An in-depth interpretation of the DeFi insurance project with financing of more than $10 million: Neptune Mutual

原文标题：《 深入解读融资超$1000 万 Defi 保险项目：Neptune Mutual 》

Original source: veDAO

Neptune Mutual is a decentralized insurance protocol, based on a parametric coverage model, dedicated to reducing the crypto market risk faced by policyholders. Currently Neptune Mutual has been deployed and tested on Ethereum and Arbitrum networks. Neptune Mutual was established in 2021. Up to now, Neptune Mutual has completed 3 rounds of financing with a total financing of more than 10 million dollars. What unique design of Neptune Mutual can be so favored by investment institutions?

First, parameter insurance model

The biggest innovation of Neptune Mutual agreement is: insurance model based on traditional parameter insurance design. Parametric Insurance is also called index insurance,   The payout of parametric insurance does not depend on subjective artificial loss, but on the trigger of objective events. The biggest advantage of parametric insurance is reflected in the claim settlement process. There is no need to carry out complex on-site artificial loss determination, and insurance can quickly settle claims after contract parameters are triggered. On the one hand, it can provide more timely compensation for policyholders, and on the other hand, it can greatly reduce the cost of claims management of insurance companies.

Because Neptune Mutual is decentralized, its parameter insurance or the design of the claim process. It is different from the claims of other decentralized insurance projects, when the insurance event occurs, Neptune Mutual as long as there is a policy holder to claim, as long as the claim has been verified to be successful, all other such policy holders do not need to claim, can automatically get compensation, Each unit policy receives the same amount of Stablecoin payout (minus fees), and the policyholder receives a payout based on the number of unit policies held, although any policyholder can file a claim.    

Compared with other decentralized insurance projects, Neptune Mutual has another difference: if the risk event is confirmed to happen, the policy user gets the claim, does not require the policy holder user really have financial loss. When a risk event occurs, the claimant or other holder of the same policy is paid without providing any evidence of loss, submitting data or screen shots. That is to say, if the user guesses or predicts the occurrence of a certain insured risk event of the smart contract, the user can buy the insurance policy even if he has no assets in the smart contract. When the risk event of the smart contract really happens, as long as the agreement verifies the occurrence of the risk event, all the insurance holders can get the payment within a few days. The amount paid is the amount that the insured person can claim in the event of a risk event that was determined by the user at the time of the insurance.

Neptune Mutual agreement at present only smart contracts and exchange type of insurance, other types of parametric insurance is still in planning, the following from and other decentralized insurance projects (the current most successful insurance project) to see the advantages and characteristics of Neptune Mutual insurance agreement.

Ii. Underwriting pool design

The underwriting pool of Neptune Mutual Agreement can be similarly divided into "dedicated" and "diversified" underwriting pools, and the guaranteed payment is only applicable to the dedicated underwriting pool. Dedicated underwriting pools have no capital efficiency, leverage, or support for insurance sub-products. Diversified underwriting pools can support sub-product insurance and jointly underwrite a variety of insured subjects with additional leverage and capital efficiency. The following table presents some important differences and similarities between "dedicated" and "diversified" underwriting pools.

Iii. Creators of insurance contracts for liquidity providers

Currently, insurance contract creation can only be done by invitation. Any whitelisted user with an NPM token can create an insurance contract. The creator must destroy 1000 NPM tokens to avoid junk, suspicious and unintelligible insurance contracts. In addition, the contract creator must pledge 4,000 NPM tokens or more. In the absence of any underwriting liability, the insurance contract creator can choose to submit a proposal to terminate the insurance contract, but it needs to be voted on through the agreement governance process or at the discretion of the Neptune Mutual team.

As new insurance contracts are created, a dedicated liquidity pool is created. Each liquidity pool is jointly owned by liquidity providers, who provide liquidity, share the benefits, and share the losses in the event of a claim. The working capital pool is not part of the Neptune Mutual Agreement.

Before providing liquidity, the liquidity provider needs to analyse the insurance contract to see if it meets its risk appetite. Liquidity providers can provide liquidity with DAI, USDC, or other supported stablecoins. When providing liquidity, the liquidity provider must also provide 250 NPM or more (as specified by the insurance creator).

The liquidity provider will receive a POD (Proof of Deposit) token when providing liquidity. POD tokens are assets that generate income (or loss). Pods can be redeemed during the withdrawal period to retrieve stablecoins.

The liquidity provider has access to the income from policy premiums paid by insurance buyers. All premiums paid by insurance buyers are automatically added to the pool. At the end of each month, the underwriting commitments expire, freeing up liquidity again for users to buy insurance. Policy fee income (in stablecoins) added to the liquidity pool over time increases the price of the POD. As a liquidity provider, you get the income from the insurance without having to redeem the POD.

The excess funds of the agreed capital pool also support flash lending and lending business in the case of risk control, to obtain more sources of income for the capital pool.

POD pledge award

The creator of the insurance contract may offer additional incentives to the POD pledge. The reward payout awarded to the pledgee is not in stablecoins, but in project tokens underlying the insurance contract.

Iv. Commission and income

Purchase insurance

Anyone holding 1 or more NPM tokens can purchase insurance contracts for up to 3 months. KYC is not required. To ensure a successful settlement, the agreement will restrict liquidity providers from withdrawing liquidity for a certain period of time, which means that the agreement will lock up assets in the pool for a certain period of time. The cost of expired policies is automatically accumulated in the pool.

Commission and income

The agreement automatically deducts 6.5% of the cost of a policy at the time of purchase. Commission income is mainly used to guide and own long-term liquidity and fund protection pool. In order to build the community, a portion of the revenue will also be awarded to the administrator of the agreement.

V. Economic model

There is no fixed supply of Neptune Mutual Tokens (NPMS), but the maximum number of tokens that can be minted is limited to 1 billion tokens. It will take about 10 years for all NPM tokens to be fully issued by mid-2033. Tokens that have been allocated to strategic and institutional investors are subject to a cliff period and lock-in schedule of up to 2 years, depending on the region. Team tokens will be released linearly over the next five years, which will result in a total token lock-in of about seven years.

Locked tokens: Release and circulation

No lock-in token

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