With the introduction of more LRT and speculation surrounding AVS airdrops to LRT holders this year, Pendle is likely to continue dominating this market segment. This article is sourced from a publication by CHARLES AND HUMBLE FARMER ARMY RESEARCH, compiled and translated by DeepChain.
(Previous summary: TVL exceeds $3.6 billion: a review of 6 Ethereum re-staking protocols: EigenLayer, ether.fi..)
(Background supplement: How large will the EigenLayer airdrop be? Bankless: $1800 per address.)
Although Pendle has been online for quite some time, it wasn’t until early 2023, with the booming LSD industry, that Pendle as a “yield trading” platform began to gain widespread adoption. By splitting assets into principal and yield components, Pendle tokenizes and trades yields. Pendle allows users to purchase assets at a discounted price (similar to zero-coupon bonds) to generate fixed income and speculate on the yields of certain assets using their principal and yield tokens (similar to interest rate swaps).
Since then, with the emergence of yield-bearing stablecoins and recent liquidity re-staking tokens (LRT), the variety of yield-bearing tokens has gradually expanded. Pendle has been able to iterate and support yield trading for these cryptocurrencies. Pendle’s LRT market has been particularly successful as they essentially allow users to pre-sell or position themselves for long-term airdrop opportunities (including EigenLayer). These markets have quickly become the largest on Pendle and are leading by a large margin.
Driven by the hype of EigenLayer, the success of this product has brought positive upward momentum to the price of $PENDLE token.
Through customized integration with LRT, Pendle allows Principal Token holders to lock in underlying ETH yields, EigenLayer airdrops, and any airdrops related to the restaking protocol for issuing LRT. This creates an annual yield of over 30% for Principal Token buyers.
On the other hand, due to the integration of LRT into Pendle, Yield Tokens allow for some form of “leveraged point farming.” Through the exchange function in Pendle, we can exchange 1eETH for 9.6 YT eETH, accumulating EigenLayer and Ether.fi points as if we were holding 9.6 eETH.
In fact, for eETH, Yield Token buyers can also earn double points from Ether.fi, which is essentially “leveraged airdrop farming.”
Considering the approaching expiration date, Yield Tokens will tend towards zero, and the value of betting on the airdrops of EigenLayer and Ether.fi (or Kelp within rsETH) will be greater than the ETH spent on purchasing Yield Tokens.
Given the expected scale and high liquidity staking demand of EigenLayer airdrops, it is not surprising that these LRT markets have received the most attention on Pendle. Locking in airdrop yields denominated in ETH and leveraged liquidity mining both serve different market segments, but it appears that there is significant demand for both operations.
With the introduction of more LRT by Pendle and speculation surrounding AVS airdrops to LRT holders this year, Pendle is likely to continue dominating this market segment. In this sense, $PENDLE provides a good risk position for the success of LRT and EigenLayer in the vertical field.
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