Pendle (PENDLE): Unlocking the Full Potential of the Yield Market

Crypto yield trading can be highly lucrative, but the actual return that an investor may realize is uncertain. This is because future yields cannot be accurately projected, due to fluctuations in the yield markets caused by numerous factors in the crypto sphere. Various yield protocols enable investors to gain from a future yield, but there are flaws with many of these established protocols that can minimize gains substantially. 

Pendle takes an improved approach to yield trading to optimize the investor’s return.

Key Takeaways:

• Pendle is a tokenized yield protocol that allows investors access to an asset’s future yield. It’s known for its time-decaying automated market maker feature and other yield components.
• When a user deposits assets in Pendle, the underlying asset is represented through a principal token while the anticipated yield is represented through a yield token. 
• Users can trade principal tokens and yield tokens on Pendle’s AMM, and cash them in before the expiration date to secure gains. 
• Looking to trade PENDLE? Bybit now offers the PENDLE/USDT Spot trading pair and PENDLEUSDT Perpetual Contracts.

What Is Pendle?

Pendle has been designed as a permissionless yield trading protocol. This DeFi protocol is built on the Ethereum blockchain. Its users can adopt various strategies. When a user deposits assets in Pendle, the underlying asset is represented through a principal token (PT). The anticipated yield is represented by a yield token (YT). Because the principal and yield can be split through these tokens, users have greater flexibility to manage their assets. 

Users can trade these tokens on Pendle’s AMM, and cash them in before the expiration date to secure gains. Additionally, you can adopt yield strategies such as long yield, discounted long assets, fixed yield, or a mix of these strategies. The platform also supports Arbitrum.

History of Pendle

Pendle was created by a group of anonymous individuals who go by the pseudonyms TN Lee, GT, YK and Vu. It maintains its headquarters in South Korea, and raised $3.7 million in funding from investors such as Bitscale Capital, Crypto.com Capital, Fisher8 Capital, Strategic Round Capital and others. After considerable development, the project officially launched in June 2021. According to Pendle’s official website, its trading volume has reached $350 million to date. Its total value locked (TVL) has also recently exceeded $130 million. The Pendle team has grown substantially since launch to meet the platform’s continued growth and development.

What Does Pendle Aim to Achieve?

Pendle was established to improve the yield trading experience for crypto users. By doing so, its founders have focused on making crypto yield trading more mainstream. Furthermore, they recognized the challenge associated with time decay. The platform has been designed with specific features that enable traders to create separate tokens for their original asset and their future yield asset to optimize flexibility and profitability. At the same time, Pendle uses an evolved AMM that specifically overcomes the challenge of time decay in yield trading.

Pendle has already launched its second version, and additional updates are planned in the near future. Pendle V2 introduced an updated AMM that allows for fixed rate trading. It also optimizes liquidity provisions and provides greater opportunities for profits.

How Does Pendle Work?

Those who own yield-generating assets deposit their tokens into their Pendle account. Once that’s done, a PT is minted by Pendle, representing the underlying asset that was deposited. In addition, a yield token, or YT, is minted, which represents the token holder’s claim on that asset’s future yield. It’s important to note that PTs and YTs are valid for a limited time, and their associated assets must be claimed before their expiration dates.

Yield Tokenization

Yield tokenization is Pendle’s fundamental mechanism. While the PT represents the original asset, the YT represents the expected interest earned on the underlying asset. Splitting the yield components maximizes the user’s control of those assets. A YT can be used to provide liquidity to an AMM. By doing so, a YT can generate protocol rewards and earn transaction fees. Another way to use a YT is to simulate an interest rate swap. This is done by locking in a return at a fixed rate by selling the YT immediately.

AMM

An AMM, or automated market maker, supports individual trades of crypto assets. Specifically, it’s a type of decentralized exchange (DEX) that algorithmically completes buy and sell orders, as compared to making direct trades with individual traders. However, a traditional AMM is flawed since it doesn’t account for time decay. Without taking time decay into account, an investor may suffer financial loss because of mispriced assets. 

Pendle resolves this issue through its unique AMM. It uses a time-decaying AMM model to optimize capital, while increasing exposure to future yields. Specifically, Pendle’s AMM makes incremental adjustments that more accurately price assets. At the same time, it prevents liquidity pools from being depleted.

Governance

PENDLE token holders can participate in the platform’s governance. Specifically, they do this by using vePENDLE, or vote-escrowed PENDLE tokens. The vePENDLE tokens are obtained by staking PENDLE. The specific amount of vePENDLE received is based on the staking period, which can be as long as two years. Over the course of the staking period, the value of vePENDLE in a user’s wallet decays. It will reach no value at the end of the staking period, which is when the staked tokens are unlocked.

Pendle collects a fee of 3% from all yield accrued via YT. This fee is collected as revenue and distributed pro rata to all vePENDLE holders, based on vePENDLE weight.

Adding to these opportunities for gains, vePENDLE holders have access to liquidity incentives. They vote for the allocation of liquidity incentives to different pools. Those who have voted for a pool collectively earn 80% of that pool’s swap fees.

Pendle Pro

Source: Pendle

Pendle Pro is an interface that gives users complete access to all of the platform’s features. Through Pendle Pro, users can deposit assets, mint YTs and PTs, make trades, and more. This feature is accessible through a toggle button at the top of the mobile app. There’s also a useful tutorial available that shows new users how to get the most out of Pendle Pro’s features.

Features of Pendle

Pendle offers greater opportunities for investors to maximize the return on their yield-bearing assets without locking up their collateral. These opportunities include minting, swapping, farming and claiming. A closer look at these features is essential.

Mint

A user can mint tokens by depositing a yield-bearing asset in Pendle. Under the Markets tab on the interface, select the terms of the transaction. This includes the input asset, the desired asset and the maturity details. By doing so, the user creates a principal token and a yield token for the underlying asset. Through this minting process, the asset is separated from its future yield, and these tokens can be used separately in various ways.

Swap

Once the YT has been minted, the user has the option to sell or swap it. Depending on the movement of the underlying asset’s value, this could be highly lucrative. It also presents users with the opportunity to swap one asset for another one that may produce a higher yield going forward. The original PT can also be swapped independently. Swapping is done through the interface’s Markets section. After selecting the Swap tab, select the slippage, transaction volume, input and output assets, and maturity.

Farm

The YT may also be added to a liquidity pool. Users can review the maturity, total liquidity and annualized percentage yield (APY) for each pool. By contributing to a pool, users receive liquidity pool tokens that allow them to earn liquidity incentives. Liquidity incentives can continue to be earned until the liquidity pool tokens are cashed in. The user can increase the APY through the use of vePENDLE.

Claim

Once a YT’s established expiration date passes, that token no longer has any value. The user must decide whether to redeem the asset before the expiration date, or to roll over the asset to create a new expiration date. In order to redeem the token, the user must hold both the PT and YT. Depending on the situation, this may require the user to take a liquidity provision from the pool or buy new tokens on the market. 

To claim the YT as well as rewards and swap fees, the user should click on Claim Yield and Rewards in the Markets section. By toggling through the options, the user can claim specific rewards and gas fees. The user can also select how the token will be claimed, such as through a raw token or USDC.

Pendle Road Map

Pendle stands apart from other seemingly comparable platforms through its three components. Two of these are already live: yield tokenization and AMM. The third component, governance, is still in development. 

Within a year of the platform’s launch, more than $350 million of yield trades were settled. Pendle V2 was released in late 2022 with a redesigned AMM. This updated AMM supports fixed rate trading. It also offers liquidity provisions, greater capital flexibility and improved efficiency. It establishes low slippage trades, minimal impermanent loss and the ability for liquidity pool providers to earn fees on two assets, even though they provide just one asset.

Looking forward, the project's developers are focusing on permissionless integration with all yield-bearing assets. There’s also a plan to generate greater fees and liquidity by properly aligning incentives.

PENDLE Tokenomics

The native token of Pendle is PENDLE. It’s an ERC-20 utility token with a total and maximum supply of 231,725,335 tokens. The circulating supply is approximately 97 million tokens. Its purpose is to manage governance at the completion of the protocol. Specifically, it will support protocol management and the mechanics of value accrual. PENDLE is a hybrid inflationary token, with a 2% perpetual inflation rate. 

Source: Pendle

Its initial distribution allocated 37% to liquidity incentives, 22% of the supply to the team and 15% to investors. In addition, the ecosystem fund received an allocation of 18%, and 7% was applied to liquidity bootstrapping. The remaining 1% of the supply was reserved for advisors.

Source: Pendle

However, as of October 2022, PENDLE has revised its token distribution. It now has 65.1% allocated to its circulation, 19.2% to the ecosystem fund, 10% to incentives and 5.7% to the team. Tokens allocated for the team were vested until April 2023, and weekly emissions are 667,705, with a 1.1% decrease each week until April 2026.

PENDLE Price Prediction

PENDLE was launched on Apr 28, 2021 at the price of $2.11. It quickly dropped to a low of $1.08 by Apr 30, 2021 before it rose to its all-time high of $2.45 on May 5, 2021. PENDLE’s price continued to fluctuate over the following months, remaining between $0.30 and $1. There was a spike in price in the middle of August 2021, from $0.44 to $1.27, possibly due to the integration of Pendle’s price page on Crypto.com.

PENDLE’s price then fell once again, before rising again in the middle of October 2021 to $0.98. This is likely attributed to the announcement of the Pendle and Olympus Pro partnership, whereby users can obtain PENDLE tokens at a discount through the exchange of PENDLE/ETH LP tokens on Olympus.

As the entire crypto market entered a downturn at the end of 2021, PENDLE’s price also fell. When the Terra LUNA crash occurred in May 2022, PENDLE dropped to a low of $0.04 and remained there throughout most of 2022. However, PENDLE’s price experienced an uptrend beginning in January 2023, as it rose from $0.04 to $0.64 in April. Despite faltering briefly, PENDLE’s price continued to climb to a peak of $0.96 on Jul 3, 2023.

The current price of PENDLE is $0.85 as of Jul 19, 2023. The general sentiment for this token among crypto experts is bullish for both short and long terms. At the end of 2023, according to DigitalCoinPrice, the anticipated price of PENDLE will be $1.87. This is expected to rise to $3.07 in 2025 and $4.63 in 2028. In 2030, the price of PENDLE is predicted to double and reach $8.95. 

PricePrediction shares the same sentiments, and is in fact more positive than DigitalCoinPrice in the long run. It predicts that PENDLE will close 2023 at $1.23 and reach $2.91 by 2025. By 2028, PENDLE is expected to rise to $9.08 and cross the $18 mark to hit $18.57 by 2030.

While the token’s price is expected to increase considerably over the next decade, keep in mind that all crypto price predictions are speculative. Many factors cause crypto prices to move, and these factors cannot accurately be predicted. As such, it’s best that you do your own research before investing your money in crypto.

Where to Buy PENDLE

PENDLE tokens are available on centralized exchanges including Bybit. You can choose to trade the PENDLE/USDT Spot trading pair or PENDLEUSDT Perpetual Contracts. To get started, you must first sign up for a Bybit account and fund it with cryptocurrency before navigating to the PENDLE/USDT Spot trading page or PENDLEUSDT Perpetual Contracts page. 

Is PENDLE a Good Investment?

As discussed in the previous section, the price of the PENDLE token is projected to increase from its current $0.85 to $18.57 at the end of 2030, an increase of almost 2,085%. This substantial value increase presents a lucrative opportunity for those who intend to hold their tokens for a longer period of time. 

In addition to the financial gain associated with token value appreciation, users can take advantage of liquidity incentives for additional gain. Moreover, this yield trading platform enables users to split their yield token from their principal token, which allows for improved flexibility and capital efficiency in yield markets. The possibility of loss is always present in the crypto world, but Pendle presents many avenues for users to profit.

Closing Thoughts

Yield trading presents crypto investors with exciting financial opportunities. Pendle is designed specifically to optimize the profitability of yield trading. With its user-friendly interface and tutorials, it’s just as well-suited to experienced traders as it is to those new to the world of crypto yield trading. You can launch the Pendle app today to start putting its features to use for your yield trading activities.

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