Pendle

Yield Aggregator

Pendle is a novel protocol that enables the tokenization and trading of future yield via an automated market maker (AMM) design.

Risk Rating
Good
Protocol Code Quality
Protocol Maturity
Protocol Design
Summary
What we like
Pendle is a novel DeFi protocol that enables users to bet on future yields through the tokenization of yield-generating assets.
What we like less
The protocol is still transitioning to full decentralization via governance. It is currently controlled by a 2/4 multisig.
What it means for you
Offers you a way to sell your current yield to lock in a fixed amount and/or buy crypto assets at a discount.

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Information
Exploit/Hacks
None
Info
  • Website
  • Token: PENDLE
  • Tags: Yield Aggregator
Key Metrics
  • TVL: $3.8B (Rank #8)
  • TVL Ranking by Yield Aggregator: #0
  • Blockchain: Ethereum, Arbitrum, Mantle, Binance, Optimism, Avalanche
  • Chain TVL
    • Ethereum: $3.44B
    • Arbitrum: $271.91M
    • Mantle: $108.09M
    • Binance: $3.24M
    • Optimism: $590.5K
    • Others: $70.12K
Risk Assessment
Good
Protocol Code Quality
  • Code reviewed by several experienced auditors; Dedaub and ackee
  • Public team promotes accountability
  • No documented protocol hacks since launch
Protocol Maturity
  • Latest protocol version launched in 2022; maturity over one year minimizes technical risk as smart contracts are well battle-tested
  • Top 5% by total value locked reduces risk
  • Multisig wallet controls protocol upgrades
  • Multisig consists of less than 4 signers, which makes the protocol more susceptible to centralization risks
  • No timelock exists or no information documented, which mean a malicious actor could approve upgrades without any delay
  • Low voting power concentration reduces risk
Protocol Design
  • No death spiral concerns
  • This protocol is susceptible to risks related to yield optimizers which deploy custom strategies to automatically manage user funds
Things to know about Pendle

How Pendle works

Pendle is the latest DeFi innovation that enables users to trade and hedge their future yield. This is made possible due to the tokenization of yield-generating assets. For example, users who deposit USDC into Aave receive aUSDC, which is an interest-bearing token that increases in value over time. Pendle separates this asset (i.e. aUSDC) into two parts: the base asset and the future yield. The base asset, or Ownership Token (OT), represents ownership of the underlying asset. The future yield, or Future Yield Token (YT), represents the rights to the asset's future yield. YT and OT both have expiration dates. YT holders will no longer receive yield once the expiry date is reached. This means that YT tokens are time-decaying since their value depreciates over time until reaching zero at maturity. Hedgers will sell their YT tokens for upfront cash when yields are high; this cash can then be used across other protocols in DeFi to generate additional yield. Borrowers can hedge their borrowing rates when they are low. Speculators may choose to buy YT tokens to gain exposure to future interest rates without the capital intensity of owning the asset outright. The buying and selling of YT tokens are enabled by Pendle's own automated market maker (AMM). The Pendle AMM allows users to speculate, hedge, or arbitrage against fluctuations in yield. This AMM is designed specifically to cater to assets with time-decaying properties like YT.

How Pendle makes money

Pendle charges a variable swap fee for all trades within liquidity pools on Pendle's native AMM which is dependent on the time to maturity. This fee is 0.1% of the trade at 1 year to maturity and may be higher/lower if the time to maturity is longer/shorter. Liquidity providers receive 20% of this fee, while the rest is distributed to PENDLE stakers (vePENDLE). Pendle also collects 3% of all yield generated from YT. This fee is distributed to all vePENDLE holders.

How you make money on Pendle

Users can come to Pendle to speculate on the future yield of their assets. For example, a trader can gain exposure to rising lending rates (within the next year) for UNI by simply going to Pendle to buy the YT. The token value will increase if rates rise and the trader may sell at any time or hold until expiry. PENDLE holders can also stake on the platform to earn a portion of protocol revenue generated from swap and yield fees.

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Pendle Pools
Pendle ETH Market Making (12/25/24)
8.1%
Yield
$28M
TVL
Risk
B
Protocol
Pendle
Chain
Ethereum
Pendle ETH Principal Token (12/25/24)
3.7%
Yield
$28M
TVL
Risk
B
Protocol
Pendle
Chain
Ethereum
Pendle ETH Market Making (12/25/24)
6.8%
Yield
$5M
TVL
Risk
B
Protocol
Pendle
Chain
Ethereum
Pendle ETH Principal Token (12/25/24)
5.5%
Yield
$5M
TVL
Risk
B
Protocol
Pendle
Chain
Ethereum

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