It is important that you understand all parameters and then set clear expectations. Although cryptocurrency and DeFi projects are perceived to yield an overall good return for investors, that might not always be accurate. Understanding the risk aspects of Neptune Mutual and other DeFi platforms helps you make well-informed decisions.
There are at least two risk segments when it comes to bond and farm.
Note the following information carefully before you proceed with creating a bond.
Let's assume you supplied BNB to create a bond. Along with your BNB supply, the Neptune Mutual protocol will add an equivalent amount of NEP to form a pair or provide liquidity in a DEX. This means that you have now become a liquidity provider and will automatically receive your proportional share of transaction fees in the DEX. But it also means sudden price movements in the liquidity pool can result in impermanent loss thereby exposing yourself to unwanted risks.
Let's assume you created a bond by supplying 1 BNB to receive NEP three months ago. During that time, the ratio between NEP and BNB was 10000:1. Say your lockup period ends today and now you can see that the ratio has:
Decreased: and that now NEP/BNB ratio has become 2500:1. This results in an extremely favorable outcome for you on both BNB and NEP sides. That's because you will not only receive your full proportional share of NEP/BNB liquidity but your share now also has added asset value due to transaction fees earned in the pool.
Increased: and that now NEP/BNB ratio has become 15000:1. This is not so pleasant situation for you because other users who provided bond liquidity recently got much more rewards than you. Also, your share of the liquidity pool now has declined price-wise overall.
Smart Contract Exploit
Malicious actors are burning the midnight oil to profit from smart contract vulnerabilities and possible exploits such as flash loan attacks. We've witnessed numerous smart contract exploits even after having gone through an extensive audit from renowned audit firms.
The Neptune Mutual core team members are communicating with some security firms to get the initial smart contract audit completed. However, what most users do not understand is getting an audit is not a one-off task. Many platforms have obtained an audit report once and then have never updated their smart contracts or did not bother to complete another audit again. Unlike that, the Neptune Mutual platform will be engaging security research firms on a long-term basis.
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.
Due to the irreversible nature of cryptocurrency transfers, there has been an immense rise in phishing attacks since the last decade. The trick these malicious actors employ is copying a feature or page of a popular website, wallet, or exchange to make it look the same.
These links are sent via email or messaging app to uninformed users who get fooled into entering their credentials, mnemonic, seed phrase, or private keys. The malicious actors then completely drain the funds out of the wallet.