What is Pendle and what is its role?
Pendle lets you split a yield-bearing crypto asset into two tradeable tokens, one for the principal and one for the yield. PENDLE is a separate token.
Vahe HakobyanEditor-in-chief
Updated Oct 6, 20263 min readFact-checked
On this page
- PENDLE is the protocol's token, not a share of a market
- Holders lock PENDLE to vote and earn rewards
- Risks include smart contract bugs and thin liquidity
- Pendle launched in 2021 on Ethereum
The protocol's job is to create a market for the yield an asset will earn. One trader takes a return that is set in advance, and another takes whatever the asset actually pays.
What does the PENDLE token do?
PENDLE is the protocol's own token, separate from the principal and yield tokens that trade in its markets. Holders lock it to vote on how the protocol is run, and those same locks bring rewards and market incentives.
How does Pendle split yield?
Pendle takes an asset that already earns a return and divides it into two tokens that trade apart until a maturity date. The principal token stands for the original asset, and the yield token stands for the yield it earns.
What is Pendle used for?
People use Pendle to separate the return on an asset from the asset itself. One user takes a payoff that is set when the trade is made, and another takes whatever the asset actually pays.
- Lock in a known return: a principal token bought at a discount pays a set amount later.
- Speculate on yield: a yield token gains value if the asset earns more than the market expected.
- Earn incentives: providing liquidity to a Pendle market can earn PENDLE rewards.
Who created Pendle and what are the risks?
Pendle launched in 2021 on Ethereum, built by a team led by TN Lee. The main risks are smart contract bugs and thin liquidity in some markets. A yield token can lose most of its value if the underlying asset stops paying yield, and US regulators have brought cases against other DeFi projects.
Frequently asked questions
Pendle is the protocol that runs the yield markets, and PENDLE is its own token. Holding PENDLE does not give you a share of any market's assets.
Principal tokens can be redeemed for the underlying asset, and yield tokens stop earning new yield. The two tokens stop trading as separate claims.
Access depends on the interface you use, and some front ends block US users. US regulators have brought cases against other DeFi projects, so the legal picture can change.
Staking usually means locking a coin to help secure a network. Pendle does not secure a network. It creates a market that separates an asset's yield from the asset.
