Liquidity Providers

Along with the creation of a new cover contract, a dedicated liquidity pool is also constituted. Each liquidity pool is jointly owned by the liquidity providers who supply the liquidity, share in the gains, and bear the loss together in the event of a cover incident. The liquidity pool is not owned by the Neptune Mutual protocol.

Prior to providing liquidity, liquidity providers might analyze a cover contract to verify that it meets their requirements. Then, liquidity can be provided in DAI, USDC, or another supported stablecoin. To join the pool, a liquidity provider must also put up 250 NPM or more (as specified by the cover creator).

You will receive POD (Proof of Deposit) tokens in exchange for supplying stablecoin liquidity to the system. The POD tokens are assets that generate revenue (or loss). PODs can be redeemed during the withdrawal period in order to receive the stablecoin back.

Always refer to the Protocol Fee document for the latest information since the fees are configurable and can change. 

Cover Fee Income#

In exchange for protection or coverage for a certain amount and length of time, policyholders pay a stablecoin cover fee. All cover fee revenue is compounded into the pool automatically. At the conclusion of each month, cover commitments expire, releasing liquidity for purchase again.

Cover fee revenue (in stablecoin) added to the liquidity pool over time raises the price of the PODs. As a liquidity provider, you do not need to redeem your PODs in order to receive cover income, as PODs earn income in real time.

Flash Loan#

A flash loan enables traders and arbitragers to obtain loans without having to provide collateral. Because Neptune Mutual vaults adhere strictly to the EIP-3156 standard, you can be confident that whatever you create will work with any other flash loan provider that supports the EIP-3156 standard. View the source code for our protocol to learn how to use Neptune Mutual's flash loan feature.

Profits from flash loans (in stablecoin) are automatically funneled into the liquidity pool, which helps to raise the market price of PODs. PODs generate income in real-time, so you don't have to redeem them to earn flash loan interest.

Lending Incomes#

The Neptune Mutual protocol has been integrated with a number of popular lending protocols, including Compound and Aave. To maximize pool rewards, the Neptune Mutual protocol supplies these external protocols with a portion of the idle or uncovered stablecoins. The interest earned on the loan is compounded into the cover liquidity pool, which the liquidity providers collectively share. The protocol deducts a 2% fee from the interest earned, which will be used to purchase and burn NPM tokens. Due to the fact that the Neptune Mutual protocol supports multiple chains, the process of burning NPM tokens must take place on the Ethereum main network.

Rather than burning NPM tokens directly, each chain's lending interest protocol fee is sent to a treasury wallet. The Neptune Mutual team will use this revenue on a periodic basis to purchase and burn NPM tokens.

Lending interest income (in stablecoin) is automatically deposited into the liquidity pool. POD holders do not need to do anything special to receive this profit.

POD Staking Reward#

Cover creators can offer additional rewards to liquidity providers who stake their PODs in the POD staking portal. This income is not a part of the core cover feature and is not capitalized into the pool.

The payout for staking PODs is not in stablecoin, but rather in the form of the cover project's token.