Pendle Finance

22 Jun 2024

Pendle Finance is a decentralized finance (DeFi) protocol that enables the trading of future yield. By separating ownership of an asset from the yield it generates, Pendle allows users to express their views on yield rates through trading. Let’s delve into the details:

  • Tokenization of Yield:Pendle tokenizes yield-bearing assets (such as cDAI, stETH) into two components: PT (Principal Token) and YT (Yield Token).
    • PT represents ownership of the principal amount, which can be redeemed at maturity. For example, holding 1 PT-stETH means you can redeem 1 ETH worth of stETH after a year.
    • YT represents the current yield generated by the underlying asset. If you hold 1 YT-stETH and stETH’s yield rate is 5%, your YT token will accumulate 0.05 stETH over a year.
    • Liquidity Mining for Rewards:Users can provide liquidity by depositing assets into Pendle pools.
    • Pendle pools are designed for single-sided liquidity provision (PT/SY).
    • The relationship between PT and YT allows for lightning-fast exchanges within the PT/SY pool.
    • Yield Trading:Users can express their views on future yield rates:Bullish on yield: Buy YT tokens.
    • Bearish on yield: Hold PT or sell YT.
    • Pendle provides an underlying APY reference for users to compare with implied APY (market-traded yield).
    • vePendle and Ecosystem:vePendle represents a stake in the protocol.
      • Locking $PENDLE tokens yields benefits:Boosted rewards for providing liquidity.
    • Voting power to allocate liquidity rewards.
    • Users can earn at their convenience based on their vePendle holdings.

Pendle’s simplicity, innovative yield tokenization, and integration with vePendle make it an intriguing DeFi protocol. Keep an eye on its growth and evolving ecosystem.

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