Phoenix Network log in Blast L2, introducing an innovative dual Token economic model

Recently, the decentralized derivatives protocol Phoenix Network announced its official log in to Blast L2 and launched a brand new Token and economic model, injecting new vitality into the decentralized derivatives track.

Phoenix Network launched its IDO on May 13 and announced its conclusion on May 29. In just 15 days, the project reached its IDO hard cap, raising 625 ETH and surpassing $2.4 million in subscription amounts. Such a hot market response has drawn attention to the Phoenix Network. This article will provide a detailed introduction to the dual-token economic model of Phoenix Network on Blast L2, including the governance token $PEX and the contribution token $WIN.

Overview of Phoenix Network

Phoenix Network is a decentralized derivatives trading platform deployed on Blast L2, aimed at providing an efficient, secure, and transparent perpetual trading environment to attract more users to participate in the decentralized finance market and provide incentives. The dual-token economic model of Phoenix Network on Blast L2 is a core component.

In the decentralized finance market, the economic model is crucial for the success of a project. It not only determines the Token distribution and incentive mechanisms but also affects the long-term development and market performance of the project. An excellent economic model can attract more investors and users, thereby promoting the rapid development of the project.

governance Token PEX

PEX is the governance Token of the Phoenix Network, with a maximum supply of 10 million. The main functions of PEX include platform governance voting rights and serving as the primary value storage point for various revenues from the protocol derivatives exchange.

PEX is an asset-backed cryptocurrency, with all PEX minted by the Phoenix treasury at a rate of 1 PEX for 0.0002 ETH. A 10% minting tax will be charged by the protocol each time PEX is minted.

PEX Minting and Issuance

The issuance of PEX is closely related to the development of the Phoenix Network. In the early stages of the project, a genesis minting was conducted through an IDO, with a total of 333,333 PEX minted. Among them, 33,333 PEX (10%) were used as minting tax, and 300,000 PEX (90%) were allocated for IDO distribution and to add initial liquidity. The IDO price was 0.0025 ETH, and the initial listing price was 0.0031 ETH.

Except for the PEX minted during the Genesis Minting, subsequent issuance of PEX can only be minted through bond sales. By selling LP bonds, the treasury holds 100% liquidity of the PEX-ETH trading pool.

The minting tax of PEX is used for the technical development and maintenance of the protocol, rewards for community node users, and development funds. Over time, the actual circulation of early PEX will gradually increase, but due to various factors affecting its actual supply, it will enter a deflationary phase in the mid to late term, with the actual circulation being far below 10 million coins.

The risk-free value of treasury assets (Treasury-RFV) (measured in ETH quantity) determines the upper limit for the minting amount of PEX.

The circulation of PEX

1. PEX holders can earn staking rewards by staking PEX during the Rebase period. The staking rewards increase in a compound manner in the form of sPEX and can be unstaked at any time, but compound rewards will be released in equal amounts over 180 days and can be accelerated by burning WIN to a maximum of 30 days.

2. Users can also purchase LP bonds by adding PEX-ETH LP liquidity to obtain PEX minted by the treasury. When users purchase LP bonds to obtain PEX and stake it in full, they will receive an additional reward of about 5% in PEX tokens.

PEX's destruction and equity

PEX is closely related to the derivatives exchange PbTrade. The treasury serves as the short-term counterparty for all transactions on PbTrade, while PEX acts as the long-term counterparty, thus PEX has a strong value capture capability. In the long run, PEX will be in a deflationary state, and its price performance may outperform similar products.

In most cases, when traders incur losses, 35% of the profits from the treasury position are deposited into the treasury as reserves for minting PEX, and 55% are used for repurchasing and destroying PEX. The circulation of PEX decreases, and the price rises. In extreme cases, when traders make profits and the ETH collateral rate is less than 100%, the treasury contract activates the reserve for minting PEX, which is then sold to fill the gap in the treasury's ETH pool.

The ability of a Token pair to capture the inherent value of the project determines the success or failure of the tokenomics design. 25% of the PbTrade transaction fees will be returned to PEX stakers, meaning that PEX stakers can earn not only from their staking rewards but also from this portion of the transaction fee revenue.

Many DeFi protocols have governance tokens that are weakly correlated with the value of the protocol itself, resulting in poor value capture ability and unsatisfactory price performance. However, PEX has effectively avoided this issue.

Contribution Token WIN

WIN is the protocol contribution value Token of the Phoenix Network, with a theoretical maximum supply of 10 billion coins. It is mainly used to reward those who contribute to the growth of the protocol's users, and it can also serve as a burning mechanism to accelerate the release of WIN staking rewards.

The WIN Genesis phase will issue 1 million coins for specific phase airdrops and rewards. Apart from the WIN issued during the Genesis, all other WIN are minted by the protocol. The protocol establishes an initial treasury of 10,000 USDB for WIN.

WIN Minting Increase

WIN is minted by users who stake PEX, and the minting will consume USDB. The minted WIN is rewarded to those who contribute to the growth of the protocol's users, and the minting process will drive up the price of WIN.

PEX stakers need to spend an additional 20% of the staked PEX value (USDB) to mint WIN Tokens in order to obtain a high yield of 0.2% compound interest every 8 hours. The minted funds will go into the USDB treasury, with 5% of the minted WIN allocated as a protocol development fund, and the remaining 95% will be rewarded to referrers and node users.

The usage rate of WIN minting funds is a dynamic variable, initially set at 66%. For every increase of 5 million WIN in total supply, the usage rate decreases by 2%, with a minimum usage rate of 50%, which occurs when the total supply of WIN reaches 40 million.

New WIN minting amount = (Minting funds * Fund utilization rate) / WIN price WIN price = Total value of USDB treasury / WIN circulation

Due to the existence of capital utilization rate, the increase speed of the USDB treasury will always be higher than the issuance speed of WIN. The larger the amount of WIN issued, the faster the increase speed of the USDB treasury, therefore minting and issuing WIN will make the price of WIN rise higher and higher.

WIN redemption and burning

Users who own WIN can accelerate the release of PEX staking rewards by burning WIN. Since WIN is destroyed, burning WIN to accelerate the release of PEX staking rewards will cause the price of WIN to rise.

Users can also redeem WIN from the USDB vault at real-time prices for USDB, with a redemption tax of 15% applied. The redemption tax will remain in the USDB vault. When users redeem WIN, the total supply of WIN decreases at a rate faster than the decrease in the USDB vault, thus the redemption process will also cause the price of WIN to rise.

Therefore, the WIN Token is a unidirectional continuous appreciation model: minting WIN, burning WIN, and redeeming WIN for USDB will all cause the WIN price to continuously rise. The optimization of the WIN model is an important innovation after the Phoenix Network migrated to Blast, and this mechanism will play a significant role in the protocol launch and subsequent user growth.

Dual-Currency Economic Model

The governance token PEX and the protocol contribution token WIN play different roles in the economic model of the Phoenix Network (Blast L2). The two are interdependent and mutually promote each other, jointly driving the development and prosperity of the platform. Specifically, there are the following aspects:

1. Inject funds and liquidity into the protocol: The minting and circulation of PEX and WIN can bring more funds and liquidity to the Phoenix treasury and vault, promoting the development and prosperity of the platform.

2. Maintaining platform stability and balance: The reward mechanism of the contribution value Token WIN and the destruction mechanism that accelerates the release of PEX staking rewards promote a positive cycle of the protocol, thereby maintaining platform stability and balance.

3. Improve transparency and fairness: The minting and circulation of PEX and WIN are executed entirely on-chain through smart contracts, ensuring fairness and justice.

Summary

The dual-token economic model of the Phoenix Network is an important component of its decentralized derivatives trading platform. The interaction and impact of the two tokens, PEX and WIN, will jointly promote the development and prosperity of the platform.

PEX serves as a governance Token, supporting the governance and development of the platform, while also acting as a reward mechanism to incentivize users to participate in the platform's construction and growth. WIN, as a contribution value Token, is used to reward those who contribute to user growth for the protocol, and can also serve as a burning mechanism to accelerate the release of PEX staking rewards. Through the interaction of PEX and WIN, economic balance within the protocol is achieved, while also enhancing the platform's transparency and fairness, protecting users' interests and rights.