Pendle is a permissionless DeFi yield-trading protocol built on Ethereum and launched in 2020. Similar to the TradFi interest derivatives market, it allows users to speculate on the future earnings of yield-bearing assets, or purchase future assets at a discount, which is equivalent to enabling users to tokenise and sell the future earnings of certain assets. It aims to maximise returns for its users by increasing their revenue exposure in bull markets and hedging against yield downturns during bear markets.
Pendle wraps the yield-bearing tokens into SY (standardised income token) and then divides SY into PT (principal tokens) and YT (yield tokens).
YT can be considered as the “coupon payment” of the “zero-coupon bond” PT within a certain period. PT can be exchanged 1:1 for SY after maturity. PT and YT can be traded anytime, and PT is eligible for a manual claim on the Pendle Dashboard.
What Pendle Finance does can be summarised as follows;
→ SY = PT + YT
Pendle is an emerging crypto derivatives platform. Its flexible trading methods can help investors better manage risks and grasp opportunities when the market changes. After centralised staking services were cracked down on by the US SEC at the beginning of the year, decentralised staking has captured a significant portion of the market, with Lido, SSV, Rocket Pool, etc. entering the scene. Understanding Pendle as a notable participant in the LSD ecosystem and its evolution is necessary as this market begins to mature.
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