Pendle Finance
Web3 / defi
Pendle Finance is a DeFi protocol that enables users to tokenize and trade future yield by splitting yield-bearing assets into principal and yield components. Users can separate an interest-generating token into its principal (PT) and yield token (YT) components, allowing them to trade yield independently from principal recovery. This mechanism creates new trading and hedging opportunities, enabling yield traders to speculate on future rate movements while principal buyers can secure locked yields at predetermined prices. Example: A user holding Lido stETH can deposit it into Pendle, receiving separate Principal Tokens and Yield Tokens, then sell future ETH staking yield to a yield trader while retaining principal exposure. Why it matters for DeFi: Pendle enables yield derivatives and rate speculation markets, allowing sophisticated investors to hedge or amplify yield exposure while providing liquidity providers with new revenue strategies.
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