Phoenix Bonds FAQ
$pNEAR is an NEP141 token that is minted when users forgo their bonded $NEAR to the protocol and claim $pNEAR. The quantity of $pNEAR they can claim depends on their accrued virtual balance of $pNEAR when they claim.
$pNEAR is backed by the funds in the Reserve bucket. $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(returned as the equal value of $LiNEAR).
$pNEAR captures a boosted rewards 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 LiNEAR pool. The redemption price acts as a price floor for the $pNEAR market price.
All of the staking rewards generated by all buckets in the system (Pending, Reserve and Permanent) flows to the Reserve bucket. Since $pNEAR can always be redeemed proportionally for $NEAR in the Reserve bucket, the $pNEAR token captures extra rewards generated by $NEAR that's outside the Reserve, creating an amplified yield.
You will automatically get boosted rewards by simply holding $pNEAR.
There are two ways to obtain $pNEAR:
Fair price of $pNEAR is bounded by two formulas:
Lower bound = (Total $NEAR in protocol - $NEAR in pending bucket ) / $pNEAR supply
Upper bound = Total $NEAR in protocol / $pNEAR supply
Although we expect $pNEAR to trade on the open market at a premium over the redemption price, the canonical mathematical definition of a fair price is yet to be solved.
- $pNEAR APR = (Total $NEAR in protocol * $LiNEAR staking APY) / $NEAR in Reserve
- Yield amplification = Total $NEAR in protocol / $NEAR in Reserve
The $pNEAR supply is fully redeemable and is always backed by the underlying $NEAR in the Reserve.
Economically, burning $pNEAR makes only sense when the market price is below the floor price, but it will be very hard for users to compete with arbitrage bots.