PendlePrice

(PENDLE)

Pendle utilizes a unique "yield stripping" mechanism to split yield-bearing assets into two separate components: the Principal Token (PT) and the Yield Token (YT). The process begins by wrapping an asset into a Standardized Yield token. The PT represents the base value of the original deposit, while the YT represents the right to all future yield generated by that asset. This allow users to manage and trade principal and interest as independent financial instruments.

Upon reaching maturity, YT tokens expire and their value drops to zero because there is no remaining future yield to collect. Conversely, PT tokens become fully redeemable for the underlying asset on a 1:1 basis. At this stage, the fixed yield is considered realized, and holders can withdraw their original principal plus the accrued interest by converting their PT back into the base asset.

Users can secure a fixed yield by purchasing Principal Tokens (PT). Since PT represents the future right to the underlying asset and is typically sold at a discount to the current market price, it functions similarly to a zero-coupon bond. By buying PT and holding it until the maturity date, the user effectively locks in a guaranteed interest rate, as the token will be redeemable for its full value regardless of market yield fluctuations.

Traders who believe the yield of a specific asset will increase can "long" the yield by purchasing Yield Tokens (YT). Because YT is significantly less expensive than the full underlying asset, it offers high capital efficiency. This provides traders with leveraged exposure to interest rates; if the actual staking rewards or yield generated during the period exceed the price paid for the YT, the trader earns a profit on the difference.

Pendle is a popular tool for farming protocol rewards or points. When a user holds a Yield Token (YT), they are entitled to all the yield and associated incentives generated by the underlying principal. This allows users to accumulate rewards at a significant multiple—often 10x to 50x—compared to simply holding the asset, as the YT provides the rewards for the full principal amount at a fraction of the cost.

vePENDLE is the governance version of the protocol token, obtained by locking PENDLE for a specific period. This system follows a vote-escrowed model, allowing holders to receive a portion of the protocol's revenue sourced from yield collected by YT tokens and swap fees. Additionally, vePENDLE holders can vote on the allocation of incentives to specific liquidity pools, allowing them to boost their own potential returns.