Pendle Finance is a protocol deployed on Ethereum and Arbitrum that facilitates the tokenization of yield on assets through a fixed-rate lending market. Users can deposit yield-bearing assets into the platform, and the smart contract separates the principal and interest by minting principal tokens and yield tokens. The protocol also incorporates an automated market maker (AMM) algorithm for trading these tokens. Recently, Pendle Finance has experienced significant growth in total value locked and increased market demand, thanks to the increased market interest in the Liquidity Staking Derivatives (LSD) section and its integration with protocols like Lido and Frax.

Pendle

Pendle Finance

Pendle is the first protocol that enables the trading of tokenized future yield on an AMM system. We aim to give holders of yield-generating assets the opportunity to generate additional yield and to lock in future yield upfront, while offering traders direct exposure to future yield streams, without the need for an underlying collateral.


In part 1 of our Pendle LP Performance study, it was concluded that Liquidity providers (LPs) on Pendle:

- outperform vs non-LPs (merely holding the underlying asset)
- experience no impermanent loss (IL)
- longer time frame LPs results in more outperformance

In part 2, we further studied the performance vs yield-bearing assets in DeFi i.e. stETH, GLP and gDAI. 

Conclusion? No change in findings: 

- Pendle LPs generally outperform non-Pendle users, even when excluding PENDLE incentives
- In the worst case, IL was observed to be 0.85% only
- When including PENDLE incentives, there was zero IL in the stETH and gDAI pools
- The performance of an LP using Zero Price Impact Mode vs. without depends on the Underlying and Implied APY of the pool. Regardless, Pendle LPs still generally outperform non-Pendle users

Check out part 2 of our in-depth study in the report below:

https://lnkd.in/gCreNMW8

FINANCE:PENDLE

Pendle Finance

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