Phoenix Network log in Blast L2: Innovative dual Token economic model aids derivatives trading

Recently, the decentralized derivatives protocol Phoenix Network announced its official log in to a certain L2 network and launched a brand new Token and economic model, injecting new vitality into the decentralized derivatives sector.

On May 29, Phoenix Network announced that the first issuance of its PEX Token has ended, reaching the issuance cap within 15 days, raising a total of 625 ETH, with subscription amounts exceeding 2.4 million USD. Such a enthusiastic market response highlights the unique charm of Phoenix Network. This article will detail the dual token economic model of Phoenix Network on the new network, including the governance token $PEX and the contribution value token $WIN.

Phoenix Network Overview

Phoenix Network is a decentralized derivatives trading platform deployed on a certain L2 network, aimed at attracting more users to participate in the decentralized financial market and providing them with incentives and value capture by offering an efficient, secure, and transparent perpetual trading environment. The dual-token economic model of Phoenix Network is an important 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, thus driving the project's rapid growth.

Governance Token PEX

PEX is the protocol governance Token of the Phoenix Network, with a maximum supply of 10 million coins. The main role 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 trading exchange.

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

PEX's 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 the first decentralized issuance, with a total of 333,333 PEX coins. Among them, 33,333 PEX (10%) were designated as minting tax, and 300,000 PEX (90%) were used for the initial issuance and to add initial liquidity. The first issuance price was 0.0025 ETH, the initial online price was 0.0031 ETH, and a fundraising of 625 ETH has been completed.

Except for the PEX minted during the genesis block, the subsequent issuance of PEX can only be minted through bond sales. By selling LP bonds, the treasury holds 100% 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 in derivatives trading, it will enter a deflationary phase in the later stages, with its actual circulation far below 10M coins.

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 can be unstaked at any time, but the compounded earnings cannot be obtained immediately and will be released in equal amounts over 180 days per block. The release speed can be accelerated to a maximum of 30 days by burning WIN.

2. Users can also purchase LP bonds by adding liquidity to the PEX-ETH LP, gaining 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 about 5% in PEX tokens.

The above are two ways PEX increases circulation, and the increased circulation comes from treasury minting.

PEX's destruction and rights

The governance Token PEX has a close relationship with the derivatives trading platform PbTrade. The treasury acts as a short-term counterparty for all transactions on PbTrade, while PEX serves as a long-term counterparty. Therefore, PEX has strong value capture ability. 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 profits from the treasury positions are deposited into the national treasury as reserve funds for minting PEX, while 55% of the profits are used for repurchasing and destroying PEX. The circulation of PEX decreases, and the price rises. In extreme cases, when traders are profitable and the collateral ratio of ETH is less than 100%, the treasury contract activates the reserve fund to mint PEX, which is then sold to fill the gap in the treasury ETH pool.

The ability of a token to capture the value of the project itself determines the success of the project's token economic design, while 25% of the trading fees from the derivatives trading platform PbTrade will be returned to PEX stakers, meaning that PEX stakers can earn a portion of the trading fee revenue in addition to the income from staking itself.

Many decentralized finance protocols have a weak correlation between the governance tokens and the value of the protocols themselves, resulting in poor value capture capability for governance tokens and thus unsatisfactory price performance. However, PEX effectively avoids 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 coins. Its main function is to reward those who contribute to the growth of the protocol's users, and it can also serve as a burning mechanism to accelerate the release of WIN staking rewards.

The WIN genesis phase will issue 1,000,000 coins, which will be used for airdrops and rewards at specific stages. Apart from the WIN issued during the genesis, other WIN will be minted by the protocol, which establishes an initial treasury of 10,000 USDB for WIN.

WIN's minting and issuance increase

WIN is minted by users who stake PEX, and minting will consume USDB. The minted WIN is rewarded to those who contribute to the growth of the protocol's users. 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 compound return of 0.2% every 8 hours. The minted funds will enter 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 $WIN coin utilization rate is a dynamic variable, initially set at 66%. For every increase of 5 million WIN coins, the utilization rate decreases by 2%, with a minimum utilization rate of 50%, which occurs 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 rate, the increase rate of the USDB treasury is always higher than the issuance rate of WIN. The larger the issuance of WIN, the faster the increase rate of the USDB treasury. Therefore, minting and issuing WIN will result in a higher WIN price.

WIN's redemption and burning

Users who hold WIN can accelerate the release speed of staked PEX rewards by burning WIN. Since WIN is destroyed in this process, burning WIN to accelerate the release of PEX staking rewards will cause the price of WIN to rise.

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

Therefore, the WIN Token is a model of unilateral and continuous appreciation. In summary: minting WIN, burning WIN, and redeeming WIN for USDB will continuously drive up the price of WIN. The optimization of the WIN model is an important innovation after the Phoenix Network migration to the new network, and this mechanism will play a crucial role in the protocol 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. The two are interdependent and mutually reinforcing, which will jointly promote the development and prosperity of the platform. Specifically, there are several 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, promoting the development and prosperity of the platform.

2. Maintain the stability and balance of the platform: The reward mechanism for 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. Improve transparency and fairness: The minting and circulation of PEX and WIN are completely executed on the smart contract chain, 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 promote the development and prosperity of the platform.

PEX, as a governance Token, supports the governance and development of the platform, and also serves 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, economic balance within the protocol is achieved, while also enhancing the transparency and fairness of the platform, protecting the interests and rights of users.