
Analysis of the Curio Exploit
Learn how Curio was exploited, which resulted in a loss of approximately $16 million.
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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.
The above point invariably leads to the question
“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.
Learn how the Ronin Network was exploited, resulting in a loss of approx. $624 million.
On March 23, 2022, the Ronin Network was exploited as a result of a private key compromise, which resulted in a loss of 173,600 ETH and 25.5 million USDC, totaling approximately $624 million.
Ronin is an EVM blockchain crafted for developers building games with player-owned economies.
The root cause of the vulnerability is due to the compromise of the private key, which was effectively exploited by the hackers to forge fake withdrawals in order to steal the funds out of the Ronin Bridge.
Ronin was launched to offer the quick and affordable transaction throughput required for a P2E game to function. In order to maximize transactions per second, a Proof of Authority model was adopted, where nine validators staked their reputation rather than processing any power or funds.
Out of the nine validators, four were operated by Sky Mavis. A consensus of five validators is necessary to approve the deposit and withdrawal transactions. This meant that in order to gain control of the entire network, one more signature was required.
The post-mortem report points to the vulnerability that allowed the attacker to gain control of the fifth signature, but it doesn't provide details on how the Sky Mavis validators were compromised.
The attacker gained access to the fifth validator due to an earlier arrangement between Sky Mavis and the Axie DAO. A gas-free RPC node was set up to help customers save costs during a period of substantial network traffic when the price of the AXS token was at its peak.
Sky Mavis validators have to be approved by the Axie DAO to sign transactions on their behalf. Although the arrangement was supposed to last for around a month, the whitelist access was never revoked, allowing the attacker who had compromised Sky Mavis validators to use the additional signature of Axie Dao to approve transactions.
As viewed from two of the attack transactions, the exploiter first drained approximately 173,000 ETH and then 25.5 million USDC from the Ronin bridge contract. The stolen funds were transferred across multiple addresses on different chains in order to create a mesh-like topology to complicate the chase.
Following the exploit, the team acknowledged the occurrence of the event and stated that they were in contact with law enforcement officials, forensic cryptographers, and their investors to make sure that all funds are recovered or reimbursed.
Later, the threshold to approve transactions was set to eight out of nine validators.
We have created a proof of concept about the underlying hack using Foundry. The details surrounding the attack can also be viewed in this GitHub gist.
While no security protocol is entirely foolproof, the application of rigorous and consistent security standards can significantly mitigate the risks associated with attacks on DeFi protocols. This entails proactively identifying and addressing potential attack vectors before malicious actors exploit them.
In the context of this specific Ronin Network exploit, there are several recommended measures. Using hardware wallets to store private keys offline is a strong line of defense, while multi-signature wallets with distributed signature validations can provide an added layer of protection. Cold storage, the practice of storing private keys on a machine not connected to the internet, is another recommended tactic to ward off phishing-style attacks.
Nevertheless, it's important to acknowledge that even with the most stringent security measures in place, vulnerabilities may still be exploited. This is where Neptune Mutual comes into the picture. In the event of such security incidents, having a dedicated cover pool set up with Neptune Mutual could have significantly reduced the aftermath of the attack on the Ronin Network. Neptune Mutual offers coverage to users who suffer losses of funds or digital assets due to smart contract vulnerabilities, thanks to their parametric policies.
Users who had purchased Neptune Mutual's parametric cover policies would not have needed to provide evidence of their loss in order to receive payouts. The payout could be claimed as soon as the incident was resolved through Neptune Mutual's incident resolution system, alleviating the financial strain resulting from the exploit. Currently, Neptune Mutual's marketplace operates on two popular blockchain networks, Ethereum and Arbitrum, making it widely accessible.
Furthermore, Neptune Mutual's security team could have provided an additional layer of protection by evaluating the platform for DNS and web-based security, frontend and backend security, intrusion detection and prevention, and a broad spectrum of other security considerations. This holistic approach to cybersecurity could have further reduced the likelihood and potential impact of such exploits.
Reference Source Ronin