What Is Pendle Finance?
Pendle Finance is a yield tokenization protocol within the cryptocurrency sphere. It allows users to speculate and hedge future yields, offering a novel and unique approach to yield-based investment.
Background
TN Lee and a group of pseudonymous developers founded Pendle in 2021.
How It Works
Pendle Finance operates by segmenting yield-generating tokens into Ownership Tokens and Yield Tokens. Ownership Tokens represent the underlying assets, while Yield Tokens are a claim to the future yield of the underlying assets. These Yield Tokens can be traded on the Pendle Automated Market Maker (AMM).
A critical difference between Pendle and similar platforms like APWine is that Pendle allows users to claim Future Yield Tokens (FYT) yield prematurely. This choice gives Pendle a focus on liquidity at the expense of composability. PENDLE, the utility token for the platform, will eventually carry governance rights and value accrual mechanisms as the protocol matures.
Key Takeaways
- Pendle Finance is a yield tokenization protocol that allows speculation and hedging on future yields.
- The protocol splits yield-generating tokens into Ownership Tokens (representing the underlying asset) and Yield Tokens (representing future yield).
- Pendle differs from similar platforms as it allows users to claim Future Yield Tokens (FYT) yield prematurely.
- This approach focuses on liquidity over composability.
- The platform’s utility token, PENDLE, will eventually carry governance rights and value accural mechanisms as the protocol matures.
