The cryptocurrency price has reached a new high in nearly 7 months. A deep analysis of Pendle's mechanism and value capture from a new perspective. What makes it different? (Prior background: Funding rates can also be speculated! Pendle launches Boros to 'tokenize' the perpetual contract fees. What are its features?) (Background information: How to achieve passive income without trading: A step-by-step guide to using Pendle) Pendle is the most successful DeFi protocol that has risen in this cycle, even without needing to be modified with 'one of'. There have already been many articles explaining Pendle, and this article aims to combine the latest developments to analyze the unique aspects of Pendle's successful protocol mechanism and value capture design from a new perspective. Readers familiar with Pendle's mechanism can skip the previous explanation and read only the analysis in the following sections. What is Pendle? Pendle is a protocol for trading 'yields'. To explain how to trade yields, we introduce two assets from the synthetic stablecoin protocol Ethena: USDe and sUSDe. USDe is a stablecoin pegged to the US dollar at a 1:1 value. Simply holding USDe does not generate interest, but it does generate airdrop points from Ethena, which can be allocated to sENA tokens based on the number of points after each airdrop period ends. sUSDe is the staked version of USDe and is an interest-generating stablecoin, with interest rates fluctuating between 5% and 15% based on market sentiment and funding rates. The Ethena points earned from holding sUSDe are lower than those from holding USDe. For the two assets mentioned above, the yield from holding USDe is Ethena points, while the yield from holding sUSDe consists of both interest and Ethena points. Whether it’s interest or points, they are both 'time-sensitive'. The interest rate may fluctuate dramatically with market conditions, and the value of points is closely related to the snapshot date and the real-time price of tokens. Therefore, the 'yields' being traded require a time frame. It can be the yield over the next three months, but it should not be the yield over the next 300 years. Yields are generated from underlying assets, and we refer to the current value of an asset that will generate yields after a certain period as 'principal'. This brings together three key elements: principal, yield, and time frame. Pendle packages yield-generating assets into a standardized yield token (Standardized Yield, abbreviated as SY) using a unified token standard, then splits them into principal tokens (Principal Token, abbreviated as PT) and yield tokens (Yield Token, abbreviated as YT) and establishes a time frame so that the 'yields' within a certain period can be traded. Before expiry, holding YT will yield the corresponding yield from the underlying tokens. After expiry, the value of PT will equal SY, while the value of YT will drop to zero. (For example, if there are 10 days left until expiry, YT represents the yield from the underlying asset for 10 days and has value; after expiry, it represents the yield from the underlying asset for 0 days and has no value.) For instance, 1 USDe can be packaged into a standardized yield token USDe (Sep 2025) SY, which can then be split into 1 USDe (Sep 2025) PT and 1 USDe (Sep 2025) YT, and the values between them adhere to: 1 USDe (Sep 2025) SY = 1 USDe (Sep 2025) PT + 1 USDe (Sep 2025) YT. The value of 1 USDe SY is the same as the underlying asset of 1 USDe, which is 1 dollar. For convenience, we assume 1 USDe (Sep 2025) PT = 0.99 dollars and 1 USDe (Sep 2025) YT = 0.01 dollars. Now there is approximately 1 month until the expiry date of September 2025. As a trader, I can now buy 10,000 YT for 100 dollars, equivalent to the yield generated from 10,000 USDe within this month (i.e., Ethena airdrop points). After expiry, YT will be worth zero, and its value will transfer to the unreleased Ethena airdrop points. The motivation for traders to purchase is to be bullish on the yield value of USDe, believing that the value of Ethena's airdrop will exceed the cost spent on purchasing YT. Leveraging 100 dollars to generate points from 10,000 dollars creates a massive increase for Pendle during the previous points frenzy. Success stories of YT traders are common: traders who leveraged YT for EigenLayer airdrops recovered the entire cost of YT from ETHFI's airdrop, essentially getting EIGEN tokens for free; buying YT to leverage Ethena points when ENA was at 0.2 dollars, and within two weeks, ENA surged above 0.6 dollars, significantly increasing point value; the usual airdrop exceeded expectations, yielding over 10 times when purchasing YT. On Pendle's 'points market' page, sUSDe YT holders not only receive Ethena points but also earn interest generated from the underlying assets. Although the value of YT drops to zero after expiry, holders can claim the USDe yield generated from the underlying sUSDe assets based on the actual interest rate in Pendle's contract. Of course, there are also cases of losses in YT trading: leveraging YT for certain project points while the project delays token issuance, leading to infinite dilution of point value; taking a long position on the underlying yield of USDT in Aave at an implied APY of 8%, but due to deteriorating market conditions, the actual average interest rate during the term was 4%, resulting in a loss of half the principal when purchasing YT. Trading requires counterparties. The hot trading of YT needs market demand for PT to support liquidity. In the situation described above, one could buy 10,000 USDe (Sep 2025) PT for 9,900 dollars, and one month later, it can be exchanged back for 10,000 USDe. Earning 1% in a month equates to locking in approximately 12% annualized yield during that month, enjoying a 'fixed rate'. This is similar to the model of government bonds, where I buy a 100-dollar bond with a face value of 110 for 1 year, and when it matures, I exchange the bond for 110 dollars, thus locking in a 10% annual yield at the time of purchase. Similarly, government bonds approach their face value as they near their redemption dates and can be redeemed at par upon maturity. As the seller of the yield, PT holders have sold the 'uncertainty' of the yield, locking in a 'fixed rate'. Being a liquidity provider (LP) for Pendle is equivalent to holding both SY and PT while selling a portion of YT. In addition to the fixed income generated by the PT portion, LPs can also earn token emission rewards from PENDLE (liquidity mining). It is evident that Pendle provides options for users who want to reduce risk and increase stable income, users who wish to take on risk for potentially higher uncertain returns, and users who simply want to mine in DeFi. It addresses the essential needs of users and is naturally adopted. Pendle's...

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