09 Oct 2023
In just 18 months since its launch, Pendle has $161 million in total value locked and a $65 million market cap. From its initial hiccups with users not understanding how yield trading works. Its unique vaults have set it apart in the DeFi space,driving significant user engagement.
Pendle Finance allows users to tokenize and trade future yields from their yield-generating assets. In simple terms, Pendle lets users separate the future yield (income) from their assets and trade it with others. This way, users can lock in profits, receive upfront cash, or gain exposure to future yields from different assets. Pendle Finance is great for active DeFi users, especially those who provide liquidity to DEXs. This platform offers several benefits.
Pendle Finance brings several exciting new ideas to the world of DeFi. One of these is Yield Tokenization. This is like wrapping up your assets that generate profits into a standard form, then dividing it into two parts: the original money you put in (principal tokens) and the future profits (yield tokens). This process lets users trade their future profits and manage their investments more effectively. If you want to learn more about pendle read our deep dive here. As Pendle has been one of the most consistent growing dapps in terms of TVL, we will be going through their most recent highlights.
Pendle V2 was the one of the first highlights of Pendle. Pendle V2 features a revamped AMM emphasizing user-friendly liquidity provision, better capital use, and adaptability. It offers reduced impermanent loss, a 200x capital efficiency boost from V1, and lets LPs earn fees from two assets' trading while only supplying liquidity for one. Pendle V2 also brought in the Concentrated Liquidity and Dynamic Curve concepts to improve liquidity. The AMM curve is tailored for yield trading and adjusts for Price Tokens (PT) and Yield Tokens (YT) price changes. V2 also has auto-routing, enabling users to trade or offer liquidity for PTs and YTs using any major asset. It also presents a fee rate that varies with interest rates and is gas-efficient.
Pendle V2 rolled out vePENDLE. Those who lock their assets in vePENDLE stand to earn swap fees, but only from the pools they actively back. This update also brings a heightened focus on yield trading. By introducing the Concentrated Liquidity and Dynamic Curve concepts, Pendle V2 ensures that the curve dynamically adjusts to PT and YT price fluctuations, tailoring the experience specifically for yield trading enthusiasts.
Another significant enhancement in V2 is the reduction of impermanent loss. Liquidity providers (LPs) now have the advantage of supplying both PT and its associated yield-bearing asset. This dual provision allows them to tap into a diverse range of yield sources, from trading fees to PENDLE rewards. On the topic of network ownership, holding a share of the supply is now akin to expressing confidence in the protocol's prospective fee growth. Adding to the flexibility, the signaling mechanism associated with vePENDLE has been revamped to offer a diverse lock-in range, spanning from a short 1 week to an extended 2 years, granting lockers the freedom to choose based on their individual strategies and outlooks.
Lastly, the launch has seen the activation of token locking and pools. The seamless integration with the KyberSwap Aggregator API now empowers users to conduct trades using major assets.
Binance Labs formed a strategic alliance with Pendle Finance. This partnership emphasizes the significance of yield tokenization, aiming to change how yield is tokenized and accessed globally. This investment showcased their dedication to expanding the reach of decentralized finance to a wider audience, encompassing both institutional and retail users.
On another note, Pendle's performance in the noteworthy. According to data from DefiLlama, Pendle has a total value locked (TVL) of over $161.4 million. Furthermore, the platform generates an annual revenue of approximately $241,899. This financial traction, combined with Binance Labs' investment, positions Pendle top player in the DeFi space.
Pendle has integrated with prominent Real-World Assets (RWA) like MakerDAO’s Boosted Dai Savings (sDAI) and Flux Finance’s fUSDC. This integration allows users to harness the growing potential of RWA yields. The essence of RWA tokenization is to create a digital investment mechanism on the blockchain, anchored to tangible assets like real estate and precious metals. This means DeFi can access traditional financial instruments, such as U.S. Treasury Bonds, and utilize these tokenized assets in Dapps. Pendle's CEO, TN Lee, emphasized the vast untapped markets of Fixed Yield and RWA in DeFi and their potential to attract substantial offchain institutional investors.
On the other hand, Pendle is elevating its value proposition with the introduction of stacked liquidity, which supports the PENDLE/ETH pair on Camelot. This pool leverages the standard Pool 2 LP, introducing an added layer of depth that allows users to earn additional yield and rewards. The benefits anticipated from this include more consistent liquidity, combined yield and rewards from both Pendle and Camelot layers, and a mutually beneficial scenario for PENDLE LPs and Camelot.
The next step for Pendle is their grant application. The ARB grant will be used and deployed over the course of October 2023 (once it is received) through the end of 31st January 2024 and will be used towards increasing yield trading volume, inciting activity on the platform, deepening liquidity on existing pools as well as an additional incentive for users to bootstrap liquidity for newly listed Pendle markets Arbitrum, and finally to encourage activity on protocols built on top of Pendle.
Based on the current snapshot, it appears that the application is likely to be approved. This move signifies Pendle's commitment to growth and its alignment with the Arbitrum community's goals. The positive reception of the application suggests a promising future for Pendle on the Arbitrum platform.
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