One of the ways to make money from the cryptocurrency market is yield farming, but do you know how to increase this profit?
This can be done through Pendle Finance. The developers of this protocol have tried to create a platform for performing return transactions in the field of DeFi.
So that you can increase the efficiency of your activities in Defi. Probably, your question is what is the method and solution of the Pendle protocol and how can such a thing be done?
In this article, we have tried to answer this question and have also given explanations about PENDLE digital currency, which is the native cryptocurrency of this protocol.
I hope that at the end, you have got a good familiarity with this protocol and there is no room for ambiguity.
Key points of the Pendle
- The Pendle protocol allows future returns to be traded and used in the present by tokenizing them.
- By separating yield generating tokens into two main tokens (PT) and yield token (YT), Pendel helps to earn profit from these assets.
- PENDLE cryptocurrency is a native token of the Pendle protocol, which is built with the ERC-20 standard.
- This token can be used to pay network fees and rewards are paid in PENDLE form.
- vePENDLE is another Pendle Finance token that is used for voting and other governance purposes.
- Pendulum is now on Ethereum, Arbitrum and BNB blockchains.
Let’s dive in and explore together:
- What is Pendle Protocol?
- What is the purpose of the pendulum?
- How does the Pendle protocol work?
- What can be done in the Pendle protocol?
- Introduction of PENDLE digital currency
- From which exchange should we buy the PENDLE token and in which wallet should we keep it?
- Pendle protocol roadmap
- Which companies has Pendel cooperated with?
- Who created Pendle Finance?
- Frequently asked questions on pendle
What is Pendle Protocol?
Pendle Finance is a decentralized digital currency platform in the field of DeFi that converts the future returns of yield generating assets into tokens. Income producing assets are those assets from which you can earn profit.
For example, suppose you stake your Ether tokens on the Lido platform and receive stETH in return, which represent the Ethers staked on the Lido platform. This is an example of a yield generating asset.
Now to use this stETH in a more beneficial way, you deposit it to Pendle. Pendle divides this asset into two parts, profit and main token, and makes them tradable.
In this video that explains what the Pendle protocol is, I came across an interesting example that I would like to share with you. Consider an apple tree. This tree bears fruit and its fruit is the yield that the gardener gets.
The tree is always the same and every season you can benefit from its new fruits. The mechanism of yield trading is the same. The asset itself is like the tree and the return is the fruit of the tree.
From the combination of these two, we can benefit from the fact that the Pendle protocol has implemented the same structure in an interesting way.
The innovation of this protocol is that it allows you to exchange returns separately from the underlying asset. This issue leads to the fact that assets are purchased in Pendel at a discount and lower price than other exchanges.
Pendel currently operates on Ethereum and Arbitrum blockchains and has recently opened its eyes to the BNB chain.
What is the purpose of the pendulum?
Cryptocurrency yield trading can be very lucrative, but the actual yield to be achieved is uncertain and cannot be spoken about with certainty.
Fluctuations in the yield market, which are caused by several factors and reasons, create such conditions. Pendel was created with the idea and purpose of allowing investors to achieve their future returns and by separating the main token from the return token, to provide them with the possibility of more optimal income.
How does the Pendle protocol work?
Before we describe the mechanism of this protocol, it is better to explain some terms that will be needed during this article so that you don’t get confused.
- Yield-Bearing Token: Tokens that can generate returns. Like stETH or liquidity tokens like rETH-WETH.
- SY = Standardized Yield: This is an EIP-5115 token, which is the accelerated version of yield tokens and represents the standard yield of these tokens.
- PT = Principal Token: This token provides the possibility to receive the principal token of the yield generating asset, which can be redeemed after maturity. For example, if you have a PT-stETH token whose maturity date is one year, after this one year you can redeem an Ether with a value equal to stETH. You can trade this token at any time even before the expiration date.
- YT = Yield Token: This token grants access to generated yields in real time. You can claim the return through the Pendle Finance dashboard at any time. If you own a YT-stETH token and stETH has an average return of five percent over a year, you can earn 0.05 stETH tokens at the end of the year. This token can be traded anytime even before the maturity date.
- Maturity: This is the date on which the underlying asset can be redeemed with the PT token, and remember that after this date, YT will no longer generate returns.
- Underlying APY: shows the percentage rate of return of the underlying asset.
- Implied APY: The future yield of an asset calculated based on the YT to PT price ratio.
- Fixed APY: fixed and guaranteed return that you get by holding PT token.
- Long Yield APY: Estimated return you can earn by buying YT at the current price.
When you open Pendle Finance, you will see a dashboard similar to the image below:
Let’s examine one of these properties together to fully understand how this protocol works. We will go to the same stETH Lido that we gave an example above.
When you deposit your yield-generating asset into Pendle, a PT token is generated. Like PT-stETH which represents your base asset in the protocol.
Another token named YT will also be created, which is related to asset returns.
By having this token, you will have the right to claim this return on the Pendle platform. Together, these two tokens form the same primary asset, stETH:
ETH → stETH → SY-stETH → PT-stETH + YT-stETH
So basically, Pendle takes your yield token and splits it into two yield tokens and the main token, each of which is tradable. You can use your reward token in different ways.
For example, you can buy original tokens and get fixed APY by locking them. It is also possible to buy return tokens and earn more profit (depending on your market prediction).
If you think the yield will increase in the future, you can buy Yield Tokens (YT).
What can be done in the Pendle protocol?
In this protocol, you can access the following services:
- Mint: User can deposit their return generating tokens on the platform. By doing this, a main token and yield token will be created for the desired asset. Through the minting process, the asset is separated from its future returns and these tokens can be used separately and in different ways.
- Swap: When the yield token is minted, the user will have two options: sell and swap. A swap of an asset with another asset can lead to higher returns. The main token can be swapped separately.
- Farm: The return token can be added to the liquidity pool. In this way, users can see the maturity date and annual return percentage for each protocol. This earns liquidity tokens that allow users to earn rewards. Earning cash rewards can be continued until the pool tokens are cashed out. With the help of vePENDLE, it is possible to increase the APY, which I will tell a little later.
- Clue: When the return token expires, the token will no longer have any value. The user must decide ahead of time whether to redeem or transfer the asset and create a new maturity date. You need to have both YT and PT tokens to redeem. This may require the user to withdraw cash from the pool or purchase new tokens on the market.
- Buying assets at a discount: In this part of the Pendle protocol, you can buy some assets cheaper and at a discount and hold them for a while. Since YT is decoupled from the underlying asset (e.g. stETH), it allows the underlying asset to be purchased in the form of PT at a lower price. The image below shows the discounted properties available in Pendle.
Introduction of PENDLE digital currency
The Pendle protocol has a native cryptocurrency called PENDLE, which is a utility token with the ERC-20 standard. In the image below, you can see the distribution of PENDLE tokens:
According to this image, which shows the distribution of Pendel tokens from October 2022 (Mehr 1401), the following information can be obtained:
| Token percentage | used |
|---|---|
| 65.1% | In circulation |
| 19.2% | Financing the ecosystem |
| 10% | Reward |
| 5.7% | project team |
The tokens awarded to the team were locked until April 2023 and will be issued weekly from that date until April 2026. In the first release, 667,705 tokens were issued and this number is supposed to decrease by 1.1% every week. No more recent information is available from PENDLE Toconomics.
The total supply and maximum supply of Pendel tokens on the Coin Market Cap website are 231,725,335 and 251,061,124, respectively.
These two factors in Gecko Coin are the same and equal to 231,725,335 numbers. However, the following image has been published in the documents section of the Pendel website, which shows the supply of this token until 2030 in this way:
Pendle is used in various cases in the ecosystem of this platform, which include:
- Providing liquidity to protocol pools and receiving rewards
- Payment of network fees
- Participation in Pendal governance
One more thing to say about vePENDLE, which is the governance token of the Pendle platform. PENDLE holders can earn vePENDLE tokens by staking their assets on the platform and participate in Pendle governance and voting.
In this way, vePENDLE holders will have a share of cash rewards.
At the time of writing this article, the price of Pendel token is equal to $0.78 and it is ranked 315th in the cryptocurrency market.
The total market value of PENDLE is around 76 million dollars and the trading volume of this cryptocurrency in the last 24 hours was around 16 million dollars.
The circulating supply is equal to 96,950,723.36 Pendel tokens. The highest price of the pendulum was 2.45 dollars. The lowest price of this cryptocurrency was $0.03.
From which exchange should we buy the PENDLE token and in which wallet should we keep it?
You can buy PENDLE cryptocurrency from UniSwap Version 3 decentralized exchanges, SushiSwap, Balancer, PancakeSwap Version 3 and Dodo. If you also want to buy Pendle from centralized exchanges, available options include Binance, Kucoin, Gate, ByBit, Maxi, Coinx, and BingX.
You can store this cryptocurrency in wallets such as Trust Wallet and Metamask. Since Pendel cryptocurrency is an ERC-20 cryptocurrency, you can store it in any wallet that supports tokens of this standard.
Pendle protocol roadmap
In the official website of this project, not even a basic and old road map can be found. You can only follow Pendle’s Twitter or Discord and find out about its plans.
The most recent event of this project is Pendel’s entry into the BNB chain, which shows the progress and expansion of this protocol. We will probably hear more news about this protocol and its developments in the coming days.
Which companies has Pendel cooperated with?
Pendle has recently cooperated with Binance China and now, in addition to Ethereum and Arbitrum, it is also possible to use it on BNB Chain.
On December 15, 2022, Pendel Finance started its cooperation with CyberSwap pool. This means that now, in addition to LooksRare, Lido, Kanox, CyberSwap is another pool that supports Pendle.
Who created Pendle Finance?
TN Lee is listed as the co-founder of the Pendle protocol on LinkedIn and other social networks. Previously, he was one of the co-founders of CyberSwap between 2017 and 2018, and since 2019, he has been the co-founder of the Dana Labs research institute. He is also registered as an angel investor.
Frequently asked questions on pendle
What is the Pendle protocol?
It is a protocol related to the exchange of return-producing assets, which works through the separation of the main token and the return token. In this way, the uncertain future profit can be tokenized and used in the present time.
What is PENDLE digital currency?
The native cryptocurrency of the Pendle protocol is built with the ERC-20 standard and can be used to purchase vePENDLE, which is a sovereign token.
We lock our assets in DeFi protocols to earn profits. A profit that is uncertain and will be given to us in the future. The Pendle protocol tokenizes this profit and provides a place where we can use these tokens with different strategies.
By separating the principal of the token and its return, Pendle allows the purchase of the underlying asset at a lower price than other exchanges, which we learned in this article.
According to what you read in this article, did you decide to use Pendle? Or have you used this protocol before? If yes, what do you think about Pendle protocol? What appeals to you about it? Write to us to know more about your comments.
