Phoenix Network log in to Blast L2, launching 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 field of decentralized derivatives.

The Phoenix Network conducted its IDO on May 13 on its official website, and announced the end of the IDO on May 29. In just 15 days, the project reached its IDO hard cap, raising a total of 625 ETH with subscription amounts exceeding 2.4 million USD. Such a strong market response has sparked keen interest in 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 value token $WIN.

Overview of Phoenix Network

Phoenix Network is a decentralized derivatives trading platform built on Blast L2, aimed at providing an efficient, secure, and transparent perpetual trading environment to attract more users to participate in the decentralized financial market and provide incentives and value capture for it. Its dual Token economic model is a core component of the platform.

In the decentralized finance market, the economic model is crucial to 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, driving the rapid growth of the project.

Governance Token PEX

PEX is the protocol governance Token of the Phoenix Network, with a maximum supply of 10 million coins. The main function of PEX is to serve as a voting right for platform governance, and it is also the main value storage point for various revenues of 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, and a 10% minting tax will be charged by the protocol for each minting of PEX.

PEX Token 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 allocated as a minting tax, and 300,000 PEX (90%) were used for IDO distribution and adding 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, subsequent increases in PEX can only be minted through bond sales. By selling LP bonds, the treasury holds all the liquidity of the PEX-ETH trading pool.

The minting tax of PEX is used for the technical development and maintenance of the protocol, community node user rewards, and development funds. Over time, the actual circulation of early PEX will slowly increase, but due to various factors affecting its actual supply, such as the value of treasury assets, the price of PEX, and the profitability of positions in derivative exchanges, it will enter a deflationary phase in the mid to late stages, with its actual circulation far below 10 million coins.

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

circulation of PEX

1. PEX holders can earn staking rewards by staking PEX during the Rebase period: The earnings from PEX staking increase with compound interest in the form of sPEX and can be unstaked at any time, but the compound interest earnings will be released equally over 180 days according to the blocks. The release speed 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 approximately 5% in PEX tokens.

The above are two ways PEX increases circulation, with the increased circulation coming from the national treasury minting.

PEX's destruction and rights

The governance Token PEX is closely related to the derivative exchange PbTrade. The treasury acts as the short-term counterparty for all trades on PbTrade, while PEX serves as the long-term counterparty, giving PEX strong value capture capabilities. In the long run, PEX will be in a deflationary state, and its price performance will also outperform similar products.

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

The ability of a Token pair to capture the value of the project itself determines the success or failure of the project's Token economic design. 25% of the trading fees from the derivatives exchange PbTrade will be returned to PEX stakers, meaning that PEX stakers can earn that portion of the trading fee revenue in addition to their staking rewards.

Many DeFi protocols have a weak correlation between the value of their governance tokens and the protocol itself, leading to poor value capture for governance tokens and suboptimal price performance. However, PEX has effectively avoided this issue.

Contribution Value 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 protocol users, and can also serve as a burning mechanism to accelerate the release of WIN staking rewards.

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

WIN minting and issuance 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 users, and the process of minting WIN will cause the price of WIN to rise.

To earn a high compound interest of 0.2% every 8 hours, PEX stakers need to spend an additional 20% of the staked PEX value (USDB) to mint WIN Tokens. The minted funds 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 the referrer and node users.

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

New WIN minting volume = (coin funds * fund utilization rate) / WIN price WIN price = Total value of USD B vault / WIN circulating supply

Due to the existence of capital utilization rate, the increase speed of the USDB treasury is always higher than the issuance speed of WIN. The larger the issuance of WIN, the faster the increase speed of the USDB treasury. Therefore, minting and issuing WIN will drive the price of WIN higher and higher.

WIN redemption and burn

Users who own WIN can accelerate the release speed of staked PEX earnings by burning WIN. This process will increase the price of WIN as WIN is destroyed, thus accelerating the release of PEX staking earnings.

In addition, users can redeem WIN for USDB from the USDB vault at the real-time price. A 15% redemption tax will be charged for redeeming WIN for USDB, and the redemption tax will remain in the USDB vault. When users redeem WIN, the rate of decrease in the total amount of WIN is higher than the rate of decrease in the USDB vault, therefore the redemption process will also cause the price of WIN to rise.

Therefore, the WIN Token is a model of one-sided continuous increase. In summary: minting WIN, burning WIN, and redeeming WIN for USDB will all cause the price of WIN 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's 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 reinforcing, jointly driving the development and prosperity of the platform. Specifically, there are the following aspects:

1. Injecting 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. Maintain the stability and balance of the platform: 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 the stability and balance of the platform.

3. Increase transparency and fairness: The minting and circulation of PEX and WIN are fully executed on the smart contract chain, 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 influence of the two tokens, PEX and WIN, in the platform economy will jointly promote the development and prosperity of the platform.

PEX serves as a governance Token, providing support for the governance and development of the platform, while also acting as a reward mechanism to incentivize users to participate in the construction and development of the platform. WIN, as a contribution value Token, is used to reward those who contribute to the growth of protocol users, and it 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 transparency and fairness of the platform, protecting users' interests and rights.