Phoenix Network log in to Blast L2 and launch a new economic model, injecting vitality into the Decentralization derivation field.

Phoenix Network recently announced its official log in to the Blast L2 network and launched a new token and economic model, bringing new vitality to the decentralized derivation track. The project kicked off its IDO on May 13, reaching its hard cap in just 15 days, raising 625 ETH and exceeding $2.4 million in subscriptions, demonstrating strong market response. This article will delve into Phoenix Network's dual-token economic model on Blast L2, including the governance token $PEX and the contribution value token $WIN.

Overview of Phoenix Network

Phoenix Network is a decentralized derivation trading platform deployed on Blast L2, dedicated to providing an efficient, secure, and transparent perpetual trading environment, attracting more users to participate in the decentralized finance market and providing corresponding incentives. Its dual-token economic model is a core component of the platform.

In the field of Decentralization finance, the economic model is crucial for the success of a project. It not only determines the token distribution and incentive mechanisms but also influences the long-term development and market performance of the project. An excellent 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. The main functions of PEX include serving as a voting right for platform governance and as a primary value storage point for various revenues generated by the protocol derivation exchange.

PEX is an asset-backed cryptocurrency, where all PEX are created by the Phoenix treasury at a rate of 1 PEX for every 0.0002 ETH minted. Each time PEX is minted, the protocol will charge a 10% minting tax.

PEX's casting issuance

The issuance 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 coins. Among them, 33,333 PEX (10%) were allocated as 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.

The 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 mint 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 such as the value of treasury assets, the price of PEX, and the profitability of positions on derivation exchanges, it will enter a deflationary phase in the mid to late stages, with the actual circulation far below 10 million coins.

The risk-free value of treasury assets (Treasury-RFV) 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 earnings from PEX staking increase in a compounded manner in the form of sPEX, and the staking can be withdrawn at any time. However, the compounded earnings will be released equally over 180 days according to blocks, and the release speed can be accelerated to a maximum of 30 days by burning WIN.

2. Users can purchase LP bonds by adding liquidity to the PEX-ETH LP, obtaining PEX minted by the treasury. When users purchase LP bonds and fully stake the PEX, 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 treasury minting.

The destruction and rights of PEX

PEX is closely related to the derivation 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 possesses strong value capture capabilities. In the long run, PEX is expected to be in a deflationary state, and its price performance is anticipated to outperform similar products.

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

The value capture ability of PEX for the project itself determines the success or failure of its token economic design. 25% of the trading fees from the derivation exchange PbTrade 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 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 ability of the governance tokens, which in turn affects 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 tokens. Its main function is to reward those who contribute to the growth of the protocol's user base, 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. Other than the WIN issued during the genesis, all other WIN is 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 users, and the process of minting WIN will lead to an increase in 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 earn a high yield of 0.2% compound interest every 8 hours. The minted funds enter the USDB treasury, and of the minted WIN, 5% is allocated as a protocol development fund, while 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 in the total amount of WIN, the usage rate decreases by 2%, with a minimum usage rate of 50% (i.e., 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 treasury / WIN circulation

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

WIN redemption and burning

Users holding WIN 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 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 total amount of WIN decreases at a rate higher than the decrease in the USDB vault, thus the redemption process will also cause the price of WIN to rise.

In summary, the WIN token is a model of unidirectional continuous increase: minting WIN, burning WIN, and redeeming WIN for USDB will all lead to a continuous rise in WIN's price. The optimization of the WIN model is an important innovation after the Phoenix Network migrated to Blast, and this mechanism will play a crucial 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. The two are interdependent and mutually reinforcing, working together to promote the development and prosperity of the platform. This is specifically reflected in the following aspects:

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

2. Maintain 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, maintaining platform stability and balance.

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

Summary

The dual-token economic model of the Phoenix Network is a core component of its decentralized derivation 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 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 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 enhancing the platform's transparency and fairness, protecting users' interests and rights. This innovative dual-token economic model is expected to bring new development opportunities to the field of Decentralization derivation trading.