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.
This hot wallet of CoinSpot suffered a loss of 1,262 ETH, worth approximately $2,431,728, while another one suffered a loss of 20.99 ETH, worth approximately $40,428.
Step 3:
Reportedly, 831 ETH worth of the stolen funds have been bridged to BTC via THORChain, and the other parts of the stolen funds worth 451.7 ETH have been swapped for WBTC and transferred to Wan Bridge.
Step 4:
These stolen assets are currently held at the following BTC addresses:
It is crucial to improve the security of private keys and the general safety of hot wallets in order to reduce the risk of exploits similar to those that CoinSpot experienced. Private keys are akin to the keys to a vault, and if compromised, they can grant attackers unrestricted access to the funds. Therefore, it is paramount that exchanges implement multi-signature technology on hot wallets, requiring more than one key to authorize a transaction, thereby distributing the risk.
Additionally, exchanges could utilize hardware security modules (HSMs) to manage and protect the use of private keys. Hardware security modules (HSMs) are physical devices that are designed to keep digital keys safe and perform cryptographic operations. Compared to software-based key storage solutions, HSMs are much harder to change or hack.
Putting in place a strong intrusion detection system (IDS) can also provide real-time monitoring and alerting of any suspicious activities, allowing for quick responses to possible breaches. Regular security audits and penetration testing can also help identify vulnerabilities before they can be exploited.
Finally, maintaining a portion of funds in cold storage, which is not connected to the internet, can significantly reduce the risk as it limits the amount of funds that are accessible via hot wallets at any given time. By combining these measures, crypto exchanges can significantly bolster the security of their hot wallets and protect their private keys from unauthorized access, reducing the risk of similar exploits in the future.
In light of the security breach at CoinSpot, the implementation of preventive measures is paramount, yet the potential for unforeseen vulnerabilities will always exist. To mitigate such risks, partnerships with service providers and a marketplace like Neptune Mutual are invaluable. By establishing a dedicated cover pool with us prior to any such incident, exchanges can provide a financial safety net for their users against smart contract vulnerabilities. We don't offer coverage for exploits originating due to the compromise of the private keys, but we are open to making exceptions in many cases.
Our role in such scenarios is to remove the onus from users to present extensive proof of loss. Once an incident is confirmed and resolved within our incident management system, Neptune Mutual swiftly shifts focus to claim disbursement, offering prompt financial restitution to those impacted.
Operating on multiple blockchain networks, including Ethereum, Arbitrum, and the BNB chain, Neptune Mutual remains dedicated to ensuring user safety. Our commitment is a cornerstone of trust within the DeFi community, offering reassurance amidst the security challenges exemplified by the CoinSpot incident.
