Nirvana Finance is back, and just kicked off mainnet launch for its V2. For this discussion, I had a chance to sit down with Sid, one of the company’s anonymous co-founders.
Nirvana is back! What is the core mission of the relaunched Nirvana V2, and how does its design ensure long-term resilience and value for its users?
The Nirvana protocol has one mission: to produce a truly resilient store of value. One that holds its worth regardless of market cycles, evolves without central planning, and scales indefinitely.
Its resilience derives from the 100% protocol-owned liquidity. Every ANA token in supply has a guaranteed floor price, which rises automatically with demand, as the protocol commands greater quantities of liquidity. The governance of Nirvana steers the protocol parameters slowly and algorithmically, with a fully democratized distribution of voting power and zero allocation to insiders. And the scale of the market is indefinite, as it becomes more liquid necessarily as ANA becomes more valuable.
On top of the economics, Nirvana incorporates direct and continuous revenue sharing from top to bottom. This real yield derives from protocol fees and is shared immediately with governance token holders. The revenue share system aligns incentives for governance participants while also encouraging increased adoption of the platform.
Nirvana takes the principles of open finance and DeFi seriously. The system is fair, transparent, and decentralized in every aspect. The goal is to make an asset that is better than “digital gold,” because it is one with a guaranteed intrinsic value, regardless of temporary market sentiment.
The Market-Driven Mint (MDM) is described as a revolutionary feature of Nirvana. Could you break down how MDM fundamentally differs from traditional liquidity models and why it’s a game-changer for DeFi?
The fact that the Market-Driven Mint is the counterparty to every trade is how it guarantees a rising floor price for ANA. Whenever ANA is purchased, the reserves grow, as does the liquidity for ANA. This relationship is not the same in conventional DeFi Automated Market Makers, which become less liquid with increased demand. With Nirvana, market liquidity is provided by the protocol itself – there are no human counterparties that can potentially cause liquidity crisis events, which result in abnormal volatility. The ANA token becomes less volatile as it appreciates, making it a uniquely stable store of enduring value.
Governance often defines the trajectory of a protocol. How does the Automated Token-Managed Adjustments (ATMA) mechanism in Nirvana V2 ensure a truly decentralized governance model, and what has been the community’s response so far?
The best government governs slowly. With Nirvana, consensus among token holders affects small, incremental changes to protocol parameters at a regular interval. The result is that the protocol evolves slowly, through purely democratic means, where the wisdom of the majority converges gradually on parameter values.
Every week, the protocol automatically tallies a global ballot and puts the ballot items into effect. Each ballot item is simple: nudge a parameter a little higher or a little lower. Importantly, there are no central committees in the middle. The protocol automatically adjusts itself based on the votes.
And, in another departure from business-as-usual with DeFi “tokenomics,” there is zero “team allocation” for governance tokens. Everyone is on equal footing with respect to governing the future of Nirvana. When teams withhold governance power for themselves, this is oligarchy, not democracy & decentralization.
Your approach to protocol-owned liquidity, with a rising floor price for the ANA token, is intriguing. How does this balance between upside potential and downside protection make Nirvana unique compared to other DeFi projects?
The protocol-owned liquidity is how Nirvana guarantees a rising floor price for the asset. And this is unique even outside of DeFi. The central idea of DeFi (and cryptocurrencies generally) is the removal of humans from the loop for the sake of predictable, deterministic, and fair systems. With Nirvana, the protocol itself is the counterparty for every trade and thereby provides an orderly sale of the ANA token with a transparent price algorithm.
One important effect of this algorithmic market is how it disincentivizes panic selling. By guaranteeing liquidity and a floor price, it is irrational to sell at or near the floor. Every token is guaranteed a set exit price by the reserves. However, the risk is asymmetric. The maximum downside is capped, and the upside is unbounded. When the price is at the floor, it is effectively a zero-risk opportunity.
The perpetual recovery model introduced in Nirvana V2 is a bold promise. What inspired this mechanism, and how do you see it impacting the broader DeFi space in terms of user trust and protocol accountability?
The motivation is simply to make people whole, or hopefully more than whole. Nirvana’s mission has always been to be a stable store of value, and it attracted customers who had different expectations than were fit for highly volatile, speculative coins. And so the de-collateralization of Nirvana from the hack, though tragic in any case, hit especially hard.
The relaunch of the protocol includes permanent revenue sharing for all victims of the hack. And the goal of the relaunch is to be as profitable as possible so that the revenue share contributes significantly to the restitutions. We believe protocols should be accountable to their customers.
Expanding the ecosystem beyond stablecoins is a significant move. What criteria will Nirvana use to decide which speculative assets to support, and how will these expansions align with your overall mission of fairness and innovation?
The key criteria are volume and market capitalization. Nirvana’s market-driven mint has the unique feature of becoming automatically more liquid (with an automatically higher floor price) the greater the demand for the base asset. Since the Nirvana market becomes more functional the greater its demand, it is natural for the market to support highly scalable & liquid assets.
When incorporated with volatile or speculative assets, Nirvana becomes a novel instrument for leveraged exposure to underlying assets, with the added benefit of a guaranteed backstop. And the facility for zero-liquidation-risk interest-free loans in the base asset provides an effective means for hedging exposure.
Security and stability are paramount in DeFi. How does the single-collateral reserve system introduced in Nirvana V2 ensure resilience against the kind of cascading failures seen in other protocols?
Isolation is tantamount to security. Entanglement with other assets can pull a whole interconnected system down when only one fails, and the others become the backstop. Nirvana adheres to simplicity in order to limit counterparty risk. The NIRV & ANA tokens are each collateralized by one asset only, and this unified reserve provides strong guarantees for the floor price. The floor price of ANA and the hard peg of NIRV are 100% denominated in and secured by a single asset.
Looking ahead, what role do you see Nirvana Finance playing in shaping the next phase of DeFi? How do you plan to position the protocol as a leader in transparency, fairness, and long-term sustainability?
Sustainability follows naturally from transparency and fairness. The primary reason for Bitcoin’s value is that there is no central counterparty with incentives different from those of organic investors. And so with ANA, every token in supply exists only because someone bought it. But unlike Bitcoin, the ANA token is purchased from the protocol itself, and increases the value of its reserves as a whole. Nirvana embeds crypto’s principles of fairness and transparency into the market for the token. As liquidity gets amassed by the protocol, it raises the floor price for all holders together.
The way Nirvana adheres to the principles of open finance and DeFi is a new high watermark for the sector. Earlier crypto assets did away with human intervention when it came to settlement and bookkeeping. Nirvana brings this paradigm of algorithmic transparency into the market itself. We believe this will be a precedent for how assets get brought to the public market.
