Economics
The square
One token tracks NF × SOL² / 100 dollars. A move of x in SOL is a move of (1 + x)² − 1 in the token's index:
| SOL | Token index |
|---|---|
| −50% | −75% |
| −10% | −19% |
| +10% | +21% |
| +50% | +125% |
| +100% | +300% |
In percent, both gains and losses are larger than SOL's. The token's value can never go below zero.
Funding
A squared payoff is worth more than its index when SOL moves a lot, so the market pays for it. The fair funding is about SOL's variance. From SOL's daily closes:
| Period | Fair funding per day |
|---|---|
| 2025 | 0.202% |
| 2026 so far | 0.107% (about 39% a year) |
| Last 30 days | 0.047% |
Funding is paid through NF, not by transfers. While the pool price is above the index, NF shrinks, and so does every token's index value and every short's debt.
What a short earns
A short who mints and sells tokens holds SOL and owes tokens. The debt shrinks with NF while the token trades rich, which is the short's income. The short loses when SOL moves far in either direction, because the debt grows with SOL².
Pool fees
Every buy and sell pays 0.3% to the pool, shared by liquidity providers pro rata to their shares.
Liquidation bonus
A liquidator receives the repaid debt's value plus 10%. That bonus comes out of the vault being liquidated, never from holders.