Pendle - Liberates Future Yield

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Pendle is a fixed-rate protocol built on Ethereum. This article will briefly introduce the mechanism and token information of the protocol.
  • Pendle is a fixed-rate protocol built on Ethereum that split the principal and yield of collateralized assets.
  • Pendle is designed with a time-weighted automatic market maker (AMM) to provide trading for yield token.

Introduction

Pendle is a fixed-rate protocol built on Ethereum. The protocol states that the principal and future yield of an asset is traded separately in the traditional financial market. Pendle wants to introduce this service in the world of DeFi. Investors can separate the principal deposited into other DeFi protocols from the future yield through Pendle's smart contract. The split yield can be traded, which will help investors lock in returns in advance.

Pendle splits the principal and yield in the form of tokens. For example, if an investor deposits USDC in Aave, a decentralized lending protocol, to earn loan proceeds. He will receive aUSDC as a proof of liquidity provider (LP). If he wants to sell the principal portion or the yield portion, he can deposit the aUSDC into Pendle. aUSDC is received by Pendle and two tokens are minted: Ownership Token (OT) representing the principal, and Yield Token (YT) representing future yield. It's a process similar to the separation of coupons in the bond market, both OT and YT can be traded directly with USDC. If the investor does not want to sell the OT and YT immediately, he can stake the split tokens in Pendle for a liquidity bonus, allowing the investor to receive both the Aave and Pendle yield. In addition, the process of splitting is not a one-way process, investors can also use OT and YT to synthesize aUSDC in Pendle.

When investors split their interest-bearing assets, the principal token OT can be traded on DEXs, but the yield token YT's value decreases over time. So a normal AMM may not be able to facilitate the transaction at a reasonable price. The Pendle AMM is designed to solve the problem of pricing assets with time-decaying properties. Specifically, the trading curve of AMM can be shifted over time to match a reasonable trading price for OT. In time-decaying AMM, assets such as futures and options can also be traded. This feature increases the room for imagination.

Source: Pendle

Currently, Pendle can provide splitting for assets deposited in protocols such as Aave, Compound, etc. In November Pendle announced that it had landed on Avalanche, which helps Pendle further attract more investors on Avalanche compared to the high Gas cost of Ethereum. The launch of decentralized protocols such as Uniswap, Aave, and Compound from 2020 onwards provides the underlying financial services for digital assets. As time moves into 2022, investors are placing new demands on DeFi and protocols such as fixed-rate protocol and on-chain derivatives. As the digital asset market continues to evolve, there will be a lot of room for Pendle to expand. As of this writing, Pendle already supports support for ETH, Aava, USDC, DAI, and JOE.

Token Economics

  • Token: Pendle
  • Total Supply: 251,061,124
  • Token distribution and vesting plan

  • Funding information

In April 2021, Pendle closed a $3.5 million funding round led by Mechanism Capital with participation from CMS, imToken, DeFi Aliance and other investors.

Competitive Protocol

Notional Finance is a fixed-rate loan protocol built on Ethereum. It allows investors to lend USDC, DAI, and other USD stablecoins with WBTC and ETH as collateral assets on an over-collateralized basis. Specifically, investors can mint a zero-coupon bond fcash payable on maturity in WBTC and ETH and choose the maturity date. Investors can also trade the fcash on Notional Finance for USD stabecoins at a rate determined by the trading price of the cash.

Token Information: Pendle (PENDLE)

Derivatives

Marketplace

DeFi

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