Author: Biteye core contributor Lucky
Editor: Crush, core contributor of Biteye
Community: @BiteyeCN
On August 23, Pendle announced that it had received investment from Binance Labs. As a popular LSDFi track protocol in the first half of the year, what made Pendle, whose token has skyrocketed 10x, once again gain the favor of top capital after its explosion?
The next day, Pendle announced the integration of two RWA protocols into Pendle Earn, namely sDAI from Maker DAO and fUSDC from Flux Finance.
Pendle, a yield tokenization protocol built on multiple chains, allows users to purchase corresponding underlying assets at a discount to obtain fixed income by separating the principal and interest of interest-bearing tokens. At the same time, for yield traders, they can express their bullish or bearish views on the yield of interest-bearing assets by trading yield tokens.
This article will start from Pendle’s core product Pendle Earn, focusing on Pendle’s strategic layout on RWA and the development of multi-chain expansion, and is committed to making readers clearly understand the development context of the project and its significance to the DeFi world.
1. Pendle Earn Detailed Explanation
2. Pendle’s RWA Narrative
3. Pendle Data Analysis
4. Pendle’s multi-chain expansion
01. Pendle Earn Detailed Explanation
Pendle Earn is Pendle's core product, which is an iteration of the previous Buy with Discount. The logic behind it is still to package the interest-bearing assets deposited by users into principal tokens (PT) and interest-bearing tokens (YT), and to achieve fixed income by holding principal tokens (PT) and redeeming them at a 1:1 ratio after maturity.
principle
First, Pendle encapsulates interest-bearing tokens, such as cDAI, stETH, etc., into SY (standardized yield tokens). For example, stETH becomes SY-stETH after encapsulation. Then, SY is split into two components: principal and yield, namely PT (principal token) and YT (yield token).
PT is the principal token. Holding PT means that you have ownership of the principal, which can be redeemed after maturity. If a user owns a PT-stETH that expires in 1 year, it means that the user can redeem stETH worth 1ETH after one year.
YT is a yield token. Holding YT means owning all the current income generated by the underlying assets, which can be collected at any time. If a user owns 1 YT-stETH and the yield of stETH is 5%, then after one year, the YT token will accumulate 0.05 stETH.
What Pendle Earn does is to automatically help users purchase corresponding PT after they deposit assets. For example, if a user deposits 1 ETH and obtains 1.05 PT-stETH, he can redeem it at a 1:1 ratio to obtain 1.05 ETH after the expiration date.
Highlights of Pendle Earn’s iterations
1. Significantly lower the threshold: The updated UI page of Pendle Earn is simpler and is committed to helping investors achieve fixed income without any threshold. Users only need to select the maturity date and deposit the amount.
2. More mature investors can also obtain higher LP returns by providing LP. Unlike ordinary LP, Pendle has almost negligible impermanent losses when users provide LP through the iteration of V2 version and its unique AMM curve design. (The principle can be found in the article mentioned above;)
3. With the promotion of Pendle Earn, more people are entering Pendle Earn, which also opens up the market for Pendle's other high-end product, the trading yield token (YT).
When users are optimistic about the future yield of the underlying assets, they can hold or buy YT
When users are not optimistic about the future yield of the underlying assets, they can hold PT or sell YT.
or:
When the yield of the underlying asset is greater than the implied yield, you can consider buying YT to go long on the implied yield of the asset, or sell PT to obtain the underlying asset and do LP at the same time.
When the yield of the underlying asset is less than the implied yield, you can consider doing the opposite of the above operation.
The meaning behind Pendle Earn
Among the products listed on Pendle Earn are Lido, Frax, and Swell from the LSD track, the cross-chain bridge leader Stargate, and Spark Protocol (under MakerDAO) from the RWA track.
If you switch to the Arbitrum network, you can also see Rocket Pool in the LSD track, GMX, the leader in the sustainable track, and so on.
It is not difficult to see from these projects that the integration objects selected by Pendle all have stable and reasonable income assets behind them, such as Ethereum staking income, off-chain US Treasury bond income, LP's fee income, etc.
However, most of these benefits are floating benefits. Ethereum’s staking benefits will fluctuate according to the status of the nodes and the on-chain activities. LP’s fee benefits will fluctuate according to the transaction volume of the protocol. The benefits of DAI in MakerDAO also change according to voting. It started at 8% and dropped to 5%.
Fixed income products are everywhere in the traditional world, but in the crypto world, when we look around, we have to find that it is very difficult to find a fixed income product that people can trust.
The emergence of Pendle Earn fills this gap in DeFi.
Pendle packages the stable sources of income in the crypto world into Pendle Earn, and provides fixed income to investors seeking low risks by tokenizing the principal and interest.
When investors hold ETH and stablecoins and do not want to take risks or bear the risk of interest rate fluctuations, they can choose products that suit them based on the income from Pendle Earn and their preferences for integrated protocols.
Pendle once said that its goal is to become a principal, packaging the complex returns in the financial world into simple, low-threshold fixed-income products, making them accessible to the public, individuals and institutions, and every entity. Now it seems that Pendle is indeed moving in this direction.
02. Pendle’s RWA narrative
The hottest narratives in DeFi in 2023 are LSD and RWA. According to incomplete statistics on Dune, the staked ETH in the LSD track increased from 15M at the beginning of the year to 26M at the end of August.
https://dune.com/hildobby/eth2-staking
According to Defillama’s data, as can be seen from the figure below, the TVL of the RWA track has grown from $118M at the beginning of the year to $1.05B by the end of August. In just 8 months, the total TVL of the RWA track has increased nearly 10 times.
According to a report by Citi, RWA track funding is expected to reach US$1 trillion by 2030.
Source: https://defillama.com/protocols/RWA
Pendle has been committed to integrating different LSD protocols since the beginning of the year. Currently, the protocols it integrates include Lido, Frax, Rocket Pool, Swell, Ankr, etc. Its TVL has increased significantly during this period due to the strong development of the LSD track. Currently, LSD-related underlying assets are the main source of income in Pendle.
In addition to the LSD narrative, Pendle also officially moved towards the RWA narrative in the second half of the year. On August 24, 2023, Pendle announced the launch of RWA-related products in its Pendle Earn. The first one is a fixed-rate income product with MakerDAO's Boosted DAI Savings (sDAI) as the underlying asset.
The second is a fixed-income product with fUSDC in the Flux Finance lending protocol as the underlying asset.
According to the data from Defillama, there are currently 25 protocols in the RWA track, and Pendle happens to have chosen the two most mature leading protocols in RWA in terms of tokenization and non-tokenization. Users can obtain interest-bearing income from these two protocols by directly depositing DAI and USDC in Pendle Earn.
Source: https://app.rwa.xyz/treasuries
03. Pendle Data Analysis
Currently, Pendle's total TVL is $139.41M. From Defillama's data, we can see that Pendle's TVL has maintained a significant increase since 2023, from around 15M at the beginning of the year to nearly 10 times now. Pendle's TVL has been relatively stable overall since reaching its peak and is still on an upward trend.
There was a certain decline in August mainly due to the decline in the crypto market, which affected the price of ETH in its TVL, rather than the outflow of assets within its protocol.
As shown in the figure below, nearly 67.39% of Pendle’s TVL comes from the LSD sector, 12.31% from the RWA sector, and 20.3% from other sectors.
Since Pendle launched RWA-related businesses on August 24, its overall TVL has increased from $117M to $140M in the following week, an increase of nearly 20%. This shows that RWA's business has brought new funding drivers to Pendle's business.
Source: https://app.sentio.xyz/share/lv18u9fyu1b558xf?from=%22-2M%22&to=%22now%22
Judging from the number of Pendle-related topics on Twitter, Pendle's popularity on social media has not diminished, and it has maintained a high level of attention in the crypto community. Twitter is one of the most influential platforms for crypto adoption, and the continued growth of Twitter's influence can lay a good foundation for the large-scale adoption of Pendle.
Source: https://defillama.com/protocol/pendle
Judging from the number of token holders, the number of $PENDLE holders has maintained an upward trend because in its token economics, staking Pendle can obtain vePendle, and vePendle can be used to Boost users' income. At the same time, users who hold vePendle for voting can also obtain additional annualized income.
Source: https://pro.nansen.ai/token-god-mode/notable?token_address=0x808507121b80c02388fad14726482e061b8da827
04. Pendle’s multi-chain expansion
In March 2023, Pendle will launch Arbitrum
In July 2023, Binance announced the launch of Pendle, and then Pendle announced the launch of the BSC mainnet
At the end of July 2023, Pendle announced that it would launch Mantle Network and receive Mantle Ecosystem Fund allocation.
In mid-August 2023, Pendle will launch OP Mannet
At the end of August 2023, Pendle announced that it had received investment from Binance Labs
From the above development history of Pendle, we can see that Pendle has made rapid progress in multi-chain deployment this year, adding a chain almost every quarter, and has maintained a development plan with a good rhythm.
Its products have been deployed on 4 EVM-compatible chains, and Mantle's mainnet is expected to be launched in the next few months.
It is worth noting that Mantle is a L2 network incubated and managed by BitDAO (created by Bybit in 2021), whose treasury currently manages US$3.4 billion in assets.
According to Mantle's plan, it will use more than 270,000 ETH in its treasury as financial backing to release the Mantle LSD protocol on the Mantle network. At the same time, it will also cooperate with protocols such as Lido and Penlde to jointly build the LSD ecosystem to expand its influence in L2.
It is not difficult to foresee that with Mantle's strong financial support, once its LSD development plan is launched, a large amount of funds will flow into the network. Pendle, as part of its officially supported LSD ecosystem, is expected to achieve good development after it is launched on the chain in the future.
From the figure below we can see the development of BSC and OP, the two chains recently launched by Pendle. BSC has been online for nearly two months, with a TVL of $8.2M. OP has been online for less than two weeks, and its TVL has reached $2.46M, which is expected to increase further in the future.
Source: https://defillama.com/protocol/pendle
05. Conclusion
It is not difficult to find that as blockchain gradually matures, the narrative of investors and market preferences has gradually shifted to "Real Yield".
Whether it is LSD or RWA, what they aim to achieve is to provide investors with stable and real returns, rather than castles in the air APY.
Pendle has firmly grasped this trend, packaging high-quality assets into Pendle Earn, removing the complex logic of understanding, and allowing investors to directly obtain the rare fixed income in the crypto world in the simplest, low-threshold and low-risk way.
At the same time, high-level investors are also provided with high-yield interest rate long and short trading methods, meeting the needs of users with different risk preferences from low to high risk preferences.
Whether it is the LSD track favored by crypto people or the RWA track combined with off-chain assets, both tracks are in a period of growth in the foreseeable future.
Pendle's core products are directly related to the development of the two tracks. At the same time, judging from Pendle's control over trends and rhythms, its ability to follow trends is a leader in DeFi protocols. With the growth of the two tracks in the future, Pendle's subsequent development space is still worth looking forward to.
