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 December 02, 2022, the dumping of massive amount of aBNBc tokens on decentralized exchange opened the door for another exploit in which Helio Protocol was attacked and profited the attacker by approximately $15.5 million.
The root cause of the vulnerability is due to the failure of oracle in updating the price of the associated tokens after they had crashed to a significantly lower value than they earlier trading price.
The Ankr protocol had suffered a governance key compromise, allowing an attacker to mint massive amount of $aBNBc tokens. We have outlined the detailed analysis of the exploit in our blog post.
After the Ankr Exploiter dumped $aBNBc tokens, another user bought 183,885 $aBNBc tokens from 1inch for just 10 $BNB, which were worth about $2,879 at the time the event took place.
The attacker then deposited the 183,884 $aBNBc tokens into Helio Money to receive back 191,130 $hBNB tokens.
The price oracle of Helio was not updated during the exploit that took place with the $aBNBc tokens.
The attacker used the $aBNBc tokens they had already deposited as collateral to borrow 16,444,740 $HAY tokens.
The attacker then swapped 16,444,740 $HAY tokens to 15,504,986 BUSD.
The swapped BUSD is then transferred to this address involving three different transactions, and then to Binance hot wallet.
Changpeng Zhao, CEO of Binance also tweeted that the Binance exchange had frozen around $3 million of the funds that the hackers had moved to their CEX during this process.
The stablecoin $HAY de-pegged following the incident and fell to a low of roughly $0.21.
In a statement, the team explained that they were collaborating with Ankr Protocol to resolve the issue and that they had proposed a bilateral arrangement in which Ankr would pay for Helio's bad debt as a result of this exploit.
Additionally, in order to aid with the re-peg of $HAY, Ankr would be purchasing any extra $HAY that is produced as a result of the discounted $aBNBc and send it to a burn address.
The vulnerability assessment points to a failure in the oracle's function, as it didn't update the price of associated tokens after they had experienced a significant crash in value compared to their previous trading prices. This vulnerability led to a sequence of events that allowed the attacker to exploit the system.
To prevent such attacks, the importance of robust price oracles like ChainLink is emphasized. While there is no foolproof solution, such oracles can significantly reduce the risk of price manipulation attacks.
In this context, the Helio Protocol's exposure to this oracle-based attack vector underscores the value of a dedicated cover pool within the Neptune Mutual marketplace. While oracle attacks typically aren't covered, exceptions can be made in certain cases. Users who purchase our parametric cover policies can claim payouts without the need for extensive loss evidence once an incident is resolved through the governance system.
Furthermore, recognizing that solely auditing smart contracts is insufficient, Neptune Mutual's security team extends its assessment to encompass DNS and web-based security, smart contract evaluations, and both frontend and backend security.
In conclusion, the Helio Protocol attack demonstrates the importance of proactive security measures within the DeFi ecosystem. Neptune Mutual emerges as a pivotal player in bolstering this security, offering a mechanism to mitigate the impact of vulnerabilities and fostering a safer and more resilient decentralized financial landscape.
