Phoenix Network log in to Blast L2, launching a new economic model

Recently, a decentralized derivatives protocol announced its official log in to the Blast L2 network and launched a new token and economic model, injecting new vitality into the decentralized derivatives field.

The protocol started its IDO on May 13 and announced the successful conclusion of the IDO on May 29. In just 15 days, the IDO reached its hard cap, raising 625 ETH and exceeding $2.4 million in subscription amounts. What is the allure behind such a booming market response? This article will detail the dual-token economic model of the protocol on Blast L2, including the governance token $PEX and the contribution value token $WIN.

Agreement Overview

This is a decentralized derivatives trading platform based on Blast L2, aimed at attracting more users to participate in decentralized finance markets by providing an efficient, secure, and transparent perpetual trading environment, as well as incentives and value capture. The dual-token economic model on Blast L2 is an important component of the protocol.

In the decentralized finance market, the economic model is crucial to the success of a project. It not only determines the token distribution and incentive mechanisms of the project but also affects the long-term development and market performance of the project. 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 protocol, with a maximum supply of 10 million tokens. The main function of PEX is to serve as a voting right for platform governance, and it is also the primary value storage point for various revenues of the protocol's derivatives exchange.

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

PEX's casting issuance

The issuance and minting process of PEX is closely related to the development history of the protocol. In the early stages of the project, the 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, while 300,000 PEX (90%) were used for distributing the IDO and adding initial liquidity. The IDO price was 0.0025 ETH, and the initial price upon launch was 0.0031 ETH.

Except for the PEX minted by Genesis Minting, 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, user rewards for community nodes, 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 derivative exchanges, it will enter a deflationary phase in the mid to late stages, and its actual circulation will be far below 10 million.

The risk-free value of treasury assets ( Treasury-RFV ) (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 are compounded in the form of sPEX and can be unstaked at any time. However, the compounded returns cannot be obtained immediately and will be released in equal amounts over 180 days according to the blocks. By burning WIN, the release speed can be accelerated to a maximum of 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 fully stake their PEX, they will receive an additional reward of approximately 5% in PEX tokens.

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

PEX's destruction and equity

The governance token PEX has a close relationship with derivatives exchanges. The treasury acts as the short-term counterparty for all transactions on the exchange, while PEX serves as the long-term counterparty. Therefore, PEX has a strong ability to capture value. Over the long term, PEX will be in a deflationary state, and its price performance will also outperform similar products.

In most cases, traders incur losses, with 35% of the vault positions' profits deposited into the treasury as reserve for minting PEX, and 55% used for repurchasing and destroying PEX. The circulation of PEX decreases, and the price rises. In extreme cases, when traders profit and the collateral rate of ETH is less than 100%, the treasury contract will enable the reserve to mint PEX, which will then be sold to fill the gap in the treasury's ETH pool.

The value capture ability of tokens for the project itself determines the success of the tokenomics design of that project. 25% of the trading fees from the derivatives exchange will be returned to PEX stakers, meaning that PEX stakers can earn not only from staking itself but also from this portion of trading fee revenue.

Many DeFi protocols have a weak correlation between the value of their governance tokens and the protocols themselves, resulting in poor value capture ability for governance tokens and unsatisfactory price performance. However, PEX has effectively avoided this issue.

Contribution Value Token WIN

WIN is the contribution value token of the protocol, with a theoretical maximum supply of 1 billion tokens. Its main function 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.

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

WIN's minting increase

WIN is minted by users who stake PEX, and the minting 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 cause the price of WIN to rise.

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

The usage rate of WIN mining funds is a dynamic variable, initially set at 66%. For every increase of 5 million coins in the total amount of WIN, the usage rate decreases by 2%, with a minimum usage rate of 50%, which occurs when the total amount of WIN reaches 40 million coins.

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

Due to the existence of capital utilization rates, the increase in the USDB treasury will always be faster than the rate of WIN issuance. The larger the amount of WIN issued, the faster the USDB treasury increases, therefore minting and issuing WIN will cause the price of WIN to rise increasingly.

WIN redemption and burning

Users who own WIN can accelerate the release speed of staking PEX rewards by burning WIN. This process destroys WIN, and thus burning WIN to accelerate the release of PEX staking rewards will lead to an increase in WIN's price.

In addition, users can redeem WIN for USDB from the USDB vault at real-time prices. Redeeming WIN for USDB will incur a 15% redemption tax, which will remain in the USDB vault. When users redeem WIN, the total amount of WIN decreases at a faster rate than the decrease in the USDB vault, thus the redemption process will also cause the price of WIN to rise.

Therefore, the WIN token is a model of unidirectional continuous increase. In summary: minting WIN, burning WIN, and redeeming WIN for USDB will all cause the price of WIN to continually rise. The optimization of the WIN model is an important innovation following the migration of the protocol to Blast, and this mechanism will play a significant role in the launch of the protocol 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 protocol, with both being interdependent and mutually reinforcing, which will jointly promote the development and prosperity of the platform. Specifically, there are the following 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 protocol treasury, 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 yields promote a positive cycle of the protocol, thereby maintaining the stability and balance of the platform.

3. Increase transparency and fairness: The minting and circulation of PEX and WIN are fully executed on-chain via smart contracts, ensuring fairness.

Summary

The dual-token economic model of this protocol is an important component of its decentralized derivatives trading platform. The interaction and impact of the two tokens, PEX and WIN, will together 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 the protocol's users, and it 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.