TEAM

The main founder of the Pendle protocol is TN Lee, who previously served as the Head of BD (Business Development) at Kyber Network.

Another important team member is Vu Nguyen, who holds the position of Chief Technology Officer. An experienced smart contract developer, Nguyen previously worked as a Lead Developer at Digix. He also has notable achievements in the field of mathematics, having won three gold medals in mathematical Olympiads.

The development team of Pendle Finance consists of blockchain and smart contract experts who work on the development and improvement of the Pendle protocol. These developers are responsible for creating and maintaining the technology that allows Pendle to function as a platform for tokenizing and trading future yields.

TN Lee has assembled a group of passionate individuals in the crypto space who are dedicated to pushing Pendle and DeFi forward.

TECHNOLOGY

SY (Standardized Yield)

Pendle Finance utilizes its own standardized token type called SY, which implements a standardized API for wrapped yield tokens within smart contracts. All yield tokens can be wrapped into SY, providing them with a common interface to build upon. SY opens up the tokenization mechanism of Pendle yields for all DeFi yield tokens, creating a seamless ecosystem.

For example, stETH and cDAI can be wrapped into SY-stETH and SY-cDAI, respectively, standardizing their yield generation mechanisms to be supported on Pendle.

The tokenization of yield in Pendle Finance occurs through two types of tokens - PT (Principal Token) and YT (Yield Token).

Since all SY tokens have the same mechanism, Pendle communicates with SY as the primary interface to all yield tokens. PT and YT tokens are created from SY, and Pendle AMM pools trade PT against SY.

Principal Token (PT)

PT represents the claim on the underlying principle of a yield token, which is paid out upon maturity. For example, if you own 1 PT-stETH with a maturity of 1 year, you will be able to redeem the value of 1 ETH in stETH after one year. PT is tradable at any time, even before reaching maturity.

Yield Token (YT)

YT gives you the right to all the yield generated by the underlying yield token in real time, and the yield can be manually harvested from the Pendle Dashboard at any time. If you own 1 YT-stETH and stETH has an average yield of 5% over the year, you will have accumulated 0.05 stETH by the end of the year. YT is tradable at any time, even before reaching maturity.

Maturity

Maturity is the date when PT becomes fully redeemable for the underlying asset, and YT stops accumulating yield. One asset can have multiple maturity dates, with an independent market for each maturity date. Therefore, the expected yield of an asset may vary depending on different maturity dates.

Users deposit their yield token into a smart contract, and two tokens, YT and PT, are issued. Upon reaching maturity, YT tokens have a value of zero. PT holders can then roll their position into a new YT expiration date or redeem the underlying asset.

vePENDLE

vePENDLE also acts as an additional reserve for PENDLE tokens, which leads to the stability of the token and the overall resilience of the protocol. In this way, vePENDLE becomes a key tool for maintaining the long-term health and success of the Pendle ecosystem.

USE CASE

Pendle Finance is a platform that enables users to tokenize and trade future yields from their yield-generating assets.

The platform can be utilized for

• Early yield access: Yield asset owners can sell their future yields for a fixed period, allowing them to access cash upfront and lock in their profits. This is particularly useful in volatile market conditions, when yields may be uncertain
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• Trading future yields: Traders can buy and sell tokens representing future yields (YT) without having to lock their underlying assets. This provides them with a more efficient way to gain exposure to future yields
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• Providing liquidity: Users can provide liquidity to their YT in Pendle AMM and earn fees and other incentives. This allows them to generate additional yield from their yield-generating assets

• Hedging interest rate risks: Users can sell their YT at a fixed price, allowing them to lock in their interest rates and hedge against future interest rate fluctuations
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• Flexibility and composability: Through the tokenization of yields, Pendle users can utilize their yield tokens in other DeFi protocols, enabling them to maximize their yield and create complex strategies
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• Access to yields without capital lock-up: Users can purchase YT without the need to lock their capital in the underlying asset, enabling them to gain yield exposure with a smaller capital commitment

The PENDLE token can be used for

• Escrow voting: By locking PENDLE, users receive vePENDLE tokens, which can be used for voting on higher APYs for pools
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• Lock: If users choose not to vote with their vePENDLE tokens for pools, they receive rewards from selected Pendle fees

COMPETITION

Pendle Finance operates on the Ethereum, Arbitrum and BNB Smart Chain. Its unique selling proposition is the ability to tokenize and trade future yields, which sets it apart from many other DeFi platforms.

Direct competitors are those platforms that offer similar revenue tokenization services, such as Sense or Tranchess Yield.

Ethereum Blockchain

Pendle Finance initially started on the Ethereum blockchain. However, compared to Arbitrum, it does not have as much user support, ranking 5th in the Yield category according to TVL (Total Value Locked) data.

As seen in the graph, the TVL has been growing since the beginning of 2023, indicating an influx of new liquidity into the protocol.

Competitors on the Ethereum Blockchain

Sense Finance - This protocol works on the same principle as Pendle, though it does not have as large of a community. Compared with Sense, Pendle offers the use of its PENDLE token, a larger TVL and a longer history.

As we can see from the graphs, Pendle has performed better since its launch than Sense. This is despite the fact that Pendle only raised 3.7 million USD from investors during its funding rounds, while Sense raised 5.2 million USD before its launch.

Pendle

Sense

The decrease in TVL  shown on the graph is due to the expiration of the series. As of July 25, 2023, there is only one active series on wsETH.

Arbitrum Blockchain

On the Arbitrum blockchain, Pendle Finance performs the best among the platforms in the Yield category, based on TVL data. Its competitors are other DeFi platforms that also enable the tokenization and trading of future yields, but there are no such projects on this blockchain, therefore Pendle Finance has no direct competitors on Arbitrum.

The graph demonstrates that since its launch in February 2023, liquidity on Pendle Finance has been consistently increasing, indicating growing trust in the protocol.

Competitors on the Arbitrum Blockchain

As mentioned above, there are no platforms that offer the same services as Pendle Finance therefore we show a comparison to prePO as an example of a trading platform.

prePO - On this platform, you can short or long selected tokens using ETH. This is not a direct competitor, but by way of comparison, Pendle has a larger community base, better use of its native token, and a larger TVL.

Here, we can see that both projects on Arbitrum were launched in the same month, March 2023. However, while prePO is struggling with limited liquidity and a small community, Pendle Finance has demonstrated an established brand from the Ethereum blockchain and a strong community that has supported the protocol, even on a different blockchain. prePo raised 3.2 million USD from investors for its initial operations.

Pendle

prePO

BNB Smart Chain

The latest expansion of Pendle Finance is its arrival on the BNB Smart Chain. It was launched on July 7, 2023, and since then, it has been steadily building a stronger and more prominent position on the blockchain. Within just a month, it managed to secure 9th position in the Yield category, based on TVL.

Competitors on BNB Smart Chain

Tranchess Yield - This protocol has been operating on the BNB Smart Chain since June 2021 and experienced a lot of hype during the year 2021, and the beginning of 2022. However, after it subsided, there was a user outflow, and the overall TVL suffered significantly. It functions on a similar principle as Pendle Finance and has a larger supportive community on the BNB Smart Chain. Nevertheless, Pendle Finance surpasses Tranchess in terms of community activity, both on Discord and X, and boasts more refined tokenomics for the PENDLE token.

Although the graph may suggest that there is almost no TVL here, its value still hovers around 50 to 60 million USD, although this is not much compared with the previously locked 1.8 billion USD.

TOKENOMICS

Pendle Finance has its native token, PENDLE, which is used for voting and locking purposes. The token was launched in 2021 with the following allocation:

• 37% - Liquidity Incentives
• 22% - Team
• 18% - Ecosystem Funds
• 15% - Investors
• 7% - Liquidity Bootstrapping
• 1% - Advisors

In 2022, the tokenomics of PENDLE were adjusted, and the maximum supply was removed, making it an inflationary token. By April 2026, the inflation rate is expected to decrease to 2% annually, which will be allocated for incentives.

Token unlock

All tokens for the team, investors, and advisors were unlocked within 2 years of the token launch. Currently (as of August 2, 2023), only new tokens are being vested for incentives, with a value of 405,898 PENDLE per week. This number will decrease by 1.1% every week until April 2026, when the vesting rate is expected to stabilize at 2% annually.

PENDLE Usability

The utilization of the PENDLE token involves locking it in a smart contract and receiving vePENDLE in return. These tokens enable a higher degree of decentralization and provide PENDLE holders with access to a range of features that enhance the utility of the tokens.

• ‍Lock: You can obtain vePENDLE by locking your PENDLE tokens. The value of your vePENDLE is proportional to the quantity and duration of the lock, up to a maximum period of 2 years. Each wallet is associated with a specific vePENDLE expiration date. The value of your vePENDLE decreases over time and reaches zero once the lock period ends, when your locked PENDLE tokens will then be unlocked
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• Governance: vePENDLE also powers the incentive routing mechanism in Pendle Finance. Holders of vePENDLE can vote and direct the flow of rewards to different pools, effectively incentivizing liquidity in the pool they vote for
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• Rewards: Pendle also collects a fee of 3% from all yields generated by YT. As of July 3, 2023, 100% of these fees are distributed to vePENDLE holders, while the protocol does not collect any revenue (this may change in the future). vePENDLE also provides increased rewards for liquidity pools (LPs). If you are an liquidity provider in a pool and also hold vePENDLE, your rewards for all your LP positions will be further increased based on the value of your vePENDLE
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• Staking: PENDLE tokens can be staked in pools on various decentralized exchanges (DEXs) such as Balancer, Camelot, Uniswap, Trader Joe, Sushiswap and Curve

Another use case for the PENDLE asset is outside of Pendle Finance, in other protocols that utilize Pendle assets.

• ‍Penpie - LP tokens that you receive on Pendle Finance can be further used in this protocol. Additionally, you can lock PENDLE tokens to receive mPENDLE, and by staking this token, you will earn rewards from Penpie's yield. Penpie has its own bridge, thanks to collaboration with LayerZero, which allows mPENDLE to be freely transferred across the 3 blockchains on which Pendle operates. This protocol is focused exclusively on Pendle assets
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• Equilibria - This protocol functions on the same principle as Penpie (PENDLE staking), with the difference that it doesn't have its own bridge and has a differently designed veTokenomics for its EQB token
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• StakeDAO - Another use for the PENDLE token is converting it to sdPENDLE and staking it
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• Rodeo Finance - This platform allows leveraged trading against LP Pendle assets, such as wstETH, rETH, and ARB/ETH. (This protocol, having been exploited on July 11, 2023, continues to function)

• Dolomite - This protocol supports staking in PT GLP, which is the LP token for the GLP pool on Pendle Finance
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• TimeSwap -  Here, you can use PT wstETH as collateral and borrow USDC against it
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• Factor - This protocol enables Auto Compound for PTS wstETH. (This protocol was created in July 2023, so it's currently a young protocol with a small TVL)
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• Stella - In this protocol, you can either provide the PENDLE token itself to lending pools, or provide PENDLE/ETH for a leverage strategy

REVENUE

The Pendle protocol is designed to support its users and community, and one of the key mechanisms through which it achieves this is the fee system. Specifically, the protocol collects a 3% fee from the yield generated by the Yield Tokens (YT). This fee is then redistributed among all holders of vePENDLE, which are tokens representing long-term commitments to the Pendle protocol. The distribution of this fee may change in the future to allow the protocol to generate profit.

This mechanism allows vePENDLE holders to earn income from the fees generated on the platform, which incentivizes long-term holding and support of the protocol.

It is important to note that the Pendle protocol itself does not have any direct revenue. Instead, its economy is based on the issuance of PENDLE tokens. This model allows Pendle Finance to sustain its operations while supporting its community.

PENDLE TOKEN LIQUIDITY

To purchase a PENDLE token, you must visit KyberSwap, where it can be purchased.

On the Ethereum blockchain and BNB Smart Chain, the PENDLE token has lower liquidity compared with the Arbitrum blockchain. When transferring around 250,000 USDT or 130 ETH on the Ethereum blockchain, there is a 14% price impact, compared with 32% on the BNB Smart Chain and only 2.5% on Arbitrum. Therefore, it is better to conduct exchanges on the Ethereum blockchain and BNB Smart Chain in smaller amounts.

PENDLE has approximately 6.2 million USD in liquidity on DEXs, and centralized exchanges (CEXs) hold PENDLE tokens with a total value of around 28 million USD. The largest share is owned by Binance, with 14 million USD. This is likely because on March 7, 2023, Binance listed the PENDLE token and also received 2% of the total token supply (5,021,222) as rewards for their launchpad.

The second exchange with the highest amount of PENDLE tokens is Crypto.com, valued at 11 million USD. PENDLE has been listed on this exchange since 2021. From July 12 to July 26, 2023, a campaign ran for 1,000 users who traded at least 20 USD worth of PENDLE, with the chance to win 10 USD in PENDLE tokens.

Regarding unknown wallets, the top 10 wallets collectively own approximately 24.5 million PENDLE tokens, equivalent to around 23 million USD. The total number of PENDLE holders is 4,400. Therefore, the first 10 wallets own 15% of the circulating supply's market capitalization.

The following are a few specific wallet addresses and their corresponding activities:

• ‍0xC54A347c31763dFF669177E74b6aC36977a4d62E: This wallet has been accumulating PENDLE since January 2023, and it is likely associated with an institution as its assets have its origins at Coinbase Prime and Galaxy Digital
• 0x5fA58f29c6138C07C2F9E9D0066F774a7CA3b7DF: This address received over 1.2 million PENDLE from the ecosystem fund, some of which were transferred to other wallets, where no activity has been observed yet. This address accumulated over 480,000 PENDLE in February 2023
• 0x65fEd6AC2CBf9b552fBf6EB46FE01a9cD6086ac9, 0x01F09570377df6abFC44F7f79AFb392081CF842A, 0x6b4166974FCf730d7933656D26d52922Ee285CF0, 0xf82e1E9381A1d92B5897eBe2F9B61160222f1aeb, 0x825d968A786badd6B06ca5853eaeb176919c47d4: These 5 wallets received 1.8 million PENDLE tokens from April 2022 to April 2023. There has been no activity observed with these tokens. These wallets likely belong to the team members, and their tokens were subject to a vesting period of 2 years with a 1-year cliff
• 0x825d968A786badd6B06ca5853eaeb176919c47d4: This wallet belongs to Spartan Group, and it received 1.4 million PENDLE tokens from July 2021 to April 2022. The tokens have not been used for any transactions
• 0x98257e5A953c8932abEB0F678Ec3A90e5e587263: This wallet received 1.25 million PENDLE tokens from October 2021 to October 2022, indicating it is a VC wallet. The tokens have not been used for any transactions
• 0x4a0df1a06740dd87de62badd3033720d9951f5fe: On June 30, this wallet received 1.19 million PENDLE, making it the second-largest unknown wallet in Pendle after 0x5fA58f29c6138C07C2F9E9D0066F774a7CA3b7DF

Of these top 10 wallets, only the first two are active, while the rest show no activity, indicating that they are either team members or investors. After a quick examination of 20 more wallets, it appears that most of them are inactive and have not made any transactions with their vested tokens. These tokens are not locked anywhere, so there is a possibility of selling if there is significant appreciation.

PARTNERSHIPS

The partnership with Penpie protocol provides access to the exchange of PENDLE tokens for mPENDLE and their subsequent staking, giving PENDLE holders the opportunity to earn additional yields and utilize new financial instruments.

Through the Equilibria protocol, PENDLE token holders can participate in staking, which provides stable yields and contributes to the overall liquidity and sustainability of the Equilibria ecosystem.

The collaboration with OneClickCrypto offers another opportunity to stake PENDLE tokens and expands the protocol’s reach into various financial activities. This partnership enhances the liquidity and attractiveness of the PENDLE token for investors and users.

The partnership with LayerZero helps the vePENDLE tokens, which are ERC-20 tokens on the Ethereum platform, to be compatible for voting across all the blockchains on which Pendle Finance operates. This partnership allows Pendle Finance to develop its pools on different blockchains without the need to create separate vePENDLE tokens on each of them.

Pendle Finance also has partnerships with Frax, Lido, Aura Finance, and Ankr, which connect Pendle Finance with their pools and provide liquidity.

These partnerships significantly expand the utility of the PENDLE token, offering holders many more opportunities for profit and active participation in various platforms and protocols. These expansions open up new avenues for diverse financial activities and investment strategies.

INVESTORS

In 2021, a Private Round was held in which 3.7 million USD was raised, and investors were allocated 37 million PENDLE tokens, which were gradually released over the course of 1 year after the liquidity bootstrapping event. At this moment (July 2, 2023), all tokens for investors have been vested.

Among the investors

• Mechanism Capital: This company started selling their tokens immediately after vesting, the last of which were sold in May 2022
• Crypto.com Capital: This fund is connected to the Crypto.com exchange, which currently holds approximately 11 million PENDLE tokens. They had 21 million tokens at the beginning of the year, indicating ongoing sales
• Hashkey Capital: This fund sent all their PENDLE tokens, 2.41 million, to the Binance exchange on July 3, 2023
• Spartan Group: This fund has not sold any of their vested PENDLE tokens and currently holds 1.4 million tokens
• CMS Holding: This fund sold all their vested PENDLE tokens as soon as they received them in their wallet
• LedgerPrime: This fund staked half of their vested PENDLE tokens and holds the remaining balance of 267,000 tokens in their wallet, indicating an interest in long-term holding
• Signum Capital: This fund sold all their PENDLE tokens immediately after vesting
• Bitscale Capital: This fund sold all their PENDLE tokens immediately after vesting
• Tang Hongbo (co-founder & CEO of DeBank): This investor sold all their PENDLE tokens within two years

From this information, it can be inferred that the PENDLE tokens vested to investors are no longer at a scale where their sale would significantly impact the price.

FUTURE DIRECTION

Pendle Finance does not have a specific Road Map for its development. Instead, it focuses on a flexible approach that allows the team to respond to market conditions and user needs. This approach has its advantages and disadvantages.

On the one hand, flexibility enables Pendle Finance to adapt and innovate quickly. The team can experiment with new features and strategies without being constrained by a predefined plan. This can lead to faster development and better protocol performance.

On the other hand, the absence of a specific Road Map can make it difficult to predict the future direction and development of Pendle Finance. This may create uncertainty for some investors and users, as they do not have a clear overview of what to expect in the future.

Currently, the main goal of Pendle Finance is to increase the Total Value Locked (TVL) and trading volume on the platform. The team is working to attract more users and capital to the protocol, in order to enhance its liquidity and trading activity. This should result in better protocol performance and higher yields for users.

MARKET POTENTIAL

Pendle Finance is a protocol that focuses on yield tokenization. Its market potential is significant as it aims to bring the traditional interest rate derivatives market (with a nominal value of over 400 trillion USD) into DeFi and make it accessible to retail users. By creating a yield market in DeFi, Pendle enables users to engage in advanced yield strategies, such as fixed yields on stETH.

In 2023, Pendle Finance attracted over 170 million USD, indicating a renewed interest from traders in passive market yield acquisition. The total value of locked assets on the platform has increased by more than 1,100% since the beginning of the year. Out of the total volume, 115 million USD was on the Ethereum network, 65 million USD on the Arbitrum network, and 7.4 million USD on the BNB Smart Chain.

Pendle employs a dual-token model that splits and represents any investment in DeFi protocols like Lido or Stargate into two parts:

• The first part represents the initial asset invested by the user
• The second part represents the future expected yield on that position in the form of token rewards

This allows Pendle to offer several products to users, such as the ability to lock in expected fixed yields, buy yields in hopes of higher returns in the future, or switch between multiple strategies to constantly capture yields offered by different platforms.

DATA ANALYSIS

Analysis of the growing interest in Pendle finance

Pendle Finance transitioned to its V2 version at the end of 2022, introducing vePENDLE and bringing new features for users. As seen on the graph, these changes have had a positive impact on the price since the beginning of 2023. The price experienced a significant increase between June 28 and July 3, which was likely associated with the listing of the PENDLE token on Binance on July 3. Subsequently, a correction followed.

The listing on Binance brought significant trading volume to the PENDLE token, which had previously rarely exceeded 1 million USD.

After its rocketing growth since the beginning of 2023, the market cap is slowly declining. The All-Time High (ATH) was reached as a result of the listing on Binance, but since then, interest in the PENDLE token has been diminishing due to speculation surrounding the listing. Considering the usage of the PENDLE token in other protocols, though, I wouldn't see this declining interest as a long-term problem.

Since the beginning of 2023, the number of new addresses has been growing daily, ranging from 30 to 70 new addresses. After the listing on Binance, it surged to 1,500 new addresses per day. This indicates significant interest from new users, who likely learned about Pendle Finance through Binance.

When we consider both new and active addresses, we can see that the majority of new addresses have continued to remain active within the protocol. Since the beginning of the year, the number of active addresses has ranged from around 100 to 200 per day. Towards the end of June, both new and active addresses increased to 200 to 300 per day, and on July 3, there were over 2,200 active addresses on Pendle Finance. This indicates a growing and engaged user base on the platform.

Pendle Finance remains the largest holder of the token, followed by over 4,400 on the Ethereum blockchain. In addition, there are over 4,100 token holders on the Arbitrum blockchain. This means that the majority of tokens are held by the community, indicating a decentralized distribution and a strong level of participation among users.

Pendle Finance has undergone significant development in recent months, which has had a positive impact on its market metrics. With the transition to Version 2 (V2) and the introduction of vePENDLE tokens, several new features have been introduced for users, resulting in a sharp increase in the price of the PENDLE token since the beginning of 2023.

The listing of the PENDLE token on Binance on July 3, 2023, brought substantial trading volumes that had rarely exceeded one million USD before. This indicates a growing interest in the PENDLE token, which was further supported by the increase in market capitalization and the opportunities for staking the PENDLE token on other platforms.

In terms of network metrics, Pendle Finance has experienced a significant increase in new and active addresses, particularly after the listing on Binance. The daily addition of new addresses has risen to 1,500, suggesting strong interest from new users. Active addresses have also increased, indicating that the majority of new users have remained engaged with the protocol.

It is also important to note that the majority of PENDLE tokens are held by Pendle Finance and the community on the Ethereum and Arbitrum blockchains. This means that the tokens are distributed among over 8,500 holders, indicating strong community support and wide distribution of the tokens.

TECHNICAL FOCUS

Smart Contract Audit

Pendle Finance underwent a thorough auditing process for its new contracts before transitioning to V2, with a total of six audits conducted:

• ‍Ackee blockchain ‍
• Dedaub‍
• Dingbats ‍
• CMichel ‍
• WatchPug ‍
• 0xleastwood

The reports indicate that all significant issues identified during the audits were successfully addressed by the Pendle team, prior to the main deployment of the contracts on the blockchain. This responsive approach to addressing identified problems demonstrates the high level of commitment and capability of the Pendle team in ensuring the security of the Pendle Finance project.

The analysis of various report types shows that Pendle Finance takes a responsible approach to its technical development and dedicates significant attention to mitigating potential risks and issues. This approach helps build trust within the community.

From a technical perspective, the Pendle Finance project can be considered safe and reliable. However, it is important to note that no project is entirely immune to risks, and it is necessary to closely monitor updates and security measures.

Transparency of Development

Pendle Finance shares its code on GitHub, allowing anyone to look at it and potentially report any issues or bugs. Before deploying new modifications, an audit is conducted to eliminate poorly written code.

Comprehensive Documentation

Pendle Finance provides documentation on GitHub in the form of a whitepaper. In addition to that, there is further documentation and instructions with a user-friendly focus.

These resources provide users with detailed information about the functioning of the entire Pendle Finance platform. The whitepaper covers the conceptual framework, technical aspects, and underlying protocols of Pendle Finance, providing a comprehensive understanding of its operation. The user documentation offers practical guidelines, tutorials, and explanations that help users navigate the platform, interact with its features, and make informed decisions.

Interoperability

Thanks to its partnership with Layer Zero, vePENDLE has become a hybrid omnichain token. This means that you can lock it only on the Ethereum blockchain, but you can vote with it on any blockchain on which Pendle Finance operates. This feature allows for broader utilization of vePENDLE without the need to deploy it on each blockchain separately.

Security measures

Since its launch in 2021, Pendle Finance has not experienced any significant security issues, and there have been no reports of fund leaks or exploits from hackers or the development team. This is partially the result of the bug bounty program that Pendle Finance initiated in collaboration with Immunefi, which has been active since 2021.

The team behind Pendle Finance also conducts thorough audits of newly deployed smart contracts to minimize the risk of hacking to the fullest extent. These measures aim to ensure that all smart contracts are secure and protected against potential vulnerabilities.

Thanks to these efforts, and the ongoing diligent monitoring of security, Pendle Finance has gained the trust of the community and its users. The operation of the bug bounty program and the conduct of audits demonstrate the team's responsible approach and their commitment to minimizing security risks associated with the protocol.

Decentralization

As of the current date (4 July, 2023), the decision-making process for the future direction of the Pendle Finance protocol is entirely in the hands of the team. There is no community voting mechanism to decide on changes to the protocol.

At present, the Pendle Finance team has sole authority to determine the direction and strategy of the protocol. Decisions on changes, enhancements and the development of the protocol are made internally by the team responsible for its governance and development.

The introduction of a voting mechanism for protocol changes could be a strategic step in the future, allowing the community to be directly involved in the decision-making process. Such a feature could bring greater decentralization and democratic involvement to the governance of the Pendle Finance protocol.

Future Technological Adaptability

The team behind Pendle Finance is open to adapting to current trends and innovations, which is why they do not have a precisely defined Road Map to follow. Their recent partnership with LayerZero clearly demonstrates their flexibility in development and implementation.

All new deployed upgrades undergo thorough testing and multiple audits and bug fixes before being introduced to the blockchain. This ensures the security and quality of all changes implemented into the protocol. This shows that Pendle Finance places great emphasis on a responsible approach to the development and deployment of new functionalities.

RISKS

Technical Risks

• ‍Code Risk: Despite undergoing audits, it is important to recognize that the software is still susceptible to attacks. If a bug or vulnerability is discovered in the code, it could potentially lead to the loss or theft of user funds‍
• Liquidity Risk: A sudden outflow of liquidity in Pendle Finance could hinder users' ability to trade or withdraw their funds‍
• Partnership Risks: Pendle Finance engages with various other DeFi protocols. If an issue arises within one of these protocols, it could have an impact on Pendle Finance

Regulatory Risks

• ‍Future Regulation: The DeFi sector is receiving increasing attention from regulators. If stricter regulations were to be implemented, it could potentially limit the ability of Pendle Finance to operate or grow‍
• Legal Framework Changes: The crypto world is still relatively new, and legal regulations can quickly evolve. If there were significant changes to cryptocurrency-related laws, it could have an impact on the operations of Pendle Finance

INVESTMENT OPPORTUNITIES

Investment opportunities for the PENDLE token are as follows:

Long-Term

From a long-term perspective, the PENDLE token seems to be on the rise, barring any unforeseen circumstances in the crypto market. Pendle Finance has been around since 2021, and its market demand continues to grow. The upgrade to V2 at the end of 2022 opened up further utility for the PENDLE token through vePENDLE.

• ‍Acquiring PENDLE: In the long run, it is advisable to purchase PENDLE and lock it on platforms like Equilibria and Penpie. By doing so, you can receive ePENDLE and mPENDLE, which can be staked for additional rewards‍
• vePENDLE: Another component of a long-term strategy is the option to purchase PENDLE and lock it using vePENDLE. By holding vePENDLE in your wallet, you can generate income through fee distributions collected by Pendle Finance. Additionally, if you have LP tokens on Pendle Finance, you can boost your rewards using vePENDLE and achieve higher yields

It is important to note that despite the inflationary nature of the PENDLE token, the team remains active and is regularly working on innovation for the protocol, contributing to the preservation of its value. Ongoing innovation and team activities should not significantly jeopardize the price of the PENDLE token, either in the present or the future. Additionally, there is a possibility that the team will focus on strategies aimed at minimizing the impact of inflation on token value and ensuring the sustainability of the Pendle Finance ecosystem.

Yield Tokenization Change

Pendle Finance divides your deposited assets into PTs (Principal tokens) and YTs (Yield tokens), which you can either buy or mint.

• ‍PTs - PT tokens do not have a yield component and are always cheaper than the underlying asset. Their value increases gradually until maturity. (For example, when minting PT USDT for 10 USDT at a 3.84% yield, you will receive PT USDT worth 9.66 USDT, and its value will reach 10 USDT by the end of the maturity period.)‍
• YTs - YT tokens are yield-bearing tokens and are subject to a percentage increase in yield. If you find the APY % on YT to be low and start acquiring YT tokens, and the APY % increases, you earn future yields. (For example, 10 YT USDT is worth 0.33 USDT at an APY of 3.73%. If the APY increases to 4%, the value of 10 YT USDT will be 0.37 USDT.)

Another strategy on Pendle Finance involves trading PT and YT to maximize your APY.

• ‍High APY - If the APY seems high, PT tokens are cheaper, and YT tokens are expensive. Therefore, at this moment, it is best to buy PT tokens and hold them until maturity‍
• Low APY - If the APY seems low and could increase until maturity, it is beneficial to buy YT tokens as they will increase with a growing APY

Another use of Pendle Finance involves related protocols that interact with Pendle:

• ‍Rodeo Finance - This protocol allows leveraged staking in Pendle pools. With leverage of up to 10x on pools like wstETH, rETH, and ARB/ETH, you can significantly increase your APR compared with regular Pendle staking. However, it is essential to manage your position carefully to avoid liquidation due to leverage. (This protocol was exploited on July 11, 2023, but continues to function. When investing, I would exercise increased caution)
• TimeSwap - Here, you can lock your LP PTwstETH and borrow USDC against it, then reinvest it back into the LP on Pendle to increase your yield. Alternatively, you can invest it elsewhere. Pay attention to the maturity period and liquidation price to avoid losing your LP tokens on TimeSwap
• Stella - This protocol supports leverage on the Pendle/ETH pool on Uniswap, with a maximum available leverage of 3.5x. You have the option to choose between Wide, Medium, and Narrow positions, which differ only in the liquidation price range. Additionally, you can lend out PENDLE tokens and earn extra rewards
• ‍Factor - You can deposit your wstETH into the AC (Auto-Compounder) here, and all rewards earned from this pool will be automatically reinvested‍
• StakeDAO - This protocol supports PENDLE tokens, which you can exchange for sdPENDLE and then stake‍
• Curve - You can invest in PENDLE/sdPENDLE pool with an APR of 4.81% to 12.02%. Rewards are paid out in CRV tokens‍
• Equilibria - You can deposit your LP from Pendle here and earn higher yields. Additionally, you can exchange Pendle for ePendle‍
• Penpie - Here, you can also deposit your LP from Pendle and achieve higher yields. Unlike Equilibria, you can convert PENDLE to mPENDLE on Penpie, and you have the option to stake or lock it for even greater returns