Phoenix Network launches a new economic model on Blast L2

Recently, Phoenix Network announced its official launch on Blast L2 and introduced a brand new token and economic model, injecting new vitality into the decentralized derivatives track. Phoenix Network started its IDO on May 13 and reached its hard cap in just 15 days, raising 625 ETH, with subscription amounts exceeding 2.4 million USD. What is the appeal of Phoenix Network behind this enthusiastic market response? This article will detail 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 running on Blast L2, designed to provide an efficient, secure, and transparent perpetual trading environment, attracting users to participate in the decentralized finance market and offering corresponding incentives. Its dual-token economic model is a core component of the platform.

In the field of decentralized finance, 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. A good economic model can attract more investors and users, driving rapid project growth.

Governance Token PEX

PEX is the governance token of the Phoenix Network, with a maximum supply of 10 million tokens. PEX is primarily used for platform governance voting and for storing various revenues from the derivative exchange of the protocol.

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

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 allocated as a minting tax, and 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 during the Genesis Minting, subsequent issuance of 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, rewards for community node users, and the development fund. 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 profitability of positions on derivatives exchanges, it will enter a deflationary phase in the later period, with the actual circulation far below 10 million coins.

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

Circulation of PEX

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

The returns from PEX staking increase with compound interest in the form of sPEX and can be unstaked at any time. However, the compounded returns will be released in equal amounts over 180 days, and the release speed can be accelerated to a maximum of 30 days by burning WIN.

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 the full amount, they will receive an additional approximately 5% PEX token reward.

These are two ways for PEX to increase its circulation, with the increased circulation coming from the treasury minting.

Destruction and rights of PEX

PEX is closely related to 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, which gives PEX strong value capture capability. In the long run, PEX is expected to be in a deflationary state, and its price performance is likely to outperform similar products.

Generally, when traders incur losses, 35% of the profits from the treasury position are deposited into the treasury as reserve funds for minting PEX, and 55% is used for repurchasing and burning PEX. This results in a decrease in the circulation of PEX and an increase in price. In extreme cases, when traders are profitable and the ETH collateral ratio is below 100%, the treasury contract will enable reserve fund minting of PEX, which will then be sold to fill the gap in the treasury ETH pool.

25% of the PbTrade transaction fees will be allocated to PEX stakers, so in addition to the profits from staking itself, PEX stakers can also earn this portion of the transaction fee revenue.

Compared to the governance tokens of many DeFi protocols, PEX has a stronger correlation with the value of the protocol itself and better value capture capability, which helps its price performance.

Contribution Value Token WIN

WIN is the protocol contribution value token of the Phoenix Network, with a theoretical maximum supply of 1 billion tokens. Its main use is to reward those who contribute to user growth for the protocol, while also serving as a burning mechanism to accelerate the release of WIN staking rewards.

The WIN Genesis phase will issue 1 million coins for specific stage airdrops and rewards. Apart from the WIN issued during the Genesis, all other WIN is minted by the protocol. The protocol has established an initial fund pool of 10,000 USDB for WIN.

WIN minting increase

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

PEX stakers need to spend an additional 20% of the value of their staked PEX in USDB to mint WIN tokens in order to earn a high compound return of 0.2% every 8 hours. The minting funds go into the USDB treasury, and of the minted WIN, 5% is allocated as a protocol development fund, while 95% is 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 in the total amount of WIN, the usage rate decreases by 2%, with a minimum usage rate of 50% (when the total amount of WIN reaches 40 million).

New WIN minting amount = (Minting funds * Fund utilization rate) / WIN price WIN price = Total value of USDB fund pool / WIN circulating supply

Due to the existence of capital utilization rate, the increase rate of the USDB fund pool is always higher than the issuance rate of WIN. The larger the amount of WIN issued, the faster the USDB fund pool increases; therefore, minting and issuing WIN will lead to a continuous rise in WIN prices.

WIN redemption and burn

WIN holders can accelerate the release speed of PEX staking rewards by burning WIN. Since WIN is destroyed in this process, burning WIN to accelerate the release of PEX staking rewards will lead to an increase in the price of WIN.

In addition, users can redeem WIN for USDB from the USDB fund pool at real-time prices, and a redemption tax of 15% will be charged at the time of redemption, which will remain in the USDB fund pool. The redemption of WIN by users will result in a faster decrease in the total amount of WIN than the decrease in the USDB fund pool, so the redemption process will also lead to an increase in the price of WIN.

Overall, the WIN token is a unidirectional continuous growth model: minting WIN, burning WIN, and redeeming WIN for USDB all lead to a constant increase in the price of WIN. The optimization of the WIN model is an important innovation after the Phoenix Network migration 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 value token WIN play different roles in the economic model of the Phoenix Network (Blast L2). They are interdependent and mutually promoting, jointly driving the development and prosperity of the platform. This is specifically reflected in the following aspects:

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

2. Maintain platform stability and balance: The reward mechanism of WIN and the destruction mechanism that accelerates the release of PEX staking earnings promote a positive cycle of the protocol, maintaining stability and balance in the platform.

3. Improve transparency and fairness: The issuance and circulation of PEX and WIN are fully executed on the blockchain through smart contracts, ensuring fairness and justice.

Summary

The dual-token economic model of 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 drive 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 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 also serves 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, safeguarding users' interests and rights.