Pendle is a permissionless yield-trading protocol that lets users carry out different yield-management strategies.

To get a full picture of Pendle, it helps to understand its three main components:

Yield Tokenization

To begin, Pendle wraps yield-bearing tokens into SY (standardized yield tokens). SY is a wrapped form of the original yield-bearing token designed to work with the Pendle AMM (for example, stETH → SY-stETH). After that, SY is separated into its principal and yield parts- PT (principal token) and YT (yield token). This is called yield-tokenization, meaning the yield is represented as its own token.

Pendle AMM

PT and YT are both tradable on Pendle’s AMM. While the AMM is the system’s main mechanism, you don’t need to understand how it works in order to trade PT and YT.

vePENDLE

As a yield-derivative protocol, Pendle brings the TradFi interest derivatives market into DeFi so it’s available to everyone.

By building a yield market in DeFi, Pendle aims to help users tap the full potential of yield and run sophisticated strategies, such as:

Fixed yield (e.g. earn fixed yield on stETH)

Long yield (e.g. make a bet on stETH yield rising by buying more yield)

Increase yield without extra risk (e.g. add liquidity with your stETH)

A combination of any of the above strategies