This series presents my recent research findings on the Pendle protocol, offering a detailed overview of its business model, tokenomics, and on-chain data. The first article explores Pendle's core operations, token economics, vePENDLE model, and business metrics. The second part will analyze Pendle's token data, while the third introduces key ecosystem projects like Penpie and Equilibria.
Core Operations
Pendle enables users to tokenize and trade future yield streams. The protocol follows this workflow:
- Standardized Yield Tokens (SY): Converts yield-bearing assets into SY tokens (ERC-5115 standard), which can encapsulate most interest-generating assets.
Token Splitting: SY tokens are divided into:
- Principal Tokens (PT): Represent the asset's principal amount
- Yield Tokens (YT): Represent future yield rights
Investment Strategies
| Token | Characteristics | Risk Profile | Strategy |
|---|---|---|---|
| PT | Functions like zero-coupon bonds with fixed returns | Lower risk | Short yield (bearish on future rates) |
| YT | Provides leveraged exposure to variable yields | Higher risk | Long yield (bullish on future rates) |
Key Yield Metrics
Pendle displays four critical APY indicators:
- Underlying APY: 7-day moving average of the asset's yield
- Implied APY: Market consensus on future yields (reflected in YT/PT prices)
- Fixed APY: Guaranteed return from holding PT
- Long Yield APY: Dynamic return from YT positions (can turn negative)
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Trading Signals
- YT Buy Signal: When Underlying APY > Implied APY
- PT Buy Signal: When Underlying APY < Implied APY
FAQ Section
Q: What makes Pendle different from traditional yield protocols?
A: Pendle introduces time-based yield trading through its PT/YT system, allowing both fixed-rate and leveraged yield exposure.
Q: How does vePENDLE enhance the ecosystem?
A: The veToken model aligns long-term incentives by granting governance rights and boosted yields to locked PENDLE holders.
Q: What risks should YT investors consider?
A: YT holders face principal loss risk if the underlying asset's yield underperforms market expectations.
👉 Explore advanced yield strategies on Pendle
Q: Can PT positions lose value?
A: While PT offers fixed returns at maturity, its market price may fluctuate before expiration based on yield curve movements.
Q: What assets are supported on Pendle?