Author | Qin Xiaofeng

Editor | Hao Fangzhou

Produced | Odaily

Author | Qin Xiaofeng

Editor | Hao Fangzhou

Produced | Odaily

In the past few days, a project called "Nirvana" has attracted much attention and caused extensive discussions in the encryption community.

The project adopts a dual-token system: ANA, an algorithmic metastable token, used as a store of wealth; NIRV tokens generated by ANA as collateral, which is a decentralized super stable currency, used as a store of value.

Official website data shows that in the past week, the price of ANA soared from US$3.6 to US$20, with a maximum increase of 455%, and the current price remains at US$19.1; the base price of ANA recycling also increased from US$1 to US$4.65, an increase of 365%. At present, the circulation of ANA is 1.966 million, the circulation market value is 37.55 million US dollars, and the annualized rate of return of ANA pledge is close to 300%.

In the recent heated discussions around algorithmic stablecoins, "Is there a bug in Nirvana's mechanism" and "Whether Nirvana will become a game-breaker in this track" appear frequently, which will also be the focus of this article.

secondary titlehttps://app.nirvana.finance/DeFi matryoshka, circular pledge, loan

Below, we use cases to help you understand the rule design and related gameplay of the "Nirvana" project.

First of all, users first log in to the official website (

The ANA token is an investment tool specially designed by the Nirvana protocol for sustainable returns and high APY. It has high volatility (risk)——ANA’s initial price was close to $10, and then quickly plummeted to $3.1. It has risen sharply recently to the current $19.1.

As mentioned earlier, ANA has a recovery floor price (Floor Price), which is currently $4.65. It means that when the price of ANA plummets below $4.65, users can sell their ANA tokens back to the agreement at a price of $4.65, thereby reducing losses (equivalent to the agreement setting the lowest market price for ANA); What supports the recovery of the agreement is the reserve value of the agreement (Reserve Value), which is currently 19.11 million US dollars (marked in the above picture). The floor price and the reserve fund will be introduced in detail later.

After obtaining ANA tokens, users can click on the "Stake & earn" function to pledge ANA to obtain income. The current annualized rate of return is close to 300%; the pledge rewards appear in the form of special tokens: pre-ANA or prANA (taken from from the Sanskrit word for "life").

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(Pledged ANA)Get/Repay NIRVprANA is a special financial instrument, an option with a dynamic strike price, ie the prANA token gives its owner the right to buy ANA at the current reserve price. To put it simply, the current market price of ANA is $19.1, and the floor price (Floor Price) is $4.65. People who hold prANA can pay 1 prANA plus $4.65 to get 1 ANA (Note: The agreement will destroy prANA tokens later ), a net profit of 19.1-4.65= 14.45 US dollars, which is the source of mining income.

prANA rewards are distributed once per epoch, prANA reward amount = ANA supply * reward coefficient, as the ANA supply increases, the reward will also increase; the amount of prANA received by a personal account depends on the pledged ANA held by the account in Percentage of total pledge.

"Function. Suppose the user has pledged 100 ANA, the market price is $19.1, and the reserve price is $4.65. At this time, the total amount he can borrow is: 100*4.65=$465, and the system will provide the user with a maximum of 465 NIRV tokens.

The NIRV token is a Nirvana protocol stable currency, also known as a super stable currency. The value behind it is supported by the bottom price of ANA; as long as the agreement can guarantee that ANA can eventually be recovered at the bottom price, NIRV loans will never trigger liquidation, and the NIRV price will not There will be fluctuations. Therefore, the official said that the Nirvana agreement is zero liquidation risk lending.

Finally, after the user obtains NIRV tokens, he can go back to the first step and use NIRV tokens to purchase ANA tokens again, second pledge, second loan...unlimited dolls, forming compound interest. As long as the agreement exists, this kind of nesting doll is basically risk-free.

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Reserve guaranteed reserve price repurchase

This section will introduce the last function on the Nirvana protocol, "Nirvana buyback" (recycling). When the price of ANA tokens falls sharply and falls below the reserve price, users can click this function to sell all ANA back to the agreement at the current reserve price without any slippage.

Of course, the chances of this happening are extremely slim, as the Nirvana protocol invented a virtual AMM mechanism that encodes ANA's floor price into its pricing function. The AMM guarantees that ANA will not be purchased at a price lower than the reserve price, and that there is sufficient liquidity to recover ANA at the reserve price.

The Nirvana protocol-owned market (POM) is connected to ANA's central mint. Instead of locking unspent ANA tokens in traditional AMM pools, the POM holds virtual ANA. When a user buys new ANA, the POM mints an ANA token in time; when ANA holders sell it back to the POM, the ANA is burned and removed from the supply. Also, there is no ANA pool waiting to be purchased in the POM, because such an unused ANA pool needs to reserve relevant liquidity for each unused token at the reserve price.This POM model has the greatest capital efficiency. Unlike traditional AMMs, where funds must be locked for both tokens at all possible prices, Nirvana's POM does not require ANA, nor does it require liquidity above the current market price of ANA. POM only pools liquidity at a price below the current spot price of ANA, providing an exit for those who sell back ANA. The POM visualized liquidity visualization graph is as follows:In simple terms, when someone buys ANA, the cash they pay goes into the reserve and provides liquidity to those who sell their ANA back; when someone sells their ANA to the POM, they receive some market liquidity Sex, their ANA will be burned.

Note that yes,

The existence of the reserve fund is to ensure that ANA can be recovered at the reserve price, which is also the biggest core competitiveness of the agreement.In order to provide this assurance, the reserves must be extremely low risk, as close to "zero risk" as possible in theory. Therefore, when ANA was initially purchased, the Nirvana protocol only supported the purchase of stablecoins, thereby reducing system risk; and, accepting a basket of multiple types of stablecoins, the intrinsic value of ANA does not depend on a single stablecoin.

Regarding the ANA reserve price, there is one point that needs to be emphasized:The agreement stipulates that the reserve price will continue to rise over time and will never fall.

The rise of the reserve price needs to meet the following conditions: before the reserve price is raised, the minimum liquidity near the current market price must be guaranteed - the liquidity must reach 30% of the total reserve assets; when the liquidity threshold to support the price is reached, part of the reserve There will be reallocation to increase the floor price, thereby reducing the liquidity supporting the price to 25% of the total reserve value, and so on, continuously increasing the floor price.