Pendle Finance: Tokenizing DeFi Yield

Pendle Finance is a yield trading protocol that allows users to trade DeFi assets at a discount and materialize the yield that yield-bearing DeFi assets generate into fungible tokens. It also provides a dedicated market for these tokenized yield assets, enabling users to trade them and protocols to participate in liquidity incentives, commonly known as “bribes” in the DeFi space.

Pendle’s yield tokenization works by “wrapping” yield-bearing tokens into standardized yield (SY) tokens. The SY token is then split into two separate components that are minted as a principal token (PT) and yield token (YT), that have expiry dates.