Pendle (PENDLE) Research Report
Project Name: Pendle
Tag: $PENDLE
Type: Decentralized Computing Network

Introduction

Pendle is an interest rate derivatives protocol established on multiple chains, allowing users to lock in the future yield of their crypto assets and receive returns in advance. By separating principal tokens and yield tokens, it offers users different investment paths for fixed and speculative yields.

SY, PT, and YT

SY

SY is a token standard used to generate yield-bearing assets in the form of wraps in smart contracts. Subsequently, the principal and yield of these yield-bearing assets can be stripped into PT and YT tokens. SY refers to the underlying yield asset (e.g., aUSDC), which is then split into PT-aUSDC and YT-aUSDC, offering users a wide range of investment strategies.

Principal Token (PT)

PT represents the original capital of the investment, excluding future yields. Holding PT means that the user intends to reclaim the principal at a future date, but it does not generate returns over time.

Yield Token (YT)

YT represents the future yield rate of the underlying asset before maturity. Purchasing YT is an expectation of increasing yield rates, providing a way to earn potentially higher returns.

Trading Process

The specific trading of PT and YT is conducted through an upgraded AMM mechanism. Pendle sets up liquidity pools for yield-bearing assets, PT/SY, consisting solely of StETH’s PT and SY. When investors purchase PT, the liquidity pool receives the yield-bearing assets provided by the investors, wraps them into SY, and then directly conducts an equivalent exchange between PT and SY. When investors purchase YT (YTFlashSwap), since the price of 1 unit of YT is much lower than 1 unit of PT or SY, the liquidity pool needs to extract more SY to mint PT and YT, send the generated YT to the buyer, and sell the excess PT to the liquidity pool to exchange for SY.

Investors can express their views on the interest rate trends of the underlying assets by buying and selling PT and YT. PT can be exchanged back to the underlying yield-bearing asset at a 1:1 ratio on and after the maturity date, similar to zero-coupon bonds issued at a discount, with value returning to face value as maturity approaches, providing a fixed yield. YT can receive the yield generated by the underlying assets, and its value approaches zero as the maturity date approaches and future cash flows decrease, offering a leveraged floating yield.

vePENDLE

Pendle adopts the veCurve model, allowing existing token holders to stake PENDLE to obtain vePENDLE, thereby reducing the circulating supply of PENDLE. The longer the PENDLE is locked, the greater the corresponding vePENDLE value. The more vePENDLE held, the greater the voting rights. After voting for a pool, holders are entitled to receive 80% of the swap fees collected by that pool. Additionally, vePENDLE holders can also receive a portion of the yield generated by YT.

vePENDLE decreases linearly over two years, after which PENDLE will be released. Therefore, users who wish to maintain their voting weight and the value of their vePENDLE tokens will need to extend their staking duration or increase the staking amount.

Key Metrics

Tokenomics

Total token supply of 258,000,000:

• Incentives: 10%
• Circulating: 65.1%
• Ecosystem Fund: 19.2%
• Team: 5.7%
  
  Starting from October 2022, the weekly emission is 667,705, with a 1.1% decrease each week until April 2026. The current tokenomics allows for an annual inflation rate of 2% for incentives.