Pendle

Pendle is a decentralised finance (DeFi) protocol focused on yield tokenisation and trading. It allows users to manage and trade future yield on various yield-bearing assets. Pendle tokenises yield-bearing tokens into two components: Principal Tokens (PT) and Yield Tokens (YT). These components can be traded independently on Pendle’s automated market maker (AMM), which supports different DeFi strategies including fixed yield and speculative yield trading. The protocol's architecture facilitates yield management and enables complex financial strategies like hedging yield fluctuations or gaining leveraged exposure to yield changes.

Pendle operates permissionlessly, supporting diverse yield-bearing assets across various chains, including Ethereum and layer-2 solutions like Arbitrum. The protocol's governance is driven by vePENDLE, a vote-escrowed token system that incentivises participation in governance and liquidity provision.

Pendle is primarily used for yield management and yield trading. The protocol’s main use cases include:

1. *Yield Tokenisation*: Pendle allows users to convert yield-bearing assets (e.g., stETH) into two separate components: Principal Tokens (PT), which represent the principal amount, and Yield Tokens (YT), which represent the future yield. This tokenisation enables users to either lock in fixed yields or speculate on yield fluctuations.

2. *Trading on Pendle AMM*: Users can trade PTs and YTs independently on Pendle’s AMM. By trading PTs, users can lock in future yield or buy yield at a discount. YT holders can speculate on increasing yield by purchasing YTs during low market conditions and selling them at a higher value.

3. *Advanced Yield Strategies*: Users can engage in various strategies, such as fixed yield (earning a predetermined yield on assets), leveraged yield (increasing exposure to yield changes), or hedging against yield volatility. Pendle also supports liquidity provision in its AMM, where users earn rewards from trading fees, vePENDLE incentives, and rewards from yield-bearing assets like stETH.

4. *vePENDLE Governance and Incentives*: Holders of vePENDLE (vote-escrowed PENDLE) can lock their PENDLE tokens to participate in governance and boost their liquidity rewards by up to 250%. Additionally, vePENDLE holders control the flow of rewards to liquidity pools by voting, and they earn a share of the fees generated by the protocol.