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.
Understand what wrapped bitcoins are including its workings, benefits, and challenges.
In the cryptocurrency world, two giant networks, Bitcoin and Ethereum, always stand out. Bitcoin has long been revered as the standard of digital currencies and the pioneer of blockchain technology, providing a robust decentralized ledger. Ethereum, on the other hand, revolutionized the space with its smart contract capabilities, paving the way for decentralized finance (DeFi) applications.
However, a notable gap existed: Bitcoin's isolated network couldn't interact directly with Ethereum's smart contracts and DeFi. This is where Wrapped Bitcoin (WBTC) steps in, a groundbreaking innovation melding the strengths of both worlds.
Wrapped Bitcoin (WBTC) is not just another token in the crypto universe. It's a bridge and a connector that allow the value and stability of Bitcoin to flow freely into Ethereum's dynamic ecosystem of smart contracts and dApps.
In this article, we'll delve into the essence of WBTC, its benefits, how it functions, and its transformative impact on the crypto landscape.
Explaining Wrapped Bitcoin (WBTC) – A Brief Overview#
Wrapped Bitcoin, or WBTC, is a tokenized version of Bitcoin. It's an ERC-20 token that represents the value of underlying Bitcoin on the Ethereum blockchain. To put it simply, wrapped Bitcoins allow utilizing BTC and other Bitcoin assets on a non-native blockchain network, i.e., Ethereum. This ingenious solution offers the best of both worlds: the market dominance and trust of Bitcoin coupled with the flexibility and functional richness of Ethereum.
Launched in 2019, WBTC has been a pivotal innovation in the blockchain and Web3 ecosystems. It extends the utility of Bitcoin beyond its traditional domain, enabling Bitcoin holders to venture into the vibrant world of Ethereum's DeFi and dApps without giving up their Bitcoin holdings. This seamless integration broadens the horizons for both Bitcoin enthusiasts and Ethereum advocates.
2) Wrapped Bitcoin (WBTC) is the first ERC20 token backed 1:1 to Bitcoin. It’s aiming to bring the representative and new use-cases of Bitcoin into Ethereum blockchain. pic.twitter.com/NtaKbZvsdm
One of the most significant advantages of WBTC is its ability to inject Bitcoin's vast liquidity into Ethereum's DeFi ecosystem. This liquidity is vital for the healthy functioning of various financial applications, from lending platforms to decentralized exchanges.
WBTC leverages Ethereum's faster block times, leading to quicker transaction confirmations compared to traditional Bitcoin transactions. This speed is a game-changer for users accustomed to the slower pace of Bitcoin's network.
WBTC stands as a testament to the growing interoperability in the crypto world. It enables the smooth transfer of value between the Bitcoin and Ethereum networks, a feature that was previously unattainable.
The process of transforming Bitcoin into WBTC is fascinating and involves several key players: users, custodians, merchants, and WBTC DAO members.
The WBTC token is created when users request it in exchange for their BTC. Users pay the amount in BTC for the WBTC they want and some additional minting fees. They receive an equivalent amount of WBTC in return while maintaining the value of Bitcoin to WBTC at a 1:1 ratio.
Merchants are the entities that facilitate the exchange process and carry out regulatory requirements like KYC (Know Your Customer) and AML (Anti-Money Laundering) on the users. Merchants are the intermediaries between users and custodians who receive the bitcoin amount from users before sending it to custodians.
Custodians are trusted entities responsible for holding the original Bitcoin and issuing the corresponding WBTC. Their role is crucial in maintaining the integrity and trust of the WBTC system.
When Bitcoin is converted to WBTC, new WBTC tokens are minted to reflect the added value on the Ethereum blockchain. Conversely, when WBTC is converted back to Bitcoin, the equivalent WBTC tokens are burned, ensuring the total supply remains consistent.
Members of the WBTC DAO are the holders of the keys to a multi-signature contract. The multi-signature contract is useful in facilitating contract adjustment and the addition and removal of merchants and custodians.
The involvement of custodians in the WBTC process introduces an element of centralization. Since custodians hold the actual Bitcoin, there's an inherent trust factor at play. This setup contrasts with the decentralized ethos that many in the cryptocurrency community value.
Wrapped Bitcoin must navigate complex regulatory waters. The users requesting WBTC tokens will have to comply with the KYC and AML procedures. Though it’s crucial for legitimacy and security, it might not align with the original philosophy of cryptocurrency, which prioritizes anonymity and freedom from traditional financial systems.
The integration of Bitcoin into Ethereum's ecosystem through WBTC creates a new dynamic between these two major cryptocurrencies. It's vital to monitor how this impacts the market, especially considering the vast differences in their respective communities and use cases.
While WBTC brings Bitcoin's value to Ethereum, it’s distinct from native Ethereum tokens or other cryptocurrencies. Its unique position as a bridge between two major blockchains sets it apart.
The concept of wrapped cryptocurrency has seen significant adoption since its inception. It's useful in providing Bitcoin holders with access to Ethereum's expansive ecosystem without needing to liquidate their Bitcoin holdings. It’sutilized across various DeFi platforms, including MakerDAO, Compound, and AAVE, for lending and borrowing. It's also used in liquidity pools on Uniswap and Balancer, enabling users to earn interest, participate in yield farming, and engage in margin trading via applications like Fulcrum.
As of November 2023, over 163,700 WBTC tokens are in circulation and has a market capitalization of over $5.72 billion as per CoinMarketCap.
Wrapped Bitcoin Market Capitalization of over $5.72 billion; source: CoinMarketCap; Date: November 7, 2023
However, challenges such as regulatory shifts, the evolving landscape of blockchain technology, and competition from other wrapped assets or interoperability solutions could impact WBTC's trajectory. To maintain its relevance and utility, WBTC will need to adapt to these changing circumstances. Innovations in blockchain interoperability, improvements in the decentralization of the WBTC process, and collaborations within the broader crypto ecosystem could all play a role in its future success.
Wrapped Bitcoin represents a significant milestone with its unique ability to bring together the liquidity and familiarity of Bitcoin with the flexibility and innovation of Ethereum's DeFi ecosystem. While WBTC marks a significant advancement in the DeFi ecosystem, it is not immune to threats and vulnerabilities.
Wrapped Bitcoin (WBTC) is not without security risks, primarily due to its dependency on custodians. Although WBTC operates on Ethereum, the safety of these tokens depends on the custodians holding the actual Bitcoin. If these custodians act dishonestly, releasing the Bitcoins to others, the WBTC tokens would be worthless.
This reliance on a centralized entity necessitates a high degree of trust from users, who must ensure these organizations provide sufficient guarantees. While decentralized, smart-contract-managed bridges offer an alternative, bridges do not have a good track record of smart contract security and again represent a significant risk. In either case, mitigating custodian risk or smart contract risk with DeFi insurance wherever covers are available is certainly worth consideration.
Neptune Mutual is a DeFi insurance protocol aimed at protecting cryptocurrencies like WBTC invested in different protocols. With DeFi insurance, token holders can purchase coverage for their funds and receive payouts in case hacks or exploits occur that trigger certain parameters.
