Pendle Finance (PENDLE) – introduction. Here are the features of this ecosystem and direct access to its website.
Pendle is a permissionless yield-trading protocol where users can execute various yield-management strategies.
If you’ve been keeping up with DeFi news, you’ll certainly appreciate the advantages of this protocol.
Discover the advantages of the PENDLE Finance ecosystem.
PENDLE – introduction:
Pendle Finance is a tokenized returns protocol opening up new perspectives for decentralized finance (DeFi). Launched in June 2021, it is based on a mechanism for tokenizing an asset’s future returns, allowing users to dispose of them as they see fit and unlock new investment strategies.
With Pendle, you can always maximise your yield: increase your yield exposure in bull markets and hedge against yield downturns during bear markets.
Here’s how it’s done:
There are 3 main parts to fully understand Pendle:
- Yield Tokenization: First, Pendle wrap yield-bearing tokens into SY(standardized yield tokens), which is a wrapped version of the underlying yield-bearing token that is compatible with the Pendle AMM (e.g. stETH → SY-stETH). SY is then split into its principal and yield components, PT (principal token) and YT (yield token) respectively, this process is termed as yield-tokenization, where the yield is tokenized into a separate token.
- Pendle AMM: Both PT and YT can be traded via Pendle’s AMM. Even though this is the core engine of Pendle, understanding of the AMM is not required to trade PT and YT.
- vePENDLE: As a yield derivative protocol, we are bringing the TradFi interest derivative market (worth over $400T in notional value) into DeFi, making it accessible to all.
By creating a yield market in DeFi, Pendle unlocks the full potential of yield, enabling users to execute advanced yield strategies, such as:
Fixed yield (e.g. earn fixed yield on stETH)
Long yield (e.g. bet on stETH yield going up by purchasing more yield)
Earn more yield without additional risks (e.g. provide liquidity with your stETH)
In other words, Pendle Finance enables users of decentralized finance to develop new strategies.
How does this protocol work?
Yield tokenization
The fundamental principle underpinning this ecosystem is yield tokenization. To understand what this means, let’s go back to the fundamentals of decentralized finance. In this world, cryptocurrencies can be made to work to generate returns in a variety of ways.
For example, when you deposit 100 USDC on Aave, you receive 100 aUSDC. While your USDC doesn’t carry a return, the aUSDC does. Within Pendle Finance, these famous yield-bearing tokens are known as « standard yield » (SY).
Based on this definition, this project proposes to go a step further by separating the yield-bearing token into two distinct pieces: the token deposited by the user and the future yield it is expected to generate. The first is called the Principal Token (PT) and the second the Yield Token (YT).
This breakthrough offered by Pendle Finance opens up new possibilities for investors, who can now gain exposure to the mechanisms of decentralized finance in a variety of ways. For example, it is possible to deposit a yield-bearing asset (SY) on Pendle Finance and instantly sell the future yield (YT), betting on the fact that it will decrease over time.
Summary:
In summary, the PENDLE token is the native utility token of the Pendle protocol. It plays a crucial role in governance, allowing token holders to vote on key decisions such as protocol updates and parameter adjustments.
Additionally, Pendle enables the division of each yield-bearing token into two components:
The YT (Yield Token) represents the token’s yields.
The PT (Principal Token) represents the underlying asset. Conversely, it is possible to associate the PT and YT at any time to obtain the corresponding token. In summary, Pendle facilitates the tokenization and trading of future yield returns.
In conclusion, it’s fair to say that since its launch, this ecosystem has gone from strength to strength. It currently has a total locked-in value (TVL) of over $200 million, as of mid-2023.
The platform has also partnered with several other leading DeFi protocols, such as Aave and Curve, to extend its reach and offer users more options when it comes to return strategy.
In terms of its deployment, this ecosystem is compatible with the Ethereum, Arbitrum, Optismism and BNB Chain blockchains.
Want to find out more?
Direct access to the official website
