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Risk Factors

Protect your assets from possible market and technology risks
It is critical that you comprehend all risk aspects before establishing any firm expectations. Understanding the risks associated with Neptune Mutual and other DeFi platforms can help you make better choices.

Consensus and Reporting Risks

You may submit a report without understanding or misinterpreting the cover requirements. This becomes troublesome because if the resolution is not in your favour, you will lose all of your tokens. Please use extreme caution here as you will not receive your NPM tokens back.

Cover Parameters

A cover parameter has the following components:
  • Cover Rules --> Specified by the cover creator for a given cover. To qualify as a valid report, an incident must adhere to all cover rules.
  • Cover Exclusions --> Specified by the cover creator for a given cover. An incident report cannot contain any exclusions in order to be considered valid.
  • Standard Terms & Conditions --> Set by Neptune Mutual that is common for all covers. An incident report must comply with all terms and conditions. Additional exclusions may be included in standard terms and conditions.
Only during the withdrawal period can cover creators modify the rules and exclusions. Before making a modification, we need that cover creators submit a proposal using our snapshot governance portal. Proposals that pass the voting process are then permitted to make a request for modification during the subsequent withdrawal cycle.
If the community votes and adopts the modifications, Neptune Mutual may modify the standard terms and conditions at any time.

Coverage Lag Risks

Neptune Mutual's coverage typically begins at UTC EOD the next day or after a number of day(s) based on configuration. If you purchased a policy on Monday, coverage will begin at midnight UTC on Tuesday. This is often referred to as the "coverage lag".
Coverage lag is a specified time period that can be set globally or on a per-cover basis to delay the start of coverage. The coverage of a policy begins at the EOD timestamp of the policy purchase date plus the coverage lag.
Coverage lag is customizable, and hence its value can vary. If the coverage lag is two days, your policy's coverage will commence at the UTC EOD timestamp two days after purchase.

Observed Date vs Incident Date Risk

  • Observed Date --> The timestamp at which the actual event was observed on-chain.
  • Incident Date --> The block timestamp associated with the incident report.
The UTC timestamp when a report is submitted to the Neptune Mutual protocol is taken into consideration, regardless of when an incident was observed in the actual world. Please note that if an event occurs hours before the end of the (UTC) month but is reported after the end of the month, you will not get claims payout since your cxTokens expire exactly on the end of the (UTC) month.
Even when the real incident was observed before the month end, the incident reporting block timestamp is considered as the incident date.

Diversified Pool Black Swan Event

Diversified cover pools differ significantly from dedicated cover pools. With dedicated cover pools, there is always more than 100% liquidity available to pay out claims. Diversified cover pools, however, utilize the leverage factor and hence pay out claims according to the first-come, first-served basis.
In other words, if all products under a diversified cover pool trigger an event at the same time, payouts are provided on a first-come, first-served basis until the entire fund is exhausted. Thereafter, there are no more payouts given. Assuming there is no security flaw in the Neptune Mutual protocol and the DeFi lending protocol integrations, the dedicated cover pools truly maintain guaranteed stablecoin liquidity. Utilizing the leverage factor, diversified pools optimize capital efficiency to underwrite more risk. Although we only list proven and mature products under diversified cover pools, you should still be extra vigilant when reviewing a diversified pool as there is a possibility that you may not receive payout.

Market Risks

Given that you have no influence over how the cryptocurrency market acts, it's better not to invest any money that you can't afford to lose. It is never a smart idea to put your life savings into a cryptocurrency. This is made much worse by the fact that many successful traders have lost everything in the hopes of making a profit. Due to the fact that the NPM tokens have no monetary value, they should not be regarded a cryptocurrency or an alternative method of payment. Despite the fact that NPM tokens have a variety of use cases, you should bear in mind that they are intended to be used only inside our protocol. Bear in mind the dangers and volatility associated with trading NPM tokens. When you supply NPM tokens to a decentralized exchange liquidity pool, risks such as impermanent loss may arise. When you provide the Bond Pool with NPM/DAI liquidity pair tokens, you expose yourself to the danger of the NPM price falling and resulting in a loss.

Technology Risks

Smart Contract Exploit
Malicious actors are burning the midnight oil to profit from smart contract vulnerabilities and possible exploits such as flash loan attacks. As we've seen in the past, smart contract vulnerabilities have been exploited on several protocols, even after thorough audits by well-known and trustworthy auditing firms.
The Neptune Mutual team has retained the services of a few security firms to execute the first smart contract audit. However, what the majority of community members do not realize is that obtaining an audit is not a one-time activity. Numerous platforms have gotten an audit report once and then updated their smart contracts without conducting another audit. In contrast, the Neptune Mutual platform will work on a long-term basis with security research firms.Having said that, getting an audit completed does not always guarantee the safety of the user assets. Be responsible and don't invest, lock, or stake an amount you can't afford to lose anywhere.
Wallet Exploit
Due to the irreversible nature of cryptocurrency transfers, phishing attempts have exploded in popularity over the previous decade. The trick these malicious actors use is to spoof a famous website, wallet, or exchange by replicating a feature or page.
These URLs are delivered to uneducated individuals through email or messaging app, tricking them into inputting their credentials, mnemonic, seed phrase, or private keys. The fraudulent actors then totally drain the wallet's funds. How to Recognize and Avoid Phishing Scams?