the community, we stand apart from our competitors since we don’t have to go through an individual claim evaluation process.
Neptune Mutual’s parametric model provides guaranteed payout to all policyholders if a trigger event is resolved without the need for an individual claim assessment. On the other hand, there have been times when only 30% of historical claims were paid by discretionary cover protocols.
Another major difference is that our cover pool TVL does not fluctuate together with the crypto price movements. This protects us from being helpless and trying to figure out how to deal with unfavorable situations that are not in our control or being exposed to a situation that arises not because we made a mistake but because of the market cycle.
We do not have leveraged pools nor fractionalized reserves. By using our cover pools, policyholders can feel assured that there is always sufficient capital to underwrite the coverage.
Since incorporation in September 2021, we have closed over $10M in funding from some of the most well known and respected investors in crypto, including; Fenbushi, Animoca Brands, Coinbase, Huobi, OKX, XT and of course, AVStar Capital!
We are planning to release more information about the depth our partnerships with investors in an upcoming series of blogs in our Medium space, so do please follow our channel: https://neptunemutual.com/blog/
We have successfully launched testnet in March. For those of you who haven’t yet tried out our application I would encourage you to try it out here: https://test.neptunemutual.net/
and we have some useful learning resources in our YouTube channel here: https://www.youtube.com/c/NeptuneMutual
Our protocol is nearing the end of its first security audit and we plan to have a second one completed before launch on mainnet.
We have agreements with a few CeFi platforms including XT.com to create dedicated cover pools on our platform. We are in the process of finalizing the partnership with a number of DeFi protocols.
Gillian: We aim to complete the two rounds of smart contract audit within the next two months. We expect to launch our V1 mainnet soon, which will be deployed on the Ethereum chain initially.
We will be working closely with the CeFi, DeFi and Metaverse projects to grow the number of projects that create dedicated cover pool protection for their community in the Neptune Mutual marketplace. We will be helping each and every one of those projects to improve their security, and to communicate with their respective stakeholders about the benefit of protecting digital assets in this way.
After V1 launch, we will work on:
Security is at the core of our mission and it will always play a central role in our future development plans.
Our Standard Disclaimer:
The Neptune Mutual Cover Protocol is a high-risk project. Please understand that the price of NPM tokens may not reflect the development, business, usage or any value related to Neptune Mutual. NPM may not have any intrinsic value per se and can go to zero and your participation in NPM token may be lost. NPM tokens should not be considered as any of the following: an investment agreement, securities, bonds, loans, stocks, unit trust, unit of collective investment scheme, or in any other manner of financial instrument. We do not advise, suggest, or indicate the token to have any intrinsic, financial, or investment-worthy value. No action has been, or will be taken, in respect of obtaining any approval under any laws, rules or regulatory requirement in any competent jurisdictions. We do not have a public token sale date or plans at the moment.
Just like any other cryptocurrency, NPM tokens are also subject to market price volatility. Therefore, do understand the risks of holding crypto assets, including NPM tokens. If you do not plan to use the Neptune Mutual protocol, you should not acquire NPM tokens, as the key value of the token lies in its governance and utility functions. We, therefore, encourage public investors not to speculate on the price of the NPM token but research on the advantages or disadvantages of the Neptune Mutual protocol and what problems it solves.
Binod: That is so true.
We are different from many other projects because we have already completed our protocol development and we are undergoing multiple audits. As you may have seen, many projects take years to build a product; our project is ready to go live at a moment’s notice.
100% of what we promised will be delivered on day one. We are a product company and our focus will be on the use case instead of promising the community things we can’t achieve, or take too long to achieve. We haven’t added too many things to our roadmap, or projected too far into the distant. We will go according to what the market needs in terms of cover protection instead of “assuming” what the market might need in say 5 years time.
Our team isn’t just promising “long term”, it is engraved into the terms of our tokenomics, where we have one of the longest team vesting periods of any crypto project: the team tokens are unlocked only after we are able to launch v2 of the protocol. The team tokens are then vested over a period of 5 years, so give or take, that means a total vesting period stretching out to 6–7 years.
Our biggest goal for this year is the mainnet launch. Since our protocol is accessible to cover creators via invitation only, we will be very excited to showcase our cover pools once we launch. Our mantra is “under promise” and “over deliver”, so we will announce our partnerships later.
But more than that, what success means to us is to be able to offer protection to the blockchain community from smart contract hacks and exploits.
Binod: Our primary objective is to offer parametric cover to the Ethereum network because it is the original and longest-running EVM chain, has the largest community, and the largest value at risk.
Neptune Mutual requires a number of integrations to work, such as Uniswap, Aave, and Compound. Since our risk appetite is low, we are only considering integrations with tried-and-tested lending protocols. We, as a cover protocol, can not afford to build low-quality integrations to chase unsustainable token returns.
Once our protocol is deployed on Ethereum it will be able to protect any project deployed on any chain. That said, we do recognise that although it is not strictly required for us to deploy on multiple chains, the user experience is richer and much more enhanced when we go multichain. We are communicating with select blockchain teams to understand if there is a strategic cooperation possible. Since we serve the best interest of the Neptune Mutual community, our primary concern is the availability of high-quality lending protocols on the chains on which we choose to deploy.
As I said earlier, we are not looking for double or triple digit high APY protocols for integration. We simply want to restrict ourselves to reliable, high-quality, and low-risk protocols. We will evaluate multiple blockchain networks progressively and expand as and when the right opportunities arise.
Binod: Neptune Mutual is a marketplace where communities can protect themselves from potential hacks. Cover creators can create cover pools and attract underwriters. Underwriters collectively pool the risk capital, own the liquidity pool, and receive benefits through a number of means, including policy fee income, lending income, flash loan interest, and POD staking rewards.
Once cover creators have demonstrated a commitment to their own cover pool through marketing and liquidity support to their pool, they can then apply to get funding from Neptune Mutual to join them as underwriters. Before we fund our bond capital to a cover pool, we will perform additional steps to rigorously review the security aspect of the covered apps/contracts. This typically includes security review of smart contract, frontend and backend applications, HTTP, DNS, email, hosting environment, and the overall supply chain of the product. Since it is obvious that nobody wants to risk their capital to fund an insecure project’s cover pool, getting funding from Neptune Mutual will boost LP confidence to join together with us.
For policyholders, purchasing a parametric cover from Neptune Mutual gives you a guaranteed payout if you check what is covered and what is excluded. If you use discretionary covers, you have a risk of not only losing your asset because of a hack but also losing the policy premium you paid if it does not result in a payout.
We are different from most other cover protocols as unlike others we are not, at all, exposed to any crypto price volatility. Being a cover protocol, we believe it is important to avoid cover pools being exposed to cryptocurrency market price volatility. So in the case of cover pools in the Neptune Mutual marketplace they are completely independent of NPM token price. Our cover pools are single-stablecoin denominated and highly dependable and reliable. You will not experience a sudden drop of 50% or drastic increase in TVL with us. In addition to this, we do not have “fractionalized” liquidity; our MCR is always more than or equal to 100%.
Neptune Mutual does not chase or promise any high-yield returns. We do not have uncapped tokens, mintable on demand to offer as an (unsustainable) yield which will dilute all tokenholders. This is important because we strongly believe that as and when a project’s market grows, demand progressively increases and usage gradually grows, it feels completely wrong to dilute tokenholder “value” because they believed in the project and held onto a token which has now gradually become worthless because of high-APY returns. We think “paying” people to use our platform by offering high yields will dilute existing tokenholders and believers.
Gillian: Although the Neptune Mutual bond pool feature is inspired by OlympusDAO, there are some key differences to note here. One of which is that NPM tokens are fixed in supply and are deflationary in nature. Therefore, the bond pools will only be announced and made available on a seasonal basis instead of being an always-available feature. We will announce bond pool campaigns in advance with a predetermined allocation of NPM tokens. The bond pool automatically stops as soon as the tokens are fully allocated.
We will only use a portion of the bond pool liquidity (to be announced later) to fund cover pools while still keeping remaining liquidity in the DEX for better market depth.
Our Bond pool will allow us to progressively bootstrap liquidity to fund and underwrite our cover portfolio. Based on the requests and demands from our cover creators, we will announce bond pools from time to time. The availability will also be decided based on the utilization ratio of cover pools. Meaning, if our cover pools have low-utilization, there will be no need to run a bond pool campaign.
As we serve to cover more applications, we will actively participate in and accept offers to fund cover pools to enhance the availability of underwriting capital. Having said that, we do not want to risk our funds to sponsor pools which are inherently risky so we will perform a general technical due diligence and only provide liquidity support to projects that pass our due diligence.
Edward: This is an excellent question. We always encourage users and projects to think and plan ahead for the consequences of a hack or exploit, and of course this applies as much to our own project as it does to those we are looking to protect.
The answer comes in two parts. The first part is to do our very best to avoid a hack or exploit in the first place by having a culture of security and by implementing a whole variety of security measures, technical and otherwise, to try and prevent a hack or exploit from arising.
Although it is true that even the most secure systems can be hacked, projects can use a strategy to prevent attacks before they occur. The majority of blockchain breaches have occurred as a result of the impacted project team’s lack of attention to cybersecurity.
The MyEtherWallet breach, for example, was a DNS cache poisoning attack that allowed the attacker to modify the hosting server’s IP address. Because of exposed credentials, the BadgerDAO attack was possible; nothing was wrong with the code. Similarly, the Ronin attacker was able to obtain private keys; it’s worth noting that these keys were not “hacked,” but rather leaked due to human error.
The second part of the answer, which more specifically answers the question, is that we plan to build up an investor protection fund that we can use to mitigate any losses in the event of a hack or exploit of our own protocol.
We have considered a range of other options, and it may be that we adopt additional measures in the future, but for the time being we believe that an investor protection fund is the right approach to take.
In addition to this, we are also communicating with traditional insurance and reinsurance companies in order to find a solution to protect our protocol.
My Etherwallet and Bancor
Binod: The next roadmap item is the mainnet launch. ;)
Edward: Thanks for the question Julie,
Definitely yes — we have a very active Discord community where we encougage our community to provide feedback.
Gillian: Our most important next step is completing the smart contract audit, we are about completing the first round and are in chat with a few lead auditors for the second round of audit; after which we can deploy the protocol on the mainnet. I understand the question is raised given the uncertainty of this market environment, but we have raised 10M$ and our cost base is predominantly tech expertise and our large team is based in India, we are sufficiently covered for 3 years run way and are not impacted by market conditions.
Binod: We will list on a decentralized exchange initially. We will then progressively list to centralized exchanges as well.
Gillian: We do have such plan in future enabling devs to build on top of Neptune Mutual, pls do read our docs part and feel free to reach out to us.
Cavani | AVstar Capital:
Thank you Mr. Binod Nirvan, Mr. Edward Ryall and Mrs.Gillian Wu for all these great answers. Our community is getting real hot for this live answer from you guys.
We will post the winners later.
The AMA meeting today has come to an end. Thank you for participating, we all appreciated having you here and giving us such amazing information for this project. Neptune Mutual will moon
Thank you again Mr. Binod Nirvan, Mr. Edward Ryall and Mrs.Gillian Wu