If you are reading this, there is almost a 100% certainty that you have heard of Bitcoin before. Bitcoin was created as a decentralized store of value with the prospect of its value accruing over time. Many use bitcoin and crypto as a way to hedge against inflation, while others use it as an investment vehicle.
As the crypto ecosystem expands, new types of coins are being created all the time. There are two major types of cryptocurrencies that are common in the crypto space – stablecoins and altcoins.
Altcoins are tokens on a blockchain that do NOT have a fixed price. This means that their prices are meant to go up (or down ????).
Stablecoins on the other hand is another category of cryptocurrencies whose value is kept constant at all times. Most of these stablecoins are pegged to represent a United States Dollar.
Introducing Nirvana Finance
Nirvana is a platform built on the Solana blockchain network. The Nirvana protocol is creating two different tokens, one stablecoin and one altcoin. These two tokens are the NIRV and the ANA tokens.
NIRV
The NIRV token is designed to be a stablecoin. With this token, the value will always be equal to $1 USD. There is a need for a decentralized stable cryptocurrency that is not influenced by central banks and government etc. NIRV hopes to accomplish this goal with it's unique mechanism.
With the NIRV token, users can keep their assets in a state that leaves it at the same purchasing power when it was acquired.
You might be thinking, “How does NIRV get its value and how does it retain that value over time such that its always constant?” Here comes ANA.
ANA
ANA, the second token in the Nirvana ecosystem, is the cryptocurrency that can be used to store one’s asset. It has an infinite capacity for an increase in value contrary to the NIRV stablecoin.
Algorithmically, it has a mechanism that makes it metastable. What this means is that Nirvana made the ANA token with the ability to never go below the floor value. It is technically the up only kind of token.
NIRV is backed with many stablecoins as collateral. This token is also used as the collateral to back the NIRV token so as to make it retain the pegged value it must hold as a stablecoin. With this mechanism in place ANA will never trade at a value below the floor but will trade above the floor.
A benefit of the ANA token is the staking rewards that can be earned from the protocol. If as a holder of ANA, you decide to stake, you will be earning prANA as reward tokens.
prANA Token
prANA is pre-ANA. Holders of ANA may choose to stake it with the protocol, and earn regular prANA reward tokens. This is a token used to represent a call option that is non-expiring. For the unaware, a call option is a trading instrument that is used to guarantee the ability of a user to purchase an asset at a fixed price.
So, with these prANA tokens you can purchase more ANA in the future at a lesser price that is different from the current public price. ANA generates yield for the holders through this staking rewards mechanism.
Fees and Revenue for Nirvana
The fees received from trading prANA and NIRV loan activities are earned by the development team of Nirvana Finance protocol. All other needs for funding such as marketing, bug bounties etc., are branched from this allocation.
Please note that none of the tokens have been pre-allocated for the dev team. The fees earned are the single source of revenue for the development of the protocol. This is the way funds are secured for the protocol.
The Nirvana protocol is designed to scale sustainably. It uses a fee-oriented structure so that any funding of the company or ecosystem is directly proportional to the growth & usage of the protocol.
This revenue model is distinctively unique compared to the way projects may pre-mint or emit tokens to give to themselves and the community. This model often runs into trouble with dilution, liquidity, and price support. Holders of these special tokens have to find a market to sell them in in order to recover their value.
Nirvana simplifies this with a simple fee structure, paid in the protocol's own native tokens. There is no need for special secondary markets or mercenary liquidity. Fees are paid in NIRV, ANA, and prANA, and get reabsorbed by the system on pace with its growth.
Since ANA acts as a reserve currency on Solana, its total supply would not be fixed (like in the case of Bitcoin). It can be burnt away from the circulating supply and more of it can be released. The ANA tokens sold to the protocol and used to balance its mechanism on the AMM is burnt.
Some other Uses of NIRV
- With the ANA token, you can easily take a loan of NIRV stablecoins. The ANA floor price will be used to measure the value of your collateral. Putting in mind that your ANA would have a value that is higher than the previous floor, you can use your NIRV to get more ANA loans and then continue the cycle.
- There has been a recent case of a stable coin on the Waves network that went tumbling down 20%. Losses of about $200 million occurred. For one not be exposed to these kinds of risk, NIRV has multiple stablecoins ranging from the centralized type to the collateralized type and the algorithmic ones.
- As you leave your ANA collateral locked in the protocol, they continually earn prANA for you. Since the floor price of ANA is projected to increase with time, it means the prANA call options can help you offset your debt that would have accrued by taking out NIRV.
On the home page, in the Trade ANA section, you will see many stats that shows you the current volume, market cap and the total value locked in the protocol.
On the same page, you will see the current price for ANA and you can take a quick look at the recent trades that had just occurred in the Nirvana protocol by scrolling through the Swap History section.
As shown above, when you click on the Buy ANA, you will be prompted to connect your wallet to continue with the purchase. I bought ANA worth $10 USD to try out the examples to show in this article.
The next section is “Stake & earn”. This is the spot to deposit your ANA tokens so that they can earn yield passively for you in time. This is how you earn the prANA token that was mentioned in this article.
After staking your ANA tokens you can see your balance and the amount of prANA at the lower part of the page. This makes it easy for you to easily view the performance of your portfolio.
After selecting the “Stake ANA” button, you will be routed to this page. You can enter the amount of ANA you want to stake or you can just be like me and stake all your ANA token balance.
Unstaking your ANA tokens is the process of removing your ANA fron the state of being locked away to earn passive income. This can only be done after you have repaid your NIRV loans if you have borrowed any. If you did not borrow NIRV token with your staked ANA then you can unstake it whenever you want to.
In the Realize prANA page, you can claim all the preANA tokens your staked ANA generated for you as yield during the time wherein it was staked. Mine was zero here because my size is not size enough and I unstaked it after about 5 minutes.
In the Realize section, you can. Swap your prANA yield to ANA. But to do this, you will have to redeem it with the strike price since it is a call option (remember I explained what call options are above). By supplying the USDC value of the strike price, which is the floor price of the ANA token, you will receive ANA token that can now be traded at the current market price of ANA. This gives you a profit since the floor price of ANA will always be less than the market price.
As decscribed in one of the sections above, you can borrow the NIRV stablecoin from Nirvana protocol by using your locked ANA as the collateral. This process is what is called “mint a NIRV loan” on the page.
After borrowing NIRV, you can see your loan in the dashboard provided at the top of the “Get/Repay NIRV” page. You can also borrow more NIRV if youb didn’t exhaust the maximum amount possible for you to borrow.
After borrowing NIRV on the protocol, you can repay it here. Since you had to lock your ANA tokens to borrown NIRV, if you are unable to pay back your borrowed NIRV, the ANA tokens will remain locked!
If you choose to sell your ANA tokens to the protocol as shown below, just know that you are selling it at a loss because the price there will always be lower than the price of ANA on public markets (this is because as designed, it is meant to assume to lowest floor value for the ANA token).
To sell back your ANA tokens for the USDC you had originally, you can navigate to this spot to swap it.
Conclusions
Since Nirvana is still a relatively new project on Solana with many products, features and plans to build out in the coming months, you would do well to stay informed concerning their progress in the space.