Author: J.A.E, PANews
Pendle, which innovates on-chain yield trading with the PT/YT mechanism, is expanding its territory into the trillion-dollar derivatives market. On August 6, 2025, its new product Boros was launched, achieving on-chain tokenization and hedging of perpetual contract funding rates for the first time, marking Pendle's key strategic transformation from a 'yield management protocol' to 'DeFi interest rate infrastructure.'
In the past year, Pendle has achieved explosive growth, with TVL exceeding $10 billion, and is no longer limited to splitting existing yields, but is committed to building a complete on-chain yield curve.
Nansen has pointed out: 'Pendle is becoming the interest rate infrastructure in the DeFi space.' The birth of Boros is a core piece to achieving that ambition.
Boros core mechanism: The 'interest rate derivatives' market for funding rates
Pendle has built a new platform Boros on Arbitrum, with the core function of transforming the highly volatile funding rates in perpetual contracts into tradable tokenized tools—Yield Units (YUs). Each YU represents the yield rights of one unit of collateral asset (such as BTC/ETH) over a specific period (e.g., 1 YU-ETH represents the yield of one ETH nominal value until maturity). Boros's mechanism references the YT (Yield Token) representing future yield rights in Pendle V2, and the logic is similar to TradFi's interest rate derivatives.
Boros has created a floating-fixed funding rate swap market, where users can hedge risks or bet on the rise and fall of funding rates according to their purposes. Boros provides effective on-chain tools for users with risk hedging needs. Users facing funding rate risks in the perpetual contract market due to executing spot-perpetual contract basis arbitrage or Delta-Neutral strategies can offset their funding rate exposure on exchanges by paying a fixed rate on Boros and receiving a floating rate, thus earning profits or locking in maximum holding costs.
Similarly, Boros has created a brand new trading variety for users with trading demands, allowing users to assess the future trend of funding rates, either by going long on YU betting on its rise or going short on YU betting on its fall, thus profiting from the fluctuations in funding rates. It is worth noting that during the same period, the volatility of the perpetual contract funding rate is much higher than that of its price.
The Pendle team believes that risk management is the primary focus in the early stages, thus Boros adopts a cautious risk control strategy, with an open interest (OI) cap of $20 million nominal value and a leverage ratio controlled at 1.4 times.
Hitting the market pain points: Injecting stability and efficiency into DeFi
In the crypto market, derivatives trading volume far exceeds spot trading volume.
Perpetual contracts are the primary trading variety, with an average daily trading volume of about $1 trillion.
Referring to the structure of the TradFi derivatives market, the interest rate swap market occupies the vast majority of trading volume. Perpetual contracts are equivalent to the cornerstone of crypto asset derivatives, and the closely related funding rate derivatives market may become one of the largest emerging markets in the entire DeFi ecosystem.
However, the high volatility of funding rates and the lack of effective on-chain hedging tools are long-standing 'pain points' in the DeFi derivatives market, which not only increases users' risk exposure but also limits the entry of incremental funds and the stability of DeFi strategies.
The emergence of Boros is particularly important for Delta-Neutral protocols. Such protocols typically rely on funding rates to maintain returns, with a strong demand for stable yields and risk hedging. Taking Ethena as an example, it has over $10 billion in TVL, and the issued stablecoin USDe is supported by volatile assets such as BTC, ETH, and LST. To achieve Delta-Neutral conditions, Ethena uses collateral as a spot position and opens a short perpetual contract position on the exchange to hedge price fluctuations.
Although Ethena maintains a Delta-Neutral position, it still needs to bear the funding rates charged by exchanges, which is also one of Ethena's revenue sources. When the funding rate is positive (long OI > short OI), Ethena profits because longs pay funding rates to shorts; however, when the funding rate is negative (short OI > long OI), Ethena incurs losses. At this time, Boros can act as a critical 'shock absorber,' helping to mitigate the risks brought by negative funding rates and smoothing the yield curve.
Pendle co-founder and CEO TN Lee emphasizes: 'With daily trading volumes of hundreds of billions of dollars in the perpetual contract market, there has never been a scalable, permissionless on-chain way to hedge or trade funding rates. Boros will change that.' Infrastructure-level supplementation could also attract more incremental funds.
Value Proposition: Empowering ecosystem win-win
Boros was released on August 6, and $PENDLE surged over 40% during the week, with prices approaching $6. The strong upward momentum also validates the market's recognition of its potential.
Boros will enhance the value capture ability of $PENDLE, with 80% of the fees generated by the protocol being distributed to vePENDLE holders, thereby consolidating vePENDLE's position as the core value capture module of the ecosystem. The accumulation of fees to vePENDLE will form a powerful positive feedback loop. The increase in Boros usage can bring more fees to vePENDLE, further reinforcing the incentive effect.
Boros has opened a dedicated Vault for LPs, who can earn returns by providing liquidity to the funding rate swap market. Sources of income include $PENDLE emission incentives, trading fees, and favorable changes in implied annualized yields.
Future Vision: A yield layer that runs through on-chain finance
Initially, Boros only opened the funding rate market for BTC and ETH perpetual contracts on Binance, with plans to gradually expand to more mainstream perpetual contract platforms (such as Bybit, Hyperliquid, Bybit) and high liquidity assets (such as SOL, BNB). The well-known market maker Caladan stated it is providing liquidity for Boros.
In principle, Boros can be integrated into the entire DeFi ecosystem, becoming a core interest rate module, meaning it is not just an independent DApp but also a highly composable 'Lego block' that can be seamlessly called by other protocols.
At the same time, Boros has a highly scalable underlying architecture design, which may unlock more types of variable income sources. In addition to yields within DeFi protocols, it can also integrate: 1) CeFi yield products, such as structured products from CEX; 2) TradFi yield tools: such as stocks, government bonds, money market rates, and mortgage rates; 3) RWA: including tokenized credit and private debt.
Boros enables the feasibility of turning most forms of income streams into tradable financial instruments and collateral, driving DeFi towards a more complete on-chain interest rate market, improving capital efficiency, and paving the way for risk-controlled leveraged strategies. In the long run, Boros may not only develop into the yield layer of DeFi but may also evolve into the yield layer of a broader tokenized financial ecosystem. When DeFi has the ability to replicate the core interest rate market of traditional finance, a true paradigm shift is about to occur.
