Vespertine Capital
4 min readMar 1, 2022


Neptune Mutual — Reducing your exposure to crypto market risks

Source: Neptune Mutual Twitter

Neptune Mutual provides you with guaranteed stablecoin liquidity to reduce your risk exposure in the crypto markets by hedging against possible capital risks and smart contract vulnerabilities. Neptune’s journey started with the notion that there was a disconnect between one of the underlying attributes of blockchain, security, and one of the most important developments in blockchain, namely smart contracts. While blockchain technology is essentially secure, the use of smart contracts often leaves certain vulnerabilities that allow criminals to hack and exploit these contracts.

As the market for crypto grows with the increasing adoption by mainstream institutions, so does the need for mainstream tools for protection, such as insurance and financial hedging. With this in mind, Neptune Mutual worked on four underlying principles: Security, Minimize Risk, Scalability, and User Experience (UX) to design and build the prototype of their insurance model.

One of the challenges of traditional insurance is the usage of jargon and fine print, which often leads to misunderstanding and complications. An example for all-round dissatisfaction is the occurrence of a crypto hack, followed by an announcement from the insurer that the policyholders will not be able to claim a payout because the type of hack/exploit was not covered by the terms of the policy. Neptune Mutual is set to change all that as you will get guaranteed payouts from what is known as their ‘parametric cover model’, which helps to resolve incidents faster without the need for a claims assessment.

A key attribute of a parametric cover is the elimination of the claim adjustment process. There will no longer be a need for an adjuster to investigate the loss, interpret the policy wording, and apply the policy based on facts discovered in the investigation. As long as the parameter was triggered, the parametric policy will initiate a payout. Unlike standard indemnity contracts that can take months or years to pay out, parametric claims are processed much faster and policyholders can receive their payouts in a matter of days.

So, how does the parametric cover work?

Rather than paying a set amount for the magnitude of losses (covered by a traditional indemnity policy), parametric cover pays a set amount based on the magnitude of the event. For example, a parametric policy could pay out a set amount if an earthquake of magnitude 5.0 or greater occurs. The contract for that policy would specify the amount of payment, the trigger parameters that determine whether or not the event has happened, and a third party responsible for verifying the status of the trigger parameters.

Neptune Mutual’s parametric covers will provide policyholders with protection against specific hacks or events on the blockchain. Parametric cover policies are generally defined by only a few parameters, with a very limited number of exclusions (for example, the exclusion of deliberate or malicious action by the cover creator or protocol team).

After that, the floor and ceiling price of the cover policies offered by the cover pool are set and the next step is to attract liquidity providers. Liquidity providers benefit from a variety of revenue streams including the fees paid by cover policyholders. One of these revenue streams arises from the option to stake the Proof of Deposit (POD) that is provided when supplying liquidity to cover pool.

As such, the ecosystem runs with three main components each contributing towards how the parametric cover will be run:

  • Receive Rewards
    Invest stablecoin liquidity to receive rewards and protect your favorite blockchain projects. Income received from flash loan lending also gets added to the pool.
  • Low Risk Cover Policies
    Stay protected against exchange hacks and dApp, DeFi, and smart contract exploits. There are dedicated cover pools, so a hack on one project will not affect the pool of another, so there is always enough liquidity to pay off all policyholders if required.
  • Create Covers
    Build a cover protection community for your protocol, exchange, or DeFi project. This protects your funding community which will instill more overall confidence in your project. You can also reward your community with your native tokens, as a form of personalized rewards.

Source: Neptune Mutual App Prototype

Underpinning the entire Neptune Mutual ecosystem is the $NPM token, which is used for both governance and utility purposes:

  • Use $NPM to stake and create contracts and markets
  • Burn $NPM to create contracts and markets
  • Use $NPM to vote in the governance of the platform’s future
  • Lock $NPM to provide liquidity, secure the protocol, and yield additional rewards
  • Hold $NPM in your wallet to purchase and claim coverage

Neptune Mutual successfully closed its Seed Round backed by industry leaders including Fenbushi and Coinbase Ventures. Soon after, Animoca Brands led the subsequent investment round and was then joined by an impressive list of investors. The team has grown from 3 co-founders to a team of over 25 — and we are confident that they are steadily building the platform and progressing at a good pace.

To keep updated on the latest with Neptune Mutual, be sure to follow them on their official channels listed below.

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