Recently, Phoenix Network, a long-established decentralized derivatives protocol, announced its official launch on Blast L2 and launched a new token and economic model, which will undoubtedly add new vitality to the decentralized derivatives track.
Earlier news, Phoenix Network announced that it would conduct an IDO on its official website on May 13. On May 29, Phoenix Network tweeted that its PEX token IDO had ended, reaching the IDO hard cap in 15 days, raising a total of 625 ETH, with a subscription amount of more than 2.4 million US dollars. With such a hot market sentiment, what is the charm of Phoenix Network? This article will introduce the dual-token economic model of Phoenix Network (Blast L2) in detail, including the governance token $PEX and the contribution token $WIN.
Phoenix Network Overview
Phoenix Network is a decentralized derivatives trading platform built on Blast L2. It aims to attract more users to participate in the decentralized financial market and provide incentives and value capture by providing an efficient, secure and transparent perpetual trading environment. The dual-token economic model of Phoenix Network (Blast L2) is an important component of it.
In the decentralized financial market, the economic model is crucial to the success of a project. It not only determines the project's token distribution and incentive mechanism, but also affects the project's long-term development and market performance. A good economic model can attract more investors and users, thereby promoting the rapid development of the project.
Governance Token PEX
PEX is the protocol governance token of Phoenix Network, with a maximum supply of 10M pieces. One of the main functions of PEX is to serve as a voting right for platform governance. Another important role of PEX is to serve as the main value storage point for various revenues of protocol derivatives exchanges.
$PEX is an asset reserve cryptocurrency. All $PEX are minted by the Phoenix Treasury at 0.0002ETH per PEX. The protocol will charge a 10% seigniorage for each minting $PEX.
- Minting and issuance of PEX
The issuance and minting process of PEX is closely related to the development of Phoenix Network. In the early stage of the project, the creation minting was carried out through IDO (Initial Decentralized Offering), with a quantity of 333,333 PEX. Among them, 33,333 PEX (10%) was used as minting tax, and 300,000 PEX (90%) was used to issue IDO and add initial liquidity. The IDO price was 0.0025ETH, and the initial price was 0.0031ETH. IDO has completed the fundraising of 625ETH.
In addition to the PEX minted at the genesis, the subsequent PEX can only be minted through bond sales. By selling LP bonds, the treasury holds 100% of the liquidity of the PEX-ETH trading pool.
The seigniorage 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 PEX will slowly increase in the early stage, but because its actual supply is affected by many factors such as the value of treasury assets, PEX prices, and position profits of derivatives exchanges, it will enter a deflationary stage in the middle and late stages, and its actual circulation will be far less than 10M pieces.
The risk-free value (Treasury-RFV) of treasury assets (measured in ETH) determines the upper limit of PEX minting. The formula is:
- Circulation of PEX
1. PEX holders can obtain staking income by staking PEX according to the Rebase cycle:
The income from PEX staking is compounded in the form of sPEX and can be unstaked at any time, but its compound interest income cannot be obtained immediately. Instead, it will be released in equal amounts per block within 180 days. The release speed can be accelerated to as fast as 30 days by burning WIN.
2. Users can also purchase LP bonds by adding PEX-ETH LP liquidity and obtain PEX minted by the treasury. When users purchase LP bonds to obtain PEX and pledge the full amount, they will receive an additional 5% of PEX token rewards.
The above are two ways to increase the circulation of PEX, and the increased circulation comes from treasury minting.
- PEX Destruction and Equity
Governance Token PEX and Derivatives Exchange PbTrade There is a close relationship between them. The vault is the short-term counterparty of all transactions on PbTrade, while PEX is the long-term counterparty. Therefore, PEX has a strong ability to capture value. In the long run, PEX will be in a deflationary state, and the price performance of PEX will also be better than similar products.
In most cases, traders lose money, and 35% of the profit of the treasury position is deposited into the treasury as a reserve for minting PEX, and 55% of the profit of the treasury position is used to repurchase and destroy PEX. The circulation of PEX decreases and the price rises. In extreme cases, when traders make a profit and the mortgage rate of ETH is less than 100%, the treasury contract activates the reserve to mint PEX, and then sells it to fill the gap in the treasury ETH pool.
The ability of the token to capture the value of the project itself determines the success of the project's token economic design, and 25% of the transaction fees of the derivatives exchange PbTrade will be fed back to PEX pledgers, that is, PEX pledgers can obtain this part of the transaction fee income in addition to the staking income themselves.
The governance tokens of many DeFi protocols have a weak correlation with the value of the protocols themselves, and the governance tokens have poor value capture capabilities, so their price performance is not ideal, but PEX can easily circumvent this problem.
Contribution value token WIN
WIN is the protocol contribution token of Phoenix Network, with a theoretical maximum supply of 1 billion. Its main function is to reward those who contribute to the growth of protocol users. It can also be used as a burning mechanism to accelerate the release of WIN staking income.
1,000,000 WIN will be issued in the Genesis phase, which will be used for airdrops and rewards in specific phases. Except for the WIN issued in the Genesis phase, all other WIN will be minted by the protocol, and the protocol will establish an initial treasury of 10,000 USDB for WIN.
- WIN Minting and Additional Issuance
WIN is minted by users who pledge PEX. Minting will consume USDB. The minted WIN is rewarded to those who contribute to the growth of protocol users. The process of minting WIN will cause the price of WIN to rise.
In order to obtain a high compound interest rate of 0.2% every 8 hours, PEX stakers need to spend an additional 20% (USDB) of the value of the staked PEX to mint WIN tokens. The minting funds will go into the USDB treasury. 5% of the minted WIN will be used as a protocol development fund, and the remaining 95% will be rewarded to the inviter and node users.
$WIN coin usage ratio is a dynamic variable, which is initially 66%. For every 5 million increase in the total amount of WIN, the usage ratio decreases by 2%. The minimum usage ratio is 50%, which is when the total amount of WIN reaches 40 million.
New WIN minting amount = (minting funds ∗ fund utilization rate) / WIN price
WIN price = USDB vault total value / WIN circulation
Due to the existence of fund utilization rate, the rate of increase of USDB vault is always higher than the rate of increase of WIN. The larger the increase of WIN, the faster the increase of USDB vault. Therefore, the minting and issuance of WIN will make the price of WIN higher and higher.
- WIN Redemption and Burning
Users who own WIN can accelerate the release of PEX pledged income by burning WIN. Since WIN is destroyed in this process, burning WIN accelerates the release of PEX pledged income, which will cause the price of WIN to rise.
In addition, users can also redeem WIN from USDB vault at real-time prices. WIN redemption for USDB will be subject to a 15% redemption tax, which will remain in the USDB vault. When users redeem WIN, the total amount of WIN decreases faster than the USDB vault, so the redemption process will also increase the price of WIN.
Therefore, the WIN token is a unilateral and continuous rising model. To sum up, minting WIN, burning WIN, and redeeming WIN for USDB will all cause the WIN price to continue to rise. The optimization of the WIN model is an important innovation after Phoenix Network migrated to Blast. This mechanism will play an important role in the launch of the protocol 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 Phoenix Network (Blast L2). The two are interdependent and mutually reinforcing, and will jointly promote 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, and promote 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 income promote the 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 completely executed on the smart contract chain, which is fair and just.
summary
Phoenix Network’s dual-token economic model is an important part 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.
As a governance token, PEX provides support for the governance and development of the platform, and also serves as a reward mechanism to encourage 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 can also be used as a burning mechanism to accelerate the release of PEX staking income. Through the interaction between PEX and WIN, the economic balance within the protocol is achieved, while also improving the transparency and fairness of the platform and protecting the interests and rights of users.
