Pendle Finance (PENDLE) Coin
Pendle Finance (PENDLE) is a tokenized yield protocol for decentralized finance (DeFi). Launched in June 2021, this system enables flexibility for users by tokenizing the future yields of assets. Pendle Finance introduces two components, the main token (PT) and the yield token (YT), offering users additional strategic options.
While the main token (PT) represents the user's investment, the yield token (YT) symbolizes the future returns of the asset. This allows users to instantly benefit from their asset's yields and develop new investment strategies. Pendle Finance is compatible with Ethereum, Arbitrum, Optimism, and BNB Chain blockchains.
Pendle Finance: How it operates
Yield Tokenization: Pendle Finance leverages the fundamental principle of yield tokenization, providing users with greater flexibility in managing their assets. Users can split yield-generating tokens into two separate parts, the main token and the yield token.
Standard Yield (SY): In the DeFi space, it's possible to use crypto assets in various ways to generate yield. Pendle Finance refers to these yield-generating tokens as "standard yield" (SY).
Main Token (PT) and Yield Token (YT): For instance, if you deposit 100 USDC into Aave and receive 100 aUSDC, with Pendle, your aUSDC can be divided into a main token (representing the base value of your deposit, i.e., $100) and a yield token (representing the future interest you'll generate, i.e., $5 after one year).
New Opportunities: The system allows investors to expose themselves to different scenarios. For example, selling future yields instantly, buying back another user's main token at a discount, or taking on risks without owning the underlying assets are all possible with Pendle Finance.
Pendle Finance has gained popularity, securing over $200 million in total locked value since mid-2023. Additionally, it has expanded its reach by partnering with other DeFi protocols, offering users a wider range of yield strategies.
Automated Market Maker with customization options.
An Automated Market Maker (AMM) is an automated system that functions as a market maker, adjusting prices automatically based on multiple criteria, allowing users to trade assets without the need for an intermediary. While traditional AMMs can be effective, Pendle Finance stands out in an area where standard AMMs fall short by not adequately applying the principles of yield tokens (YT).
In essence, yield tokens (YT) are unique assets with rules that are not related to more conventional tokens. Their values are determined not by investor demand but rather by time, categorizing them as assets that "erode" over time.
Simply put, as the recoverable yields diminish over time, their values will decrease. Recognizing this observation and aiming to create a tool perfectly tailored to user needs, Pendle has developed its own AMM that respects the codes of assets in the "eroding over time" category.The price of the yield token is artificially lowered, breaking the connection with traditional mechanisms and eliminating arbitrage opportunities and loss risks for users.
Although we are discussing Pendle yield tokens here, it's worth noting that assets eroding in value over time are not limited to these tokens. For example, an options contract in financial markets follows the same principles. Therefore, Pendle's AMM could potentially be used to tokenize such assets on the blockchain in the future.
What does PENDLE Coin do?
PENDLE is the native token of Pendle Finance, primarily used for protocol governance and user rewards incentive programs. Users can lock and acquire PENDLE, allowing them to submit governance proposals and vote.
Numerous protocols have been built on Pendle. The goal is to accumulate as much PENDLE as possible through delegation to gain more voting power in governance. By holding PENDLE, users can access increased yields in liquidity pools, reaching up to a 250% boost compared to initial rewards.
Token economics and distribution:
The maximum supply of PENDLE is set at 258,446,028, with approximately 91% of tokens currently in circulation. The distribution has largely been utilized to incentivize liquidity providers.
PENDLE was distributed with an initially inflationary model, but starting from April 2026, the annual inflation rate will decrease to 2%.
Moreover, the distribution weights have changed over time, with an increase in the share of the ecosystem development fund.
This token provides an additional reward by distributing a portion of the returns from the liquidity provider incentive program among PENDLE holders. It's important to note that PENDLE owners share a 3% commission from the returns generated by Pendle's Yield Tokens (YT). Additionally, a percentage of profits from unused Prime Tokens (PT) is distributed proportionally among PENDLE holders.
