In onchain finance, every yield stream is becoming a building block. Today Pendle introduced Boros, a new primitive that takes the floating funding-rate on perpetual futures — one of crypto’s most volatile, yet essential flows — and turns it into a tokenized instrument that can be traded, hedged, or, perhaps, even posted as collateral.
Initially available for Binance ETH and BTC perps, Boros enables a market for fixed-vs-floating funding rate swaps, unlocking a new way to price and hedge directional leverage. Essentially, it’s the creation of a funding-rate derivatives layer that can plug in throughout DeFi.
As the Boros team explains: “Traders exposed to funding rates can hedge their funding exposure on Boros by fixing the amount of funding rate they pay.”
For instance, a trader long ETH perps but wary of rising funding can buy Yield Units (YU) on Boros, paying a fixed rate in order to receive the floating leg — thus locking in a maximum cost of carry. Conversely, a stablecoin protocol like Ethena, which is structurally short perps so as to harvest funding, can sell YU to receive fixed payments upfront.
Complementary to Ethena
Once Boros expands to other exchanges where Ethena hedges its spot longs, Boros should provide ample benefits:
- Swap floating for fixed — Ethena can open a short YU position to convert volatile funding flows into a stable coupon. This enables better reserve planning, reduces tail risk from funding crashes, and even allows Ethena to pre-announce yields with confidence — which its marketing team will love.
- Post YU as collateral —While Yield Units (YUs) do not have fixed cash flows or settle to the underlying like Pendle PTs, they represent tokenized funding-rate swap positions with a clearly defined maturity and oracle-tracked valuation. This structure makes them a candidate for future use as collateral in money-markets. In that scenario, traders or protocols could post YU as collateral to borrow stablecoins, enabling them to retain funding exposure without unwinding directional hedges.
- Price certainty for protocol treasuries — Treasuries can now “lock-in” the yield side of their delta-neutral trades, turning variable PnL into predictable income. Over time, this could bring in more conservative capital, especially if protocols pass through fixed yields to end users.Pendle founder TN Lee expects Boros will eventually harmonize funding rate markets, which are quite variable today:
“Boros allows [arbitrage] of funding rates across exchanges, thereby resulting in the converging of rates,” Lee told Blockworks.
The utility goes further, however. As the Boros team writes: “Beyond the obvious utility to cash and carry traders, the mechanics we are bringing to life open up a new vertical for all assets with yield, regardless if they are on-chain or off.” The model can extend to staking, real-world credit, or even CeFi borrow/lend rates — basically anything for which there is an oracle-verifiable yield source.
To support this new interest-rate layer, Boros will open up dedicated vaults that earn fees and boosted incentives by providing liquidity to fixed/floating funding rate swaps. These vaults mirror Pendle’s V2 pools, allowing LPs to take the other side of directional hedging demand and earn a share of the new market’s fee flow.
Tokenize everything
Boros isn’t the only project racing to turn yield-bearing positions into “spendable” collateral. Notional’s forthcoming Exponent upgrade takes a strikingly similar tack: it “tokenizes new yield strategies specifically designed for leveraged yield users” and then lets those tokens be pledged on deep-liquidity lending rails such as Morpho.
Exponent’s headline innovation, Smart Redemption, lets a vault holder redeem a staked asset (e.g., sUSDe for USDe) without first withdrawing collateral from the lending market, enabling costless exits and, crucially, making yield tokens with lock-ups or thin secondary liquidity acceptable to risk engines.
Functionally, the two designs rhyme: both Boros and Notional Exponent wrap a variable cash-flow into a token whose value can be reliably marked by onchain oracles and tracked to maturity, giving risk engines a clear path to whitelist it as collateral. Even though a YU’s market value simply decays toward zero at expiry, the predictable oracle feed and known payoff window still let lending markets haircut it with confidence.
The upshot is the same capital-efficiency fly-wheel: Users can lever against the very stream of income that services their debt, while money-markets gain a diversified pool of “income-backed” collateral that is less correlated to spot swings. Together, Boros and Exponent point to a DeFi future where yield primitives are the core building blocks of credit, shrinking idle capital and smoothing the path to leveraged, yet risk-managed, strategies across the stack.
Importantly, Boros does not launch a new token. Instead, 80% of its fees will accrue to vePENDLE holders, continuing Pendle’s model of rewarding long-term stakers. At the same time, PENDLE emissions will be used to bootstrap Boros vaults. That’s also a potential source of sell pressure, but one that is likely to recycle back into vePENDLE locks as yields increase. The token’s fundamentals benefit from the added fee stream without unnecessary dilution — a design choice that deserves credit, especially in a time when many founders opt to spin off products with one or more new tokens.
Starting over
Still, the launch is not without complexity. Boros is “starting from 0 again,” the team admits, with its own risk engine and vault logic.
“As a new platform being built to stand alongside Pendle V2,” the team notes, “risk management will be our main focus at the initial stages — especially at the start when new mechanics and market dynamics are being experimented with.”
Among those dynamics: a new type of price-volatility feedback loop. Today, a sudden 1,000 bips spike in funding can force traders to unwind spot-perp basis trades just to stop the bleeding— creating a cascade of liquidations and market stress. But with Boros, those players can hedge the funding leg without closing directional exposure. If liquidity is deep, YU markets could act like interest-rate swaps in TradFi: dampening volatility and compressing extreme funding prints.
