Liquidity mining with leverage has been in the shadows for a while due to impermanent loss. The Ethereum blockchain has reignited interest in leveraged liquidity mining with re-staking. Now, NX Finance is here to bring leverage to Solana.

NX Finance is a platform within the Solana ecosystem designed to help users earn higher returns through leveraged strategies and yield farming. Think of it as a flexible financial toolbox, enabling users to reap rewards from high-yield assets and specific activities. The platform aims to address the lack of flexible financial products in the market, allowing users to adjust their investment strategies according to their risk tolerance, ensuring they pursue high returns while managing risks appropriately.

In a nutshell: NX Finance offers leverage for investors who love risk and high-interest deposit options for those seeking stability.

1. How Does NX Finance Work?

NX Finance provides leverage by staking on premium projects within Solana, such as JLP, which is similar to GMX’s GLP (liquidity provider tokens) and serves as a liquidity pool for perpetual contract users.

To leverage, someone has to supply the leverage. Therefore, deposits are necessary. Unlike traditional lending deposits, the interest rates here might be relatively high because leverage amplifies borrowing demand.

2. Value Proposition of NX Finance

NX Finance has different value propositions for users with varying risk preferences.

For High-Risk Investors: The high-leverage yield feature of NX Finance might excite you. You can amplify your returns up to 10x (compared to the current 5x maximum for JLP liquidity mining). However, remember that this also means your risk is magnified tenfold, so proceed with caution.

For Low-Risk Investors: NX Finance offers a convenient deposit option. Simply deposit your SOL or USDC, and you can earn a relatively high APR, which is 1-2% higher than typical lending platforms.

Currently, NX is running an airdrop points campaign. Each 1 USDC deposited earns you 3 points per day; for leverage lending, each 1 USDC of collateral also earns 3 points, and each 1 USDC borrowed earns 1 point.

3. Risk Management

Currently, NX allows borrowing stablecoins or SOL to purchase JLP for yield. However, fluctuations in the prices of your collateral, JLP, or SOL could introduce risks. Here are some recommendations:

Collateralize vSOL and borrow USDC with a maximum of 3x leverage for relatively safer operations. Keep your total investment under 2.5% of your total assets. 4. How to Participate? A quick tip: Using the Backpack wallet during the entire process can boost your points by 10%.

4.1 Leveraged Liquidity Mining (JLP)

Click the link to access the following page and complete the first two social tasks.

For the third task, you can either click "Join" to join my team, Daii, as shown in the image below, or create your own team. The advantage is that as the team's total points grow, everyone can enjoy additional airdrop points.

Next, click on the "Leverage" menu at the top, as shown in the image. Choose vSOL as your collateral, borrow USDC (or USDT), and set the leverage up to 3x.

Another benefit of using vSOL as collateral is that you can continue earning Vpoint points, which could lead to future airdrops from The Vault.

Note that you can only open one position per address. Different positions require different addresses. When withdrawing, you’ll need to confirm twice.

Additionally, it’s worth noting that when withdrawing, your account needs to hold 1-4 JLP and a small amount of vSOL. This is a known bug, and the team is working to fix it.

Remember, using vSOL to borrow USDC to purchase JLP doesn’t eliminate price fluctuation risks. It also gives you a taste of the opportunities Ethereum L2 provides with re-staking and leveraged liquidity mining, as explained here. So if price volatility bothers you, you might want to stick to the deposit option below.

4.2 Deposits

Low-risk investors can choose to deposit here.

Conclusion

NX amplifies the yield on JLP through leverage. This concept is similar to what I discussed in "Real Trading: How to Maximize Re-staking Returns?" with Juice, Stella, and Extra protocols. The only difference is that NX carries more risk because those protocols use ETH-based assets for collateralized borrowing.

At its core, this is because Ethereum’s AVS service makes re-staking a relatively reliable profit model. NX’s amplified JLP yield comes from Jupiter perpetual contract liquidity mining, which doesn’t match the stability and security of the re-staking profit model.

If you participate in NX, I recommend you also take a look at Juice, Stella, and Extra.