#BuiltOnNEAR Twitter Space Recap: Phoenix Bonds
LiNEAR Protocol recently launched its newest DeFi product Phoenix Bonds, which provides an alternative option for NEAR users to bootstrap liquidity at minimal cost. In just a short time, the TVL of Phoenix Bonds has already reached over USD 1.6 million, with an APY of about 300%.
In our most recent #BuiltOnNEAR Twitter Space series, we invited Stanley He, Core Contributor of LiNEAR/Phoenix to tell us more about the idea behind Phoenix Bonds and how NEAR users can make use of it to amplify yields. You can listen to the full recording here:
What is Phoenix Bonds?
Phoenix Bonds is a unique bond mechanism built upon LiNEAR Protocol that protects users’ principal while amplifying yields perpetually. The yields from Phoenix bonds come from liquid staking on LiNEAR Protocol, creating the boosted yields for Phoenix Bonds users. The TVL you see from Phoenix Bonds also reflects the same TVL on LiNEAR. Therefore, it also helps bring in a higher TVL for the entire NEAR ecosystem.
What inspired the LiNEAR team to develop a new bonding mechanism on NEAR?
We have been going through a challenging time in the crypto space, and during bear markets, we see a big drop in DeFi activity, and everyone is trying to look for more reliable and stable alternatives to earn yields. We are hoping to develop a “safe game” for NEAR users to achieve yield amplification.
We hope to make use of LiNEAR Protocol to bring this ingenious bonding mechanism to NEAR blockchain, in order to provide a safer solution for NEAR users to amplified yield, and also increase the TVL for LiNEAR Protocol and NEAR in general.
Can you explain the core mechanism of Phoenix Bond, and how does Phoenix Bonds create such a high yield?
In short, Phoenix Bonds is just a group of people pooling yields from their assets, where everyone tries to capture more of the yields. If you enter the game at the right time, other people’s opportunity cost will turn into your amplified yield, perpetually.
Phoenix Bonds operates a treasury consisting of three parts: Pending Bucket, Reserve Bucket and Permanent Bucket. Users bond $NEAR to the Pending Bucket to create a bond. All $NEAR tokens in Phoenix Bonds are staked in LiNEAR Protocol to generate staking rewards. The rewards earned by the Pending and Permanent Bucket flow to the Reserve Bucket. $pNEAR represents the ownership of Reserve Bucket shares, currently the reserve bucket is really small with only 18 bonds claimed. Therefore, we can see a huge yield amplification of 33 times. The floor price of $pNEAR will continue to appreciate against $NEAR.
Read this article to learn more about the core mechanism of Phoenix Bonds:
What is the underlying value and benefits of holding $pNEAR?
$pNEAR is just like an amplified $LiNEAR token. Reserve Bucket is constantly receiving staking yields from Pending Bucket and Permanent Bucket, and $pNEAR represents your ownership in Reserve Bucket shares. The floor price of $pNEAR will continue to appreciate against $LiNEAR. Remember that the market price of $pNEAR fluctuates, which will affect the time needed to reach break-even, and thus your profit. But you can always recover your bonded $NEAR before claiming $pNEAR. Just take your time and you won’t lose your initial principal at all.
Also due to the current high APY of $pNEAR, its floor price will grow very fast, which means a claimed bond that’s not in profit today, is likely to become profitable after a period of time, since $pNEAR appreciates.
What makes Phoenix Bonds special when compared with other DeFi products?
With the implementation of NEAR’s Proof-of-Stake, Phoenix Bonds provide users with a DeFi product that enables principal-protected amplified yield for end-users. Being built on LiNEAR Protocol, Phoenix Bonds also allows greater degree of decentralization of staked value on the NEAR network.
Here’re the three competitive advantages of Phoenix Bonds:
1. Principal protection
2. Perpetually amplified yield
3. Accumulating protocol-owned liquidity
In the past two years, we witnessed the ups and downs of DeFi and there’re a lot of bad actors in the space. Are you confident to say that Phoenix Bonds is not a Ponzi?
Phoenix Bonds is operated through a self-sufficient flywheel, and the yield amplification is not only dependent on new users joining. It’s also principal-protected. Users can withdraw the bonded $NEAR any time and reclaim the amount invested.
In theory, the only cost involved in participating in Phoenix Bonds is the opportunity cost where users that decide to cancel their bonds only get back their principal but not the yield.
The Permanent Bucket is important, because it guarantees amplified yields for $pNEAR even when the Pending Bucket is empty, which incentivizes people to purchase $pNEAR on the secondary market, pushing the price of $pNEAR higher, making bonding more profitable.
In your latest blog post, we see that Phoenix Bonds can operate as a kind of game with different strategies. How can users maximize profit when they participate in Phoenix Bonds?
Phoenix Bonds’ product design has incorporated Game Theory; you can adopt different strategies and realize profits in different ways, such as a bonder, trader or liquidity provider.
1. Bond strategy — If you are a NEAR holder and want a risk-free yield, you can bond your $NEAR on Phoenix Bonds and start accumulating $pNEAR. The floor price of $pNEAR will always increase as the yield comes from NEAR’s staking rewards. You can choose to accumulate more $pNEAR, claim & sell your $pNEAR, or claim & hold your $pNEAR. If you want to compound your gains, you can also sell $pNEAR for $NEAR, and rebond $NEAR.
2. Trading Strategy — If you are the trader type, you can arbitrage between $pNEAR and $NEAR. As the floor price of $pNEAR is supported by the price of NEAR, the risk is rather limited and with high profitability potential.
3. Liquidity Provision — If you are a farmer, you can provide $NEAR/$pNEAR liquidity, and earn trading fees and farming incentives. As $pNEAR floor price is supported by $NEAR, the impermanent loss would be contained. Ref Finance launched the $NEAR/$pNEAR trading pair yesterday that allows Phoenix Bonds users to participate in liquidity mining to earn trading fees and liquidity incentives.
For more details on Phoenix Bonds’ Guide and Strategies, please read:
Are there any partnership or collaboration plans for Phoenix Bonds ?
Yes. Recently we worked with Ref Finance to launch the $NEAR/$pNEAR trading pair to enable liquidity mining. We are now actively looking for different projects to integrate with Phoenix Bonds, and we will also work with other major yield bearing assets on NEAR. So stay tuned!
Any last reminder or tips for users who want to participate in Phoenix Bonds?
We are still very early and more users are coming in. If your bond still hasn’t reached the break-even point, there’s no need to rush. Give it a couple more days or weeks to accrue more $pNEAR. Always keep an eye on the market price, and look at other opportunities on Phoenix Bonds such as liquidity provision and trading. There can be a mix of strategies you can take.
Disclaimer: Nothing in this blog constitutes investment advice, performance data or a recommendation for any individual.
About Phoenix Bonds
Developed by LiNEAR Protocol, Phoenix Bonds is a novel bonding mechanism that enables principal-protected amplified yield for end-users. Compared to the current ~10% average APY from $NEAR staking and liquid staking protocols, Phoenix Bonds can possibly amplify the yields potentially tenfold or even more.
Please follow the LiNEAR-Phoenix Bond Twitter account to get the latest updates.
