Pendle 2025: Building DeFi’s Fixed Income Layer

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Introduction: Unlocking Fixed Yield in DeFi

Pendle Finance has emerged as the leading protocol in decentralized finance (DeFi) for fixed yield, enabling users to trade future yield streams and lock in predictable on-chain returns. In 2024, it became central to major DeFi narratives such as liquid staking tokens (LSTs), restaking, and yield-bearing stablecoins—cementing its role as the go-to platform for asset issuers seeking yield infrastructure.

As we move into 2025, Pendle is evolving beyond its Ethereum origins to become a full-stack fixed income layer for the entire DeFi ecosystem. The protocol is expanding into new markets, launching innovative products, and targeting both crypto-native users and institutional capital across multiple blockchains.

The opportunity is vast. On-chain yield derivatives mirror one of traditional finance’s largest markets: interest rate derivatives, valued at over $500 trillion globally. Even minimal adoption on-chain could unlock multi-billion-dollar value. While most DeFi platforms offer only variable yields—exposing users to volatility—Pendle delivers fixed-rate exposure through a transparent, composable architecture.

This innovation has redefined the $120 billion DeFi landscape. In 2024 alone, Pendle grew 20x in total value locked (TVL), capturing more than 50% of the yield sector’s market share—five times ahead of its nearest competitor.

Pendle isn’t just another yield protocol; it’s becoming foundational infrastructure, powering liquidity and risk management for some of the largest protocols in DeFi.

👉 Discover how next-gen yield strategies are reshaping DeFi’s financial architecture.

Product-Market Fit Through Key Narratives

Pendle gained early traction by solving a core DeFi problem: unpredictable yields. Unlike variable-rate lending platforms like Aave or Compound, Pendle allows users to separate principal from yield and lock in fixed returns.

Its growth accelerated with the rise of LSTs, where users needed ways to unlock liquidity from staked assets. Pendle provided the ideal solution—enabling yield tokenization and efficient capital use.

In 2024, Pendle captured the restaking narrative almost immediately. Its eETH pool became the largest on the platform within days of launch, demonstrating strong product-market fit.

Today, Pendle’s infrastructure supports critical functions across DeFi:

As on-chain money markets mature, Pendle is uniquely positioned to serve emerging sectors with scalable fixed income tools.

Pendle V2: A Foundational Infrastructure Upgrade

Pendle V2 introduces Standardized Yield (SY) tokens, a unified wrapper for yield-bearing assets. This replaces V1’s fragmented, custom integrations and streamlines the minting of Principal Tokens (PT) and Yield Tokens (YT).

The new AMM is purpose-built for PT-YT trading, offering superior capital efficiency and pricing accuracy. Unlike V1’s generic model, V2 uses dynamic parameters like rateScalar and rateAnchor to adjust liquidity over time—resulting in tighter spreads, reduced slippage, and better yield discovery.

V2 also enhances price reliability with native TWAP oracles embedded directly in the AMM. This reduces reliance on external data feeds and lowers manipulation risk. An integrated order book provides backup price discovery when AMM ranges are exceeded—a critical feature absent in V1.

For liquidity providers (LPs), V2 offers stronger protections. Pools consist of highly correlated assets, and the AMM design minimizes impermanent loss—especially for LPs holding until maturity. This predictability makes yield farming more accessible and secure.

Expanding Beyond EVM: Solana, Hyperliquid, and TON

Pendle’s 2025 roadmap includes expansion to Solana, Hyperliquid, and TON—marking a strategic shift beyond EVM-based chains.

While Pendle dominates fixed yield on EVM chains with over 50% market share, the next wave of DeFi growth is multi-chain. By deploying via Citadel—its modular infrastructure layer—Pendle can access new user bases and capital pools.

These deployments could add hundreds of millions in incremental TVL. More importantly, they reinforce Pendle’s vision: not just as an Ethereum protocol, but as DeFi’s universal fixed income layer.

👉 See how cross-chain yield strategies are unlocking new capital flows.

Citadel for TradFi: Bridging Institutional Capital

A key 2025 catalyst is the launch of a KYC-compliant Citadel designed for institutional investors. This initiative aims to connect regulated capital with on-chain yield through structured, compliant access.

Through partnerships with protocols like Ethena, Pendle will create isolated special-purpose vehicles (SPVs) managed by regulated investment firms. This removes friction around custody, compliance, and execution—allowing institutions to access crypto-native fixed income using familiar legal frameworks.

With global fixed income markets exceeding $100 trillion, even small inflows could mean billions in new capital. A 2024 EY-Parthenon survey found that 94% of institutional investors believe in digital assets’ long-term value, with over half increasing allocations.

McKinsey projects tokenized markets could reach $2–4 trillion by 2030. While Pendle doesn’t tokenize assets, it plays a vital role by enabling price discovery, hedging, and secondary trading for tokenized yields—from T-bills to yield-bearing stablecoins.

This positions Pendle as essential infrastructure for institutional-grade DeFi strategies.

Citadel for Islamic Finance: Tapping a $4.5 Trillion Market

Pendle also plans a Shariah-compliant Citadel targeting the global Islamic finance market—valued at $4.5 trillion across 80+ countries and growing at 10% CAGR.

Historically, DeFi has been inaccessible to Muslim investors due to religious restrictions on interest (riba). However, Pendle’s PT/YT model offers structural flexibility that could align with Shariah principles—potentially resembling Sukuk (Islamic bonds).

If successful, this initiative would:

This move underscores Pendle’s ambition: to become the global standard for on-chain fixed income.

Boros: Entering Perpetual Yield Markets

One of the most transformative developments in Pendle’s 2025 roadmap is Boros, a new vertical enabling fixed-rate trading on perpetual funding yields.

While V2 focused on spot yield tokenization, Boros targets the largest and most volatile yield source in crypto: perpetual futures funding. With over $150 billion in open interest and $200 billion in daily volume, this is a massive but underhedged market.

Boros allows protocols like Ethena to lock in fixed funding rates—critical for institutional risk management. For Pendle, this unlocks a multi-billion-dollar opportunity and shifts its identity from a yield app to an on-chain interest rate desk, akin to CME or J.P. Morgan in traditional finance.

Boros enables:

With no scalable funding hedge solution currently available—on or off-chain—Pendle has a clear first-mover advantage.

Leadership & Strategic Partnerships

Founded in 2020 by pseudonymous team members TN Lee, GT, YK, and Vu, Pendle has attracted backing from top-tier investors including Bitscale Capital, Crypto.com Capital, Binance Labs, and The Spartan Group.

Key funding milestones:

Strategic partnerships have expanded Pendle’s reach:

These integrations solidify Pendle as core infrastructure across chains and asset types.

Tokenomics: The Role of $PENDLE

$PENDLE is the native token governing the protocol. As of March 31, 2025:

$PENDLE emissions decrease by 1.1% weekly since September 2024. After April 2026, a terminal inflation rate of 2% will maintain long-term incentives.

vePENDLE: Aligning Long-Term Incentives

Users lock $PENDLE to receive vePENDLE, which grants:

The locking mechanism reduces circulating supply, supports price stability, and aligns ecosystem incentives. In 2024, active vePENDLE holders earned ~40% APY—not including $6.1M in December airdrops.

Revenue Flywheel: Value Accrual to vePENDLE

Pendle generates revenue through:

Currently, 100% of revenue flows directly to vePENDLE holders—creating a powerful flywheel that rewards long-term commitment.

As V2, Citadels, and Boros scale, this model strengthens vePENDLE’s centrality in the ecosystem.

Frequently Asked Questions

Q: What makes Pendle different from other yield protocols?
A: Pendle enables fixed-rate exposure by tokenizing future yield—unlike platforms offering only variable yields. Its PT/YT system allows precise risk management and hedging.

Q: How does Pendle generate revenue?
A: Through yield trading fees (3%), swap fees (10–30 bps), and unclaimed PT yields—all distributed to vePENDLE holders.

Q: Is Pendle expanding beyond Ethereum?
A: Yes—Pendle is deploying to Solana, Hyperliquid, and TON via Citadel, making it a cross-chain fixed income layer.

Q: Can institutions use Pendle?
A: Yes—the upcoming KYC-compliant Citadel will allow regulated access via SPVs managed by licensed firms.

Q: What is Boros?
A: Boros is Pendle’s new vertical for fixed-rate trading on perpetual funding yields—targeting one of crypto’s largest untapped markets.

Q: How does vePENDLE benefit holders?
A: It provides governance rights, fee distributions, and exclusive rewards—while reducing circulating supply and aligning long-term incentives.

Key Risks and Challenges

Despite strong positioning, risks remain:

Ongoing UX improvements and product diversification will be critical to sustained adoption.

Closing Remarks

Pendle continues building toward a long-term vision: becoming DeFi’s foundational fixed income layer. Its ability to offer customizable, predictable returns bridges traditional finance sophistication with on-chain composability.

With V2 upgrades, multi-chain expansion, institutional gateways via Citadels, and Boros entering perpetual markets, Pendle’s 2025 roadmap is ambitious yet achievable.

As stablecoin markets grow and tokenized assets proliferate, demand for reliable fixed yield infrastructure will surge. If execution remains strong, Pendle is poised to become a cornerstone of DeFi’s financial future.

👉 Explore how fixed income innovation is transforming decentralized finance.