What is Phoenix Bonds ?
Founded by the LiNEAR Protocol team, Phoenix Bonds is a principal-protected bonding platform that helps protocols acquire liquidity-bootstrapping and provide perpetually-boosted yield to users.[See Official Documentation]
What is $pNEAR?
$pNEAR is an NEP141 token that is minted when a user executes “claiming” on Phoenix Bonds - that is, when they forgo their bonded $NEAR and claim $pNEAR. The quantity of $pNEAR they can claim depends on their accrued virtual balance of $pNEAR when they claim. $pNEAR is a boosted liquid staking derivatives token used to represent the share of the Reserve.
$pNEAR is backed by the funds in the Reserve. $pNEAR can always be redeemed for a proportional share of the Reserve - that is, x% of the $pNEAR supply redeems for x% of the $NEAR in Reserve.
$pNEAR captures a boosted reward compared to $LiNEAR. As a result, the redemption value of a given amount of $pNEAR will grow faster than the underlying amount of $NEAR would grow if staked in the LiNEAR pool. The redemption price acts as a price floor for the $pNEAR market price.
Why is $pNEAR<>$NEAR the most suitable pair for V2 Pools?
With a CLMM (concentrated liquidity market maker), V2 Pools bring higher capital efficiency for LPs on ref.finance.
For volatile assets, like $NEAR<>$USDT, LPs require a more active presence to improve capital efficiency and avoid being out of price range. According to Uniswap V3, the first DEX that introduced the CLMM, less than half of the LPs that used the CLMM were making a profit compared to holding tokens. So it’s not suitable for LPs who want to generate passive income.
For less volatile assets, like $USDT<>$USDC or $LiNEAR<>$NEAR, the price of the two assets stays relatively constant. Traders are offered deeper liquidity around the mid-price, and LPs are able to earn more trading fees with their capital under less active management. Currently, Ref’s stable pool allows users to interact with less volatile assets.
$pNEAR is a special asset that falls between volatile assets and less volatile assets. $pNEAR’s market price in $NEAR would fluctuate within a predictable band. If $pNEAR’s market price is below the lower band (floor price), the arbitrage bots will pull back the market price instantly. If $pNEAR’s market price has a high premium, the bonders will claim $pNEAR and sell it for $NEAR, and then rebond the $NEAR to accrue more $pNEAR.
LPs who want to make passive income could add liquidity with a price range according to the band without worrying about falling out of the price range.
LPs who want to receive more rewards and are willing to monitor closely , could add liquidity with a narrower price range according to a more predictable price trend.