THE BULL CASE — Why Blast needs Fenix (Part One)
To Blast off, we need Fenix
We’re bullish on Blast, and so is the $460M+ of liquidity that has been deposited in just 6 days.
Key to the future growth of Blast will be to adopt a layer that provides the most revenue for users and uses it to create an effective alignment between liquidity providers (LPs), holders and protocols to drive chain growth.
Fenix is a Solidly-style decentralised exchange (DEX) that takes the most effective systems in DeFi and combines them within a single layer to offer a complete trading and liquidity marketplace for Blast.
How Fenix works can be divided into key two areas:
1. The incentives model aka tokenomics
2. The trading engine that powers the exchange
In part one, we describe an incentives model that sits within an entire financial platform for protocols and users, that is a step forward in accessibility, efficiency, and value creation for the entire Blast ecosystem.
So why is Fenix the most powerful DEX on Blast?
The most effective incentives model for Blast ecosystem growth
Fenix achieves a better alignment between LPs, holders and protocols seeking liquidity.
For years the Curve “ve-tokenomics” model has been the “gold standard” for how a trading and liquidity layer should organise. Every week, veCRV holders vote on which liquidity pools should receive CRV emissions. In return, veCRV holders receive 50% of trading fees and LPs get the other 50%.
Fenix deploys a more effective approach based on a higher amount of fees collected that is distributed to platform stakeholders. LPs receive FNX emissions and veFNX voters get 100% of protocol revenue in trading fees and bribes deposited by protocols. Receiving double the amount of revenue is an improvement in voting yield and puts ecosystem stakeholders at the centre of the incentives framework to drive growth.
Fenix self optimises for Blast ecosystem growth through efficient revenue distribution.
Curve distributes trading fees to voters only based on the amount of veCRV they hold. Someone could vote for a low-volume pool to earn a large bribe or to attract emissions to a pool of interest. This means that there is no mechanism to incentivise voters to choose productive pools. The result is a loss in productivity for the DEX as emissions are being spent on a pool with low trading activity.
Fenix better aligns these actions with the best interests of the protocol by distributing revenue to veFNX voters only from the pool they vote for. In the same situation, the voter is penalised as they would earn less from a low volume pool. This introduces a better balance, where projects must invest by bribing low fee-producing pools to compete with high volume pools, which can sustain high voting APRs without bribes.
Self-sustainability for high-volume pools is important for the Blast business model as it relies on the growth of high volume USDB, ETH and BLAST pools. We’re bullish, so as Blast increases in adoption, so will trading volume on core ecosystem tokens. On Fenix, this will lead to more swap fees, a higher voting APR for veFNX voters, more FNX emissions and increasingly deeper USDB, ETH and BLAST liquidity over time, leading to even more chain adoption and resilience — A flywheel of sorts.
Fenix is a complete DeFi ecosystem under one roof
Taking the best of ve-tokenomics and removing the inefficiency.
To deliver on the promise of a better user experience and efficient marketplace for liquidity, Fenix is eliminating the significant inefficiency, value extraction and complex UX that is typically associated with ve-type DEX models.
Removing the LP Boost
We view the LP boost as an outdated component from the Curve model. The formula itself puts individual users or smaller protocols at a huge disadvantage relative to protocols or whales who can realistically accumulate enough voting power to achieve maximum emissions.
Additionally, Curve-like ecosystems require additional layers to implement a bribe marketplace, auto-compounding, voting delegation and aggregators. Whilst the system can work, this leads to inefficiency and excessive value extraction as each protocol takes their share of fees and makes it difficult for users or protocols to participate effectively.
This is what is at stake for Blast, who have the Thruster (Curve/Balancer) and Hyperlock (Convex/Aura) approach to network growth. By removing the LP Boost, Fenix gives users and protocols who hold veFNX and LPs a much lower barrier to entry to earn maximum revenue.
The Fenix Nest — The entire Curve ecosystem all wrapped up into one
The Fenix Nest will provide a superior liquidity marketplace for protocols on Blast. The Nest provides a voting optimiser, vote delegator, and an auto-compounder that sits within a native bribes marketplace all within one platform.
The Nest can provide native voting delegation that allows any user or protocol to delegate their voting power without losing ownership of their veFNX NFT.
Fenix will offer a passive experience that selects the most optimal voting strategy to collect fees and bribes and that compounds rewards into relocking FNX to maximise voting power over time.
This is a significant improvement in user experience and will maximise revenue for veFNX holders over a system that requires multiple value extractive layers. Furthermore, this efficiency in design encourages more positive-sum outcomes through users and protocols who can compound their voting power and rewards. For these reasons, we believe Fenix is best positioned to be the home for liquidity on Blast.
A model built for FNX token holders
Whilst Fenix provides efficient alignment between veFNX voters and the best interests of the DEX, current Solidly models suffer from a lack of mechanisms that can target the most productive users who lock, relock and vote frequently. To do this, Fenix is introducing a 6 month lock and the zero inflation rebase (ZIR).
A new mechanism to reward active voters
Due to a shorter lock time, max locked veFNX (26 epochs) experiences accelerated decay. This means that if you don’t relock every week, your voting power and revenue will reduce by 4% every epoch.
The image above illustrates that veFNX holders who vote and relock every week are guaranteed to receive a higher voting APR over veFNX lockers who don’t relock and vote. This effect is minimal in locking systems that have long lock periods. Additionally, we expect a shorter lock time to cause no difference in total lock rate given that it was first pioneered by Equal who maintain a high 70%+ lock rate.
A 6 month lock is a significant improvement in incentives for lockers by rewarding the best contributors to the voting ecosystem and encourages consistent relocking.
Making locking more accessible to everyone
In the same way that we have removed the LP Boost which is designed for whales and large protocols only, we believe that a 6 month lock will encourage a wider range of users to hold veFNX. Often those who contribute most to the community are users with the least capital (WAGMI). Also with the the Nest, Fenix is taking away complexity from voting by enabling users to passively compound rewards into veFNX.
The Zero-Inflation Rebase
Fenix will be the first solidly-type DEX to deploy a performance based and non-inflationary rebase model that takes the best from rebasing (dilution protection to encourage more locks) and adds buybacks to make it even better. Revenue from both The RISE Incentives veNFT and native rebasing Blast yield will be used to buy back and lock FNX to be distributed as a lock bonus and as veFNX bribes for voters.
Fenix is targeted to achieve an average rebase rate of 15% and will change according to market conditions (between 10–30%). This model significantly enhances capital efficiency by only rewarding committed lockers and active voters who are providing value to the flywheel with a larger share of governance power over time and ensures that Fenix can focus emissions to LPs to maximise trading liquidity for fee generation.
Buybacks and FNX Deflation
Fenix will deploy the most significant native buyback programme ever seen on a Solidly exchange. Automatically generating buybacks in perpetuity will increase FNX scarcity by removing supply from circulation. Our projections show that relative to a 60% lock rate, Fenix will automatically remove an additional ~30–40% of the projected circulating supply through the Zero Inflation Rebase. This mechanism is a significant step forward for emissions value stability and will strengthen the capacity for Fenix to support a healthy ecosystem long-term.
FNX Market Making
We’re very excited about this one too. Market making is an important and often unseen part of DeFi. Ichi IQ vaults operate to provide price stability whilst ensuring optimal liquidity depth during trading. We are partnering with Ichi who will be deploying their innovative Yield IQ vaults that allows users to deposit liquidity with a single blue-chip asset (USDB for e.g). This means ensuring FNX liquidity is organised in a way to reduce volatility whilst minimising price impact from selling
If the price of FNX decreases, the deposited asset is sold to buy more FNX to support price and reduce volatility. When FNX increases in value, FNX is sold to acquire more of the blue-chip deposit. This is great for users as they will experience less impermanent loss on the deposited blue-chip asset — and generally demonstrates how Ichi creates a “liquidity wall” that enhances ecosystem resilience through FNX price stability.
We’re just getting started
Combined with an efficient and fair incentives model that is most capable of driving productivity and sharing generated value with users — Fenix is poised to be the most effective trading and liquidity marketplace for Blast.
Next up is part two, where we go into depth on the most advanced trading engine for any DEX on Blast.
- Algebra Integral CLAMM which offers dynamic fees to maximise trading volume and hooks and plugins to maximise composability and protocol interoperability
- UNIV2-style vAMM and Soldily Stableswap pools
- The Fenix Liquidity Hub — An on- and off-chain liquidity aggregator that gives the best prices for any token on Blast
- Limit Orders, DCA and automated market making strategies for traders
- A yet undisclosed intent-based perpetuals trading platform
