Pendle

Pendle is the leading on-chain market for yield trading - separating any yield-bearing asset into a principal token (PT) and a yield token (YT), and letting both trade freely on its custom AMM. If you hold 1 ETH of stETH, Pendle lets you split it into PT-stETH (redeemable for 1 ETH at maturity) and YT-stETH (entitled to all staking rewards until maturity). Buyers of PT lock in a fixed yield by buying at a discount; buyers of YT take a leveraged bet on future yield being higher than the implied rate. The result is the closest thing DeFi has to a fixed-income market - bond-like instruments tradable on-chain with transparent yield curves per asset.

Markets exist for major LSTs (stETH, weETH, ezETH), restaking tokens, real-world-asset stables (sUSDe, sUSDS), and points programs from emerging projects. The most-traded category is usually whatever is currently distributing “points” (the off-chain claim to a future airdrop) - Pendle YT positions compress months of points farming into a single trade. Pool depth varies by maturity date: early in a market’s life YT trades are thin, near maturity PT trades dominate as the implied rate converges.

Audits by Spearbit, ChainSecurity, Ackee Blockchain, and WatchPug cover the core AMM and the SY (standardized yield) token wrapper. No contract-level exploits since launch in 2021; the most recent major incident was a frontend hijack in April 2024 that injected a malicious approval prompt, mitigated by alert users and quickly patched off-chain. Primary risks today are oracle dependencies on the underlying yield assets (a depeg in stETH or sUSDe propagates through every Pendle market based on them), aggressive YT leverage during high-volatility periods, and the points-program model itself collapsing if reward distributions disappoint relative to YT entry prices.