Online Plunge of 80%! Solana's New Player NX Finance Launches Token and Flips, Shifts Focus to Reviewing IDO Mechanism

Since its launch, the JLP token of the largest DeFi protocol on Solana, Jupiter, has maintained a strong trend. NX Finance seized the opportunity to launch a yield layer protocol on Solana, aiming to replicate Ethereum's existing business model on Solana. The project conducted its public IDO on September 3, but unfortunately, the price plummeted rapidly after opening, dropping by 80% compared to the public sale round. The official explanation was that the project was immediately hit by two giant whales using bots to dump the tokens. However, suspicions about the background of the founder of NX Finance began circulating on Twitter, questioning whether this was another rug pull project. The incident has triggered discussions within the Solana ecosystem, including Jupiter founder Meow, regarding IDO mechanisms.

The Era of Airdrops: Is Leveraging Products from NX Finance Becoming a Necessity?

NX Finance is best known for its leveraged holding of the JLP token, which has tripled in value since its launch last year. Simply put, holding the token is equivalent to being a counterparty to perpetual contract traders on Jupiter, with the current official announcement of an annualized return of nearly 25%. Users can collateralize JLP tokens through NX Finance, borrow stablecoins, and then invest in JLP to leverage the holding of JLP tokens.

Additionally, NX Finance has also introduced leveraged products on liquidity staking. Users can pledge their SOL in The Vault liquidity staking protocol to receive vSOL, pledge vSOL in NX Finance, borrow SOL, and then re-stake the borrowed SOL in The Vault protocol to achieve leveraged holding.

With leverage comes the need for lending, and NX Finance has also introduced its own vault for lending. Although the current annualized returns are average, if the protocol can see explosive growth, there may be decent profit opportunities.

In terms of tokenomics, the total supply of the $NX token is one billion, with 15% of tokens allocated for IDO, 51% for community incentives, 4% for liquidity pools, and the rest allocated to marketing, investors, and the team at 10% each. According to the official whitepaper, the main utility of $NX token is the ability to collectively share 100% of the protocol revenue for collateralized loans. Additionally, the token also functions as a governance token, allowing holders to enjoy fee reductions after pledging.

The official also revealed that pledging $NX tokens will lead to expected airdrops from Jupiter and Solayer. Due to space constraints, this article only provides an overview of the NX Finance protocol, while JNH Alpha offers a detailed introduction to the specific functions of the protocol, protocol revenue sources, liquidation risks, participation in airdrops, JLP token revenue mechanisms, and more in detail.

Founder Involved in Two Startups, Both Ended Without Success

NX Finance has not disclosed its team and investors, but for Solana ecosystem enthusiasts, this may not be a major concern, as the Jupiter team also maintains a certain level of mystery. The project announced whitelist IDO and public sale rounds on September 2nd and 3rd, with the 4300 SOL whitelist quota selling out within two minutes. However, perhaps due to a lack of market activity or limited attention to the project, the public sale did not sell out. Only 8450 SOL were sold in the end, with the team stating that unsold tokens will be burned.

After the $NX token opened for trading, it faced an 80% decline, prompting an urgent statement from the team, denying any token dumping and attributing the sharp decline to two whales who immediately sold about 500 SOL worth of $NX tokens with bots at the opening. This triggered a panic sell-off chain reaction. The team emphasized that all plans remain unchanged, and the $NX staking will be launched in October.

However, researcher 0xmcraider also revealed the information of the founder behind NX Finance, named TIN Yi KUNG, pointing out that he is actually an "experienced founder" whose previous startups all ended without success.

He first mentioned that NX Finance conducted an IDO less than two months after starting operations, which is very short for a DeFi protocol. Although the official IDO target of 21450 SOL, approximately $2.9 million, was not met, the project eventually raised 8450 SOL, equivalent to $1.1 million, which is quite good in today's market. At an IDO price, 1 $NX is approximately 0.2, and the FDV of the token will be around $20 million, which is quite moderate.

Shifting the focus, oxmeraider revealed information about the founder of NX Finance. His Telegram username is Timmy and he shared his project, NX Finance, in the community of a well-known KOL, Little Raccoon. When Timmy's X account UST_mean was found, it was discovered that he is an experienced founder. He founded Furion at the end of 2022, which focused on solving liquidity and asset utilization issues in NFT trading. As a permissionless NFT platform, Furion's whitepaper outlined many features, but it is unlikely that many were implemented. However, according to Twitter, the project did not continue after the testnet, so it did not cause losses to retail investors. Nevertheless, according to Timmy's personal LinkedIn record, the project raised $1 million.

He then launched Match Finance at the end of 2023, which was a yield aggregation protocol based on Lybra Finance. oxmeraider stated that the protocol was very similar to NX Finance, running for less than two months before opening whitelist IDO. The project raised about 375 ETH, with an FDV equivalent to $5 million at the IDO price, and an opening price equivalent to $7 million. However, the project's token price subsequently declined and did not list on any exchanges, with the Twitter account closing two months after TGE.

0xmcraider concluded his point of view, stating that Timmy's consistent approach is: developing aggregator-related projects with low development costs, encouraging savings to increase TVL. Finding KOLs to announce whitelist IDOs, only listing on DEX after token issuance, and then moving on to the next project.

Coin Issuance Mechanism Sparks Discussion, NX Finance Ultimately Abandons Minting Rights

Shortly after, Solana ecosystem KOL @gnarleysol stated: "It appears that the launch of $NX token did not go as planned. Obviously, two whales spent a lot of money in the presale and immediately sold after listing!" In the comments, he further replied, "The focus should be on setting limits on the maximum purchase amount per address."

Some in the comments section suggested that post-token issuance, tokens should be linearly unlocked as the project develops, rather than 100% unlocked.

Jupiter founder Meow also retweeted @gnarleysol's post, saying: "The presale mechanism needs fixing. The current standards are terrible for consistency." He added that this is why they put $JUP on lauchpool instead of IDO.

NX Finance's official response was: "We admit that we made mistakes. We welcome all constructive criticism. If our experience raises people's concerns about the current presale model on Solana, then we are happy to be a negative example driving change. We are committed to learning from it, improving, and contributing to a better ecosystem."

They subsequently posted that tokens would be minted according to tokenomics and tokens airdropped to the community would be placed in the treasury, with the team adhering to the schedule and never dumping tokens. Finally, they posted to confirm that unsold tokens, liquidity pool tokens, and minting rights have been burned.

According to DeFiLlama data, NX Finance's TVL has dropped by 35% in the past seven days.

What Constitutes a Perfect Token Launch? Community Rejects VC Tokens, Resulting in NX Finance's Misfortune

Finally, as one of the creators who contacted NX Finance before the IDO, I would like to offer some reflections. First, when the team's identity cannot be confirmed, is it possible to judge solely based on the product itself?

As a leveraged DeFi protocol, NX Finance can essentially increase user profits in a highly competitive scoring system among various collateral protocols. For more conservative users, there is also a lending function available. Additionally, the popular JLP token, which increases capital efficiency, remains strong on Solana, which is why the protocol has attracted attention.

Secondly, Jimmy's previous startup did not experience a sharp decline at the opening, so I believe this incident may be attributed to the design of the token issuance mechanism and not necessarily the team's intention.

This leads to another issue, as mentioned in @gnarleysol's post: "How do you think people should raise funds? If VCs do not participate, startups cannot raise funds in this way. Because if there is no way to make money, people will not invest."

Sometimes, retail market sentiments can lead us into unsolvable mysteries, complaining about the large unlocks behind VC tokens on one hand and 100% unlocks in IDOs on the other. It is difficult to find the perfect token launch model and satisfy everyone. For example, what exactly is the criticism of VC tokens, the large unlocks, or the VCs themselves? If the issue lies in large unlocks, then IDO tokens with linear unlocks will only shift the lock-up holders from a group of VCs to more retail investors. Harshly speaking, the selling pressure in this situation may be greater than that of VCs, as most retail investors do not have a long-term holding intention. However, the answer is often not black and white, and this IDO event may bring more discussions for future projects with token issuance plans.