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Pendle DeFi: Survival Strategy in a Bear Market & The Tokenization of Yield
Why Does DeFi Yield Keep Changing?
DeFi can be fascinating—but its constantly fluctuating APY (annual percentage yield) often drives investors crazy.
For example, when you deposit into a lending protocol like Aave, your interest rate may jump from 1% to 5% overnight.
Why? Because DeFi interest rates are dynamic, constantly adjusting to real-time borrowing demand.
Another income source is liquidity provision (LP)—depositing assets into trading pools to earn a share of transaction fees.
But those fees also vary daily based on market volume.
In short, yield volatility makes forecasting profits nearly impossible.
Some investors want to predict future returns, while others just want to lock in a fixed yield.
Traditional finance already offers this—through fixed-rate bonds or savings products.
But in DeFi, no such mechanism existed during the high-yield frenzy of the 2020 DeFi Summer.
That’s where Pendle entered the picture: a protocol designed to bring predictability and certainty into DeFi yield markets.
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What Exactly Does Pendle Do?
Pendle’s magic lies in turning DeFi yield itself into a tradable token.
This innovation lets users either speculate on future yields or lock them in like a fixed-income product.
Here’s how it works:
Pendle splits a yield-bearing asset into two components:
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PT (Principal Token) — represents the underlying asset itself
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YT (Yield Token) — represents future yield generated by that asset
For example, if you deposit stETH (staked ETH) into Pendle, you can sell your future yield (YT) while keeping your principal (PT), or vice versa.
This separation allows you to either:
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Fix your yield (by selling YT now), or
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Speculate on yield increases (by holding YT for potential upside).
Pendle essentially created a yield derivatives market, giving DeFi users the same flexibility that institutional investors enjoy in traditional finance.
Who Benefits Most From Using Pendle?
Pendle’s users generally fall into three main groups:
1. Liquidity Providers (LPs)
These users deposit assets into Pendle pools and earn 15–20% base APY, which can be boosted up to 2.5x by locking vePENDLE (Pendle’s governance token).
Their main goal: maximize yield through staking and governance participation.
2. Traders & Speculators
They take advantage of yield volatility.
When YT (Yield Tokens) trade cheap, they buy them, betting that yields will rise later—allowing them to profit from appreciation.
Pendle effectively creates a secondary market for interest rates.
3. Fixed-Rate Seekers
These users prefer stability.
By purchasing PT (Principal Tokens), they can lock in future returns—often around 6–6.8%—regardless of market fluctuations.
The price they pay for PT at the time of purchase determines their implied fixed yield.
How Does Pendle Earn Revenue?
Pendle generates income through two primary sources:
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Swap Fees – Every token trade within Pendle incurs a small fee, a portion of which goes to the protocol treasury.
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Yield Token Issuance Fees – A percentage of new Yield Tokens (YT) minted on the platform is allocated to Pendle itself.
Currently, Pendle’s estimated daily revenue sits between $5,000–$7,000, translating to around $500,000–$600,000 annually.
That’s modest compared to giants like GMX, which earn over $1.4M per week—but Pendle’s strategy is focused on TVL growth and trading volume expansion.
How Is Pendle’s Token Value Sustained?
Pendle’s team designed a robust tokenomics framework to tie protocol success directly to its governance token, PENDLE.
They took inspiration from several successful DeFi models:
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veCRV Model (Curve Finance) — aligned token utility with protocol governance, sparking the “Curve Wars” and Convex ecosystem.
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Synthetix — used community-driven deflationary mechanisms to stabilize token supply.
Building on these ideas, Pendle introduced vePENDLE, a staked version of its token with three key roles:
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Governance voting power
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Boosted yield rewards for LPs
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Access to real yield distribution
Inspired by GMX’s Real Yield model, Pendle distributes protocol fees in ETH and other real assets to vePENDLE holders.
This links token value directly to real revenue, creating sustainable incentive alignment.
What’s Next for Pendle?
Pendle hasn’t yet achieved full product–market fit, but it’s getting closer every quarter.
The team’s roadmap focuses on three key goals:
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Expanding Asset Listings – Adding new yield-bearing assets quickly as markets evolve.
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Multi-Chain Growth – Currently active on Ethereum and Arbitrum, with plans to expand to other ecosystems.
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Improved UX for Retail Users – Simplifying DeFi’s complexity through better interfaces and onboarding flows.
By making yield trading as intuitive as swapping tokens, Pendle hopes to attract a broader retail audience—bridging the gap between pro traders and everyday users.
How LSD (Liquid Staking Derivatives) Fueled Pendle’s Growth
Pendle’s explosive rise in 2023–2024 was fueled by the LSD (Liquid Staking Derivative) narrative.
After Ethereum’s Shanghai/Capella upgrade, ETH staking became more flexible, and LSD assets like stETH (Lido) and rETH (Rocket Pool) gained massive traction.
Pendle partnered with major LSD protocols to tokenize yield from staked assets—often through complex pools like Aura Reweighted Pools.
This synergy gave Pendle enormous credibility and drew institutional-level liquidity.
Collaborations with giants like Lido, Rocket Pool, and Aura signaled strong trust in Pendle’s infrastructure—turning it into a key player in the new “yield markets” of DeFi.
Final Thoughts
Pendle is addressing one of DeFi’s biggest unsolved problems — yield uncertainty.
By making yield itself a tradable financial instrument, it brings DeFi a step closer to traditional finance’s sophistication — but with the openness and innovation of Web3.
“Pendle is turning the volatility of DeFi into opportunity — creating the foundation for a new on-chain fixed-income market.”