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 January 19, 2023, Thoreum Finance was hacked as a result of smart contract vulnerability, causing the protocol to lose approximately 2260 BNB worth $580,000.
The vulnerability is caused by an incorrect implementation of the transfer function in their contract, in which if a wallet sent funds to itself, the amount of tokens in the wallet would be increased by as much as the sent amount.
It is speculated that the deployer key was compromised, allowing the exploiter to deploy a new contract, before upgrading the proxy contract to the malicious contract.
Step 3:
The attacker deposited BNB in order to obtain $WBNB tokens, utilized a function of the contract to mint $THOREUM tokens, swapped everything on BiSwap, and finally transferred the tokens to themselves.
Step 4:
When this exploiter-deployed contract performed a transfer call to itself, its balance grew as a result of the the vulnerable logic in the transfer function.
Step 5:
This procedure was repeated several times after which the contract held more than 500,000 $THOREUM tokens.
Step 6:
In the same transaction, all of the obtained $THOREUM tokens were converted to $WBNB tokens and sent to this address.
Step 7:
Later, that address transferred about 2250 $BNB tokens to Tornado Cash.
The team had a planned upgrade to their V4 version. During this, they notified their users on Twitter that the V4 of their upgrade is under maintenance due to certain errors.
They had temporarily halted trading in order to investigate and fix the issue, after which trading resumed as usual.
The unfortunate hack that targeted Thoreum Finance serves as a stark reminder of the persistent threats lurking in the decentralized finance landscape. This breach highlighted a critical flaw in the implementation of their transfer function. When funds were sent to the same wallet, the tokens within that wallet were mistakenly inflated by the sent amount. This subtle vulnerability allowed the attacker to exploit the protocol repeatedly, amassing over 500,000 THOREUM tokens.
At the heart of such incidents is the urgency for comprehensive security measures that encompass not only robust coding practices but also a safety net for unforeseen pitfalls. In the face of evolving attack vectors, Neptune Mutual stands as a safeguard against potential catastrophes. Had Thoreum Finance opted to integrate a dedicated cover pool within our marketplace, the aftermath of this breach could have been considerably mitigated.
The crux of our offering lies in our specialized parametric cover policies, which ensure that affected parties have a streamlined path to recovery. Users who purchase these policies don't need to provide exhaustive loss evidence to initiate a claim; as soon as an incident is resolved through our governance system, payouts can be swiftly claimed. Our marketplace accessibility on renowned blockchain networks like Ethereum and Arbitrum further underscores our commitment to making this protection widely available.
However, our involvement doesn't merely encompass insurance. Neptune Mutual takes a holistic approach to security, evaluating platforms for vulnerabilities through our seasoned security team. From DNS and web security checks to advanced intrusion detection and prevention, our comprehensive evaluation process ensures that platforms are fortified against potential threats.
Thoreum Finance's quick response and post-mortem analysis reveal the dedication of teams in this space to rectify and learn from such breaches. However, proactive measures are equally crucial. The value of employing hardware wallets, multi-signature wallets, and cold storage strategies for securing private keys offline and mitigating risks cannot be understated.
