Loader
logologo
Alpha Zone
Analysts
My Reading List
Log in
DeFiGaming & MetaverseInfrastructureMarketsNFTs
Pendle Finance - Restaking Tailwinds (S&P version)
Osgur Murphy O Kane
main
Key Takeaways
9 min read
  • Interest rate derivative products are growing in prominence in DeFi as the ecosystem matures and there is increased demand for risk management instruments.
  • Pendle Finance is the leading protocol at present. Its TVL has doubled to ~$280m since the start of Q4 2023 and it stands to benefit greatly from the liquid restaking narrative.
  • It allows users to hedge and speculate on yields (including future airdrops), and gives protocols further utility for their tokens and an additional source of liquidity.
  • There are several key opportunities on Pendle Finance at present outlined in the report, including locking in 24% yield on ETH and other higher risk/reward strategies.
  • Note the multi-layered smart contract risk associated with interacting with any such protocol.

Introduction

Pendle Finance is a tokenized yield-trading protocol primarily on Ethereum mainnet and Arbitrum. Pendle allows users to long or hedge the yield exposure on their yield-bearing assets by splitting the underlying asset into its principal (PT) and yield token (YT). On-chain yield-bearing assets include LP tokens, LSDs, LRTs, LRT liquidity pools on Uniswap, GLP, RWAs (real world assets), etc. Users can purchase the asset at a discount and earn a fixed yield to maturity, long the yield of an underlying asset, or employ a mix of these strategies.

This report looks at how Pendle is well-positioned to capitalize on ETH restaking and its potential to become a fundamental DeFi primitive.

Background

The Interest Rate Market...