Nirvana Finance
Image Courtesy of Nirvana Finance

The team at Nirvana Finance returns and launches its promising mainnet reboot. We got the chance to speak with one of its co-founders, Alex Hoffman, in this exclusive discussion.

The July 2022 hack was a pivotal moment for Nirvana. Can you describe the immediate aftermath of the attack and the steps you took to rebuild trust within your community?

The July 2022 hack resulted in a $3.5 million loss through a sophisticated price manipulation attack. We immediately prioritised transparency, informing our community and collaborating with law enforcement agencies, including the DOJ, HSI, and IRS-CI. This led to the first-ever DeFi hack prosecution and conviction, with $3.45 million recovered in 2024.

Beyond just returning funds, we developed a comprehensive restitution plan including METTA tokens, which give holders 10% of all future protocol revenue. Each user's share is proportional to their portfolio equity at the time of the hack.

The experience drove significant improvements in Nirvana v2, including a more robust market-driven mint system and enhanced governance controls. It established a crucial precedent that sophisticated on-chain attacks can be prosecuted through proper collaboration with law enforcement. While challenging, the incident ultimately strengthened Nirvana through improved security, technical architecture, and community trust. The combination of successful fund recovery, technical improvements, and enhanced community engagement has positioned us well for the future.

Nirvana achieved a groundbreaking legal milestone with the conviction of Shakeed Ahmed. What was the significance of this case for the DeFi industry, and how does it shape the narrative around accountability in decentralised systems?

Shakeeb Ahmed's conviction marks a pivotal moment for DeFi security. As the first successful prosecution of a DeFi hack, it proves that blockchain anonymity doesn't guarantee impunity. Through collaboration with law enforcement, we traced the attacker despite sophisticated fund mixing attempts, recovering $3.45 million.

The case establishes three key precedents: smart contract exploits constitute computer fraud under existing laws, law enforcement has developed strong blockchain forensics capabilities, and cooperation between DeFi projects and authorities can be effective. This bridges the gap between decentralised innovation and legal process, showing that DeFi can maintain its benefits while protecting users against bad actors.

This precedent encourages other DeFi projects to work with law enforcement, rather than simply accepting losses as the cost of innovation. It sets a new standard for accountability in DeFi while reinforcing that decentralisation and legal protection aren't mutually exclusive.

The revenue-sharing mechanism for hack victims is a first in DeFi. What inspired this approach, and how do you envision it influencing other protocols dealing with similar crises?

Our METTA token sharing model recognises that the $3.45 million recovery wasn't sufficient given the hack's broader impact on our ecosystem. By allocating 10% of all protocol revenue to hack victims in perpetuity, we're offering ongoing compensation that could exceed original losses while transforming a negative event into long-term protocol participation.

This mechanism breaks from traditional finance's one-time settlement approach by leveraging DeFi's programmable nature. Rather than treating the hack as a closed chapter, METTA holders become permanent beneficiaries of Nirvana's growth, creating a powerful alignment between protocol success and victim recovery.

We believe this model sets a new standard for handling DeFi security incidents. By turning victims into stakeholders, we're not just providing compensation – we're rebuilding trust through sustained value sharing. This acknowledges that community trust is essential for long-term success and demonstrates our commitment to those who supported us through difficulties. This approach could fundamentally change how protocols maintain community trust after significant setbacks.

The Automated Token-Managed Adjustments (ATMA) system is a bold step in decentralised governance. How does ATMA address the flaws in traditional governance models, and what challenges did you face in implementing it?

ATMA reimagines DeFi governance by replacing traditional binary yes/no votes with incremental parameter adjustments on a weekly basis. Instead of sudden changes that can destabilise protocols, governance token (prANA) holders can vote to make small adjustments to system parameters. For example, rather than setting a fixed fee percentage, holders can gradually nudge fees up or down each week.

To align incentives, prANA holders earn a share of protocol revenue. This creates natural checks and balances since prANA can only be earned through long-term ANA holdings.

We solved key implementation challenges by building robust manipulation resistance and ensuring intuitive parameter interactions. The result is a governance system that maintains decentralisation benefits while protecting against the destabilising effects and low participation common in traditional DAO voting.

The Market-Driven Mint is central to Nirvana's ecosystem. Can you elaborate on how this mechanism works and why it represents a breakthrough in liquidity and price stability?

The MDM represents a fundamental innovation in how DeFi protocols handle liquidity and price discovery by making the protocol the counterparty to every trade, eliminating dependency on external liquidity providers. The MDM works through a market-driven mint mechanism where every ANA token is created in response to actual demand and backed by protocol-owned liquidity. When users buy ANA, the protocol mints tokens and holds payment as reserve backing. When selling, ANA is burned and payments come from these reserves, creating perfect supply-backing balance.

The system's rising floor price mechanism guarantees ANA buyback at or above floor price, which can only increase. This creates asymmetric price action - market price fluctuates freely above the floor while maintaining permanent minimum value backed by real liquidity. This feature makes ANA uniquely suited as a store of value and as collateral for borrowing.

This design solves liquidity bootstrapping issues as market depth grows organically with usage. Since the protocol owns all liquidity permanently, it can't be withdrawn or manipulated, ensuring stable trading conditions.

This approach has proven particularly resilient in stressed market conditions, as demonstrated during periods of high volatility where traditional AMMs often struggle with liquidity crunches. The MDM ensures that users always have a predictable way to enter and exit positions.

The rising floor price for ANA tokens is an innovative concept. What impact do you expect this to have on investor confidence and the broader adoption of Nirvana's ecosystem?

The rising floor price mechanism is designed to fundamentally change how investors think about risk and value in DeFi. Unlike traditional cryptocurrencies where prices can fall to zero, ANA's floor price creates a mathematical guarantee of minimum value that can only increase over time. This isn't just a feature - it's a complete reimagining of what a digital asset can be.

When investors buy ANA, they gain exposure to unlimited upside while having their downside protected by the floor price. This asymmetric risk profile is particularly compelling because it's backed by real liquidity in the protocol's reserves, not just algorithmic promises. Every time the floor rises, it permanently locks in a new minimum value for all ANA tokens.

The system creates a natural alignment between short-term traders and long-term holders. While traders speculate on ANA's market price above the floor, their activity builds reserves that may trigger floor price increases, benefiting all holders. This virtuous cycle resolves the traditional conflict between trading volume and long-term value accrual.

Nirvana V2 is starting with stablecoins but plans to incorporate speculative assets like SOL and BTC. What is the strategy behind this phased approach, and how do you see the ecosystem evolving in the next few years?

We're starting with USDC-based Nirvana to demonstrate core mechanics in a stable environment while building confidence in our improved security and governance systems. Our vision is to create independent Nirvana markets built around different base assets like SOL, BTC, and ETH, each maintaining separate reserves and operating autonomously, allowing users to choose the underlying asset that best fits their investment strategy. This multi-asset approach lets users select their preferred value denomination while capturing different market dynamics.

Each instance will feature our core mechanisms - Market-Driven Mint, rising floor price, and ATMA governance - with unique dynamics based on its underlying asset. This creates opportunities for users to implement sophisticated strategies across different markets.

Looking ahead, we envision a rich ecosystem where users can easily move between different Nirvana markets, each offering its own risk-reward profile while maintaining the fundamental benefits of our mechanics. This expansion strategy allows us to grow sustainably while catering to diverse preferences in the DeFi landscape.

The single-collateral reserve system is designed to prevent cascading failures. How does this design set Nirvana apart from other protocols in terms of user protection and platform stability?

The move to a single-collateral system in Nirvana v2 represents a direct response to the lessons learned from past algorithmic protocol failures, including our own experience. The key insight is that while diversification is generally beneficial in traditional finance, in DeFi it can create dangerous interconnections and systemic risks.

Using a single collateral asset eliminates complex dependencies, preventing de-pegging risks and cascade failures. Combined with our Market Driven Mint system, all ANA tokens are minted against real collateral in protocol reserves, removing reliance on external oracles or complex algorithms. The floor price is always backed by actual assets in the reserve, creating a direct, verifiable relationship between ANA's minimum value and the protocol's collateral.

This approach also provides exceptional clarity for risk assessment - users can verify backing by checking reserve balance and floor price, without navigating complex tokenomics. By removing unnecessary complexity, we've created a more resilient system that provides clear guarantees about asset backing while better withstanding market stress.

Nirvana was born out of a desire to address inequities in DeFi. In what ways do you believe Nirvana V2 sets a new standard for fairness and transparency in decentralised finance?

Nirvana v2 was designed around the core principle that DeFi should provide equal opportunities for all participants, not just insiders or large holders. Our Market Driven Mint creates all ANA tokens through the same mechanism - no pre-mines, team allocations, or early investor privileges. The protocol-owned market eliminates advantages typically held by sophisticated traders, providing identical price impact regardless of trade size or timing.

The rising floor price locks in gains equally for all holders, preventing large players from extracting value at others' expense. Our ATMA governance system requires gradual, community-driven parameter adjustments rather than allowing wealthy holders to force sudden changes.

Every protocol aspect - from reserve backing to floor price mechanics to governance votes - is verifiable on-chain. This transparency eliminates trust requirements and complex algorithms, creating a system where success comes from healthy participation rather than exploitation of information or power asymmetries.

With Nirvana V2 marking a new chapter, what's next for the protocol? Are there any upcoming features, partnerships, or expansions you're particularly excited about? Tell us anything else on your mind.

While the launch of Nirvana v2 with USDC is just the beginning, we have an ambitious roadmap that extends well beyond our own protocol. We're actively developing partnerships with token projects across the Solana ecosystem to help them establish their own Nirvana markets, providing their communities with the benefits of our rising floor price mechanics and protocol-owned liquidity.

Think of it as bringing the stability and price protection of Nirvana to any token that wants it. A project could launch a Nirvana market using their token as the base asset, giving their holders access to our unique features like risk-free leverage and guaranteed minimum value. This has the potential to transform how new tokens build and maintain value for their communities.

But perhaps most exciting is our development of a permissionless version of Nirvana. Imagine being able to create a Nirvana market for any token with just a few clicks - no partnership required. This democratisation of our technology could revolutionise how communities interact with their favorite tokens, allowing anyone to establish rising floor price mechanics for any asset they believe in.

The rising floor price mechanism has proven to be a powerful tool for building sustainable value, and we believe this technology should be accessible to everyone. By making Nirvana's technology widely available, we can help create a more stable and equitable DeFi ecosystem where price protection and risk-free leverage aren't limited to major tokens.

Each new Nirvana market will operate independently but benefit from the battle-tested security and mechanics of our core protocol. We're excited to see how different communities adapt and utilise these tools, potentially creating entirely new use cases we haven't even imagined yet.

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Brendan Blowers is an M.F.A. from @scaddotedu, a member of @thefrc_official, and member of @createpotentia. He is a former professor, current journalist and media relations professional.