💡 What if Ownership and Yield Could Be Traded Separately?
Imagine owning a fruit orchard worth $500,000 that earns $50,000 per year from harvests. Some years bring abundance, others fall short. What if you could sell the future fruit income separately from the orchard itself?
That’s the idea behind Pendle Finance — a DeFi protocol that splits crypto assets into two parts:
- Principal Token (PT): Represents the asset’s ownership.
- Yield Token (YT): Represents the right to earn yield over a defined period.
Let’s dive into how Pendle works, what problems it solves, and how it empowers both conservative and aggressive crypto investors.
🚀 What Is Pendle Finance?
Pendle Finance is a DeFi yield-strategy protocol that enables users to split yield-bearing tokens like stETH, aUSDC, or GLP into two components:
- PT (Principal Token): Redeemable for the full asset at maturity.
- YT (Yield Token): Grants access to the yield generated by the asset during the term.
This allows:
- Fixed income investors to lock in predictable returns
- Yield hunters to bet on high performance
- Risk managers to hedge against volatile interest rates
📊 Pendle’s Total Value Locked (TVL)
As of early 2025, Pendle boasts a TVL of $4.78 billion, ranking it among the Top 15 DeFi protocols globally.
The protocol saw rapid growth in 2024, followed by a healthy correction and a new wave of adoption. This suggests not hype, but sustained market confidence after stress testing.
Source: DefiLlama
⚙️ How Does Pendle Work?
Pendle lets you lock in yield from yield-generating protocols like Aave or Lido — before the yield actually materializes.
“How much yield can you make from lending 1,000 USDC on Aave?”
Maybe 1%, maybe 5% — no one knows for sure.
With Pendle, you can fix your yield today.
Here’s a simplified example:
- You deposit 1 stETH (a token that earns ETH staking rewards) into Pendle.
- Pendle splits it into:
- 1 PT-stETH, which you can redeem as 1 stETH when the contract matures.
- 1 YT-stETH, which gives you the right to earn all staking rewards over the next year.
Now, you can:
- Sell PT for instant liquidity
- Trade YT based on how bullish you are on ETH staking yield
Pendle offers a custom AMM (automated market maker) where you can swap PT and YT, making these tokens liquid and tradable at any time.
🖥️ Platform Walkthrough: The Pendle App
Visiting app.pendle.finance, you’ll see different yield strategies organized by token and maturity date.
Let’s take an example:
- A 1-year stETH contract matures in 349 days.
- Current stETH market price: $3,316.98
- PT-stETH (principal token) trades at $3,216.20
- YT-stETH (yield token) trades at $100.78
This gives users two clear strategies:
✅ Strategy 1: Fixed Yield with PT
Buy PT-stETH for $3,216.20. One year later, redeem for 1 full stETH (worth $3,316.98 or more).
- Locked APY: ~3.27%
- Ideal for: fixed-income seekers, low-risk strategy
📈 Strategy 2: Yield Speculation with YT
Buy YT-stETH for just $100.78 and receive all the staking rewards for the year.
- Potential reward: much higher than 3% if ETH staking yield increases or if there’s an airdrop
- Ideal for: risk-takers who want exposure without capital-heavy commitment
You can swap into PT or YT using ETH, USDC, or other tokens. All it takes is a wallet signature and a few clicks.
🔄 Use Cases for Different Investors
| Investor Type | Strategy | Token to Use |
|---|---|---|
| Conservative | Lock in fixed yield | PT |
| Aggressive | Bet on future yield increase | YT |
| Hedger | Buy both PT and YT | Full exposure |
| Liquidity Seeker | Sell PT to unlock capital | PT sale |
Pendle’s flexibility makes it an excellent tool for portfolio diversification, especially in uncertain market conditions.
🧠 Final Thoughts
Pendle Finance is more than just a yield farming platform — it’s a structured yield marketplace.
By decoupling ownership from earnings, Pendle allows you to tailor your investment strategies:
- Want fixed yield? Buy PT.
- Want leveraged upside? Buy YT.
- Want both? Hold the original asset or LP.
As the DeFi market matures, protocols like Pendle will play a crucial role in creating transparent, modular, and tradable financial products.
Whether you’re a DeFi veteran or just exploring yield opportunities, Pendle is worth a serious look.
Disclaimer:
The content of this article reflects the author’s personal opinions and should not be considered as investment advice. Readers are strongly encouraged to consult an independent financial advisor before making any investment decisions to ensure they fully understand the associated risks. Contracts for Difference (CFDs) are leveraged products and may result in the loss of your entire capital. These products may not be suitable for all investors. Please invest responsibly. For more details, please refer to the full disclosure.
