Phoenix Network launches an innovative dual Token model on Blast L2

Recently, the decentralized derivatives protocol Phoenix Network announced its official launch on Blast L2, introducing a brand new Token and economic model to inject new vitality into the decentralized derivatives space.

The Phoenix Network launched its IDO on May 13 and announced the successful conclusion of the IDO on May 29. In just 15 days, the project reached the IDO hard cap, raising 625 ETH, with subscription amounts exceeding 2.4 million USD. Such a hot market response has sparked great interest in the Phoenix Network. This article will provide a detailed introduction to the dual-token economic model of the 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 built on Blast L2, aimed at attracting more users to participate in the decentralized financial market by providing an efficient, secure, and transparent perpetual trading environment, along with incentives and value capture. 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 to the success of a project. It not only determines the project's Token distribution and incentive mechanisms but also affects the project's long-term development and market performance. An excellent economic model can attract more investors and users, thereby driving 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 pieces. 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 created by the Phoenix treasury at a ratio of 1 PEX for 0.0002 ETH. Each time PEX is minted, the protocol will charge a 10% minting tax.

PEX Minting and Issuance

The issuance and minting process of PEX is closely related to the development history 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 minting tax, while 300,000 PEX (90%) were used 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 at the Genesis Forge, subsequent PEX issuance can only be minted through bond sales. By selling LP bonds, the treasury will hold 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 gradually increase, but due to various factors such as the value of treasury assets, the price of PEX, and the profits from positions on derivative exchanges, it will enter a deflationary phase in the later stage, with its actual circulation far below 10 million coins.

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

Circulation of PEX

1. PEX holders can earn staking rewards by staking PEX during the Rebase period:

The收益 from PEX staking increases in a compound interest form of sPEX and can be unstaked at any time, but the compound interest收益 cannot be obtained immediately and will be released in equal amounts over 180 days according to the blocks. Users can accelerate its release speed by burning WIN, which can be shortened to as fast as 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 and stake PEX in full, they will receive an additional reward of approximately 5% in PEX tokens.

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

PEX's destruction and rights

The governance token PEX has a close relationship with the derivatives exchange PbTrade. The treasury acts as the short-term counterparty for all trades on PbTrade, while PEX serves as the long-term counterparty, thereby granting PEX strong value capture ability. In the long run, PEX is expected to be in a deflationary state, and its price performance is also anticipated to outperform similar products.

In most cases, when traders incur losses, 35% of the profits from the treasury position will be deposited into the treasury as reserve funds for minting PEX, and 55% will be used to repurchase and burn PEX. This will lead to a decrease in the circulation of PEX and an increase in price. In extreme cases, when traders make a profit and the collateral ratio of ETH is below 100%, the treasury contract will enable the reserve fund to mint 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 of the tokenomics design of that project. In the Phoenix Network, 25% of the trading fees from the derivatives exchange PbTrade will be returned to PEX stakers. This means that PEX stakers can earn not only from the staking itself but also from this portion of the trading fee revenue.

Many DeFi protocols have governance Tokens that are weakly correlated with the value of the protocol itself, resulting in poor value capture for the governance Tokens and subsequently affecting 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 1 billion pieces. Its main purpose is 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 WIN staking rewards.

During the genesis phase, WIN will issue 1 million tokens for specific phases of airdrops and rewards. Apart from the WIN issued during the genesis, other WIN will be minted by the protocol. The protocol has established an initial treasury of 10,000 USDB for WIN.

WIN's minting and issuance increase

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

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

The utilization rate of WIN minting funds is a dynamic variable, initially set at 66%. For every increase of 5 million WIN tokens, the utilization rate decreases by 2%, with a minimum utilization rate of 50% (i.e., when the total amount of WIN reaches 40 million tokens).

New WIN Minting Volume = (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 speed of WIN issuance. The larger the amount of WIN issued, the faster the USDB treasury increases, therefore minting and issuing WIN will continuously raise the price of WIN.

WIN Redemption and Burning

Users who own WIN can accelerate the release speed of staked PEX earnings by burning WIN. In this process, since WIN is destroyed, burning WIN to accelerate the release of PEX staking earnings will cause the price of WIN to rise.

In addition, users can redeem WIN for USDB from the USDB treasury at real-time prices. A redemption tax of 15% will be charged for redeeming WIN for USDB, and the redemption tax will remain in the USDB treasury. When users redeem WIN, the total supply of WIN decreases at a faster rate than the decrease in the USDB treasury, thus the redemption process will also lead to an increase in the price of WIN.

Therefore, the WIN Token is a model of one-sided continuous appreciation. In summary, minting WIN, burning WIN, and redeeming WIN for USDB will all cause the price of WIN to keep rising. 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). They are interdependent and mutually reinforcing, and will together promote the development and prosperity of the platform. Specifically, there are several 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 earnings promote a positive cycle of the protocol, thereby maintaining the stability and balance of the platform.

3. Improve 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, will jointly promote the development and prosperity of the platform.

PEX serves as a governance Token, providing support for the platform's governance and development, 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 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, the Phoenix Network achieves economic balance within the protocol, while also enhancing the platform's transparency and fairness, protecting users' interests and rights.