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Introduction to Pendle

How much will you earn from lending 1,000 USDC on Aave? 1%? 3%? 5%?

Truth is, you can't say for sure. Yield fluctuates just like token prices. It tends to go up in bull markets, and go down in bear markets, and there are further micro-factors that cause fluctuations within those general market trends.

Compound historical yield charts
Compound historical yield charts from The Block Crypto

With Pendle, you can always maximise your yield: increase your yield exposure in bull markets and hedge against yield downturns during bear markets.

What does Pendle do?‚Äč

We give users the reins to their yield.

Pendle is a permissionless DeFi yield-trading protocol, currently built on the Ethereum blockchain, where users can execute various yield management strategies.

We first wrap yield-bearing tokens into SY(standardized yield tokens). Then, SY is split into their principal and yield components, PT (principal token) and YT (yield token) respectively, which allows them to be traded via the custom V2 AMM.

This brings the TradFi interest derivative market (worth over $400T in notional value) into DeFi, making it accessible to all. PT is the equivalent of zero-coupon bonds while YT is the equivalent of coupon payments.

By creating a yield market in DeFi, Pendle unlocks the full potential of yield. Pendle enables users to execute advanced yield strategies, such as:

  • Long assets at a discount
  • Fixed yield for low-risk, stable growth
  • Leverage exposure to future yield streams without the need for collateral
  • A mix of any of the above strategies