Pendle - Beyond the Point Meta
Pendle might be suffering from the dawn of 'Point Meta,' but Pendle has more to offer.
This is my third dive into analyzing Pendle! You can check out my first and second posts on Pendle for more insights."
tl;dr on what is Pendle. Pendle allows you to trade yield-bearing interest asset by separating it into the principal token (PT) and yield token (YT).
Content
What is ‘Point Meta’?
Downfall of ‘Point Meta’
Pendle V3 a.k.a Boros
Competitive Landscape and Ecosystem
Upcoming Catalyst
The Team
Risks
Closing Thought
1. What is ‘Point Meta’?
‘Point Meta’ refers to a system where protocols distribute points instead of tokens, and future airdrops are determined by the number of points one accumulates. Similar to experience points in games, this system encourages 'farmers' to farm points to secure more airdrops.
Pendle provides an ideal platform for this due to its YT feature, which essentially allows for 'buying points with leverage.' This is a high-risk, high-reward strategy that has attracted significant capital to Pendle.
2. Downfall of ‘Point Meta’
What goes up will come down. Pendle took a big hit when the "Point Meta" cooled off. Coupled with the bear market, the TVL fell from $6.7 billion down to $1.9 billion, a 71% decrease from its peak.
Many think that Pendle is over but Pendle is something more than that.
Sooner or later, Pendle expanded to the Bitcoin sidechain, embracing yet another source of TVL. Another 'point meta' from the Bitcoin sidechain, although not as significant as the Ethereum chain, it has propelled Pendle's TVL beyond $4 billion.
In the end, Pendle is still about ‘Point Meta’?
Not quite, here comes the long anticipated ‘Pendle V3’.
3. Pendle V3 a.k.a Boros
Instead of Pendle V3, it is known as Boros. Boros introduced yield trading on margin which includes off-chain rates.
a. Why this is a catalyst for Pendle?
Margin trading is generally more profitable than spot trading due to several reasons:
Higher transaction fees
Increased trading volume
Interest on borrowed funds
Leverage multiplies exposure
Funding rate hedging as a new avenue for DeFi (confirmed partnership with Ethena). What is the funding rate?
It can be down via off-chain (oracles) and on-chain.
New revenue source for Pendle
Pendle’s Boros Flywheel
b. Product Market Fit
Daily trading volume of perpetual on the top 5 centralized exchanges is $245 billion with $95 billion in open interest.
USDe TVL of $3.8 billion.
c. For the Pendle holders
There will be no new tokens
vePENDLE holders will get an airdrop on the tokens earned by Pendle during the ‘point meta’, with an estimated yield of 4%.
80% of the revenue from Boros will go to vePENDLE holders
4. Pendle’s Competitive Landscape and Vibrant Ecosystem
There have been a few competitors trying to compete with Pendle, but there is no real threat yet. Fortunately, the release of Boros has solidified Pendle's moat, establishing it as the best yield trading platform in DeFi.
5. Upcoming Catalyst
a. Limitless chain expansion
Their latest expansion will be to the Sonic chain (formerly Fantom). Another untapped chain with huge potential is the Base chain. As the chain with the highest TVL among Layer 2 chains, DeFi TVL on Base has just reached an all-time high of $3.34 billion. Despite there being no announcement on expansion to the Base chain, this would certainly be a huge catalyst if Pendle decided to move forward with it.
Update: Surprise surprise, Pendle has expanded to Base!
b. BTCFi
Bitcoin is reaching an all-time high of close to $100,000. However, BTCFi has underperformed compared to Bitcoin's performance. Currently, BTCFi has dominated the liquidity on Pendle with three pools each holding over $100 million in liquidity. While none of these BTCFi protocols are currently going through a Token Generation Event (TGE), it is expected that Pendle will still be able to maintain this Total Value Locked (TVL) for the foreseeable future.
Update: Solv Protocol (largest BTCFi protocol) TGE soon!
6. The Team
Props to the team! They could have launched a token for Boros, but they didn't. Instead, they gave 80% of the revenue to vePENDLE holders. Knowing how to distribute profits is always one of the key elements a successful project. The launch of Boros signifies not only innovation but also shows that the team cares about the stakeholders.
7. Risks
a. The Dawn of BTCFi
Will BTCFi come to an end? Nobody knows, but the versatility of Pendle to fit itself into most narratives could minimize this risk.
b. Boros Does Not Live Up to Expectations
As of now, Boros has secured Ethena as a partner. However, there are not many DeFi products that rely on funding rates. Will there be many users using Boros? We shall find out.
8. Closing Thought
The DeFi Renaissance is already here, and the expansion of Base along with Boros will bring Pendle to the next level. Pendle will not only be limited to the 'Point Meta,' and I believe that Pendle will not stop here.