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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?

We give users the reins to their yield.

Pendle is a permissionless yield-trading protocol where users can execute various yield-management strategies.

There are 3 main parts to fully understand Pendle:

  1. 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.

  2. 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.

  3. 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)
  • A mix of any of the above strategies, learn more on how to execute these strategies at our Pendle Academy