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Decentralized finance today is still largely an ouroboros, as Vitalik once pointed out.
Protocol revenues and fees are real, and they prove the tech works. That is important! But these revenue flows are still largely the downstream result of speculative capital passing between traders in a circular, self-consuming cycle.
Protocols like Pendle observed these state of affairs, declined to pass judgment, then simply built the best possible product to capitalize on this ouroboros-like economy.
Want a fixed yield? Buy Pendle Principal Tokens (PT). Prefer to farm points with expectation of big airdrops? Buy Yield Tokens (YT). It’s as simple as that.
What Pendle has created is not new. It’s the TradFi-equivalent of zero-coupon bonds, interest rate swaps or forward rate agreements.
But Pendle has emulated these traditionally structured products extremely well in DeFi. In 2024, Pendle grew its TVL levels to $4.4 billion and daily average trading volumes to $96 million — a 20x and 100x increase, respectively.
Pendle is so successful that it has in effect become a de facto token launchpad akin to an ICO, but better.
For instance, in the weeks leading up to Berachain’s genesis airdrop, Berachain Pendle markets accumulated more than a billion in TVL from users wanting to yield trade on Berachain assets and game airdrops.
Pendle’s 2025 outlook
Pendle co-founder TN Lee announced last week the protocol’s big plans for 2025.
There are a host of minor piecemeal upgrades coming, like dynamic fees for yield trading and improvements to the vePENDLE token bribe system.
But the most notable upgrade looks to Pendle’s plans to target the most lucrative yield source in crypto: perps funding rates.
As part of this “Boros” (a play on ouroboros?) initiative, Pendle will allow traders to swap to yield trade perpetual funding rates.
Source: Pendle
This would enable protocols like Ethena to lock in predictable funding yields, which would entail fixed APYs for sUSDe holders.
In hyper-volatile perps markets like memecoins, long traders will also be able to hedge against their perps positions by locking into a predictable, fixed funding rate.
Pendle is also planning an expansion to non-EVM chains Solana, Hyperliquid and Ton. Solana already has a burgeoning yield-trading market, though it’s still small relative to Pendle.
Finally, Pendle is coming for TradFi. The pitch is straightforward: “Why stick with 8% yields on a 5-year corporate bond when you can enjoy a 17% WBTC PT yield?”
This is part of the team’s plans to launch a KYC’d product for regulated entities as well as Islamic funds to access crypto yields.
Pendle’s pendulum is swinging, and looks to swing even harder in the coming year. With its planned expansions to target non-EVM chains and TradFi liquidity, these moves radically expand Pendle’s target addressable market beyond spot yield markets on Ethereum and the broader crypto sector itself.
