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Introduction to Pendle

Pendle is a DeFi yield-trading protocol with a native AMM, currently built on the Ethereum and Avalanche blockchains, where users can obtain fixed yield or compounded yield exposure on yield-bearing assets.

What does Pendle do?

We give owners of yield-bearing assets the reigns to their yield. By splitting yield-bearing assets into tokenized ownership and yield components, limitless yield-trading possibilities are unlocked, increasing the versatility and profit-making potential of the assets.

Pendle creates the opportunity to generate additional yield and to lock in future yield upfront, while offering traders direct exposure to future yield streams, without the need for underlying collateral.

Yield-bearing assets are crypto tokens which generate yield.

Examples of yield-bearing assets are [ETH/USDC] SLP, aUSDC, and xJOE. $ETH, $USDC, and $JOE are not yield-bearing assets.

Pendle exists on top of first-degree yield-generating protocols. We currently support Aave, Compound, Sushi, and Redacted Cartel on Ethereum, and TraderJoe and Benqi on Avalanche, with more protocols to be integrated in the future.

How does Pendle work?

There are three components that make up Pendle's system:

  1. Tokenization of Yield
  2. Pendle's Automated Market Maker (AMM)
  3. Governance - coming soon

Users can deposit yield-generating assets into Pendle and mint Ownership Tokens (OT) and Yield Tokens (YT). OT represents ownership of the underlying asset, while YT represents entitlement to the yield of the asset.

In TradFi, what Pendle does is similar to bond stripping. The principal and interest of bonds are separated, so OTs are equivalent to zero-coupon bonds, while YTs are the detached coupons.

Users can then trade asset yield by swapping YT on Pendle's native AMM or trading OT on SushiSwap on Ethereum and TraderJoe on Avalanche.

Users can also deposit OT and YT in liquidity pools in return for swap fees and $PENDLE incentives.