Authors
Pendle Finance, with support from Aura contributors
Summary
Pendle is proposing to enable a Balancer gauge for a PENDLE-ETH pool on mainnet with a 2% emissions cap.
Protocol Description
The Pendle protocol enables permissionless tokenization and trading of yield. Pendle allows anyone to purchase assets at a discount, obtain fixed yield, or long DeFi yield. The protocol enables this by taking yield-bearing tokens and then splitting them into their principal and yield components, PT (principal token) and YT (yield token) respectively, which allows them to be traded via the custom V2 AMM.
This brings the TradFi interest derivative market into DeFi. PT is the equivalent of zero-coupon bonds while YT is the equivalent of coupon payments.
By creating a yield market in DeFi, Pendle unlocks the full potential of yield. Pendle enables users to execute advanced yield strategies, such as:
- Long assets at a discount
- Fixed yield for low-risk, stable growth
- Leverage exposure to future yield streams without the need for collateral
- A mix of any of the above strategies
Utility
PENDLE is the platform token of the Pendle protocol and is the cornerstone of value accrual mechanics and management. It also functions as the governance token, by staking and locking into vePENDLE. With vePENDLE, an array of new features are unlocked for PENDLE holders, increasing the token’s utility.
The Pendle protocol collects a 3% fee from all yield accrued by yield tokens (YT) and 80% of the swap fees(0.1% of the trade at a 1 year maturity) in the V2 AMM. Currently, 100% of this fee is distributed to vePENDLE holders, while the contributors collect no revenue. This is subject to change in the future. A portion of the yield from matured unredeemed PTs will be distributed pro rata to vePENDLE holders as well. If you LP in a pool while you are holding vePENDLE, your PENDLE incentives and rewards for all of your LPs will be further boosted as well, by up to 2.5x based on your vePENDLE value.
The Pendle protocol is currently deployed on Ethereum mainnet, with the intention of deploying the protocol on other EVM chains. Recently, Pendle launched a v2 AMM which made several improvements to the protocol: increased capital efficiency with more LP revenue sources and trading, specialized yield trading with concentrated liquidity and optimized fee rate, and minimal impermanent loss with no value leakage from arbitrage. In addition, with the v2 launch, the protocol is now fully permissionless wherein anyone can list and create a market for any yield-bearing asset.
PENDLE distribution
As of October 2022:
- 10% Incentives
- 19.2% Ecosystem Fund
- 5.7% Team (Vested)
- 65.1% Circulating
- Total: 235,890,444 PENDLE
Team tokens vest up to April 2023. Beyond this, any increase in circulating supply will be contributed by incentives and ecosystem building.
Emissions as of Oct 2022 are 667,705 PENDLE per week, with a 1.1% decrease each week until April 2026. At this point, the current tokenomics allow for a terminal inflation rate of 2% per annum for incentives.
As the industry matures, governance may propose changes based on the evolution of ecosystem best practices.
Motivation
Pendle currently has ~$545.08K on Sushi and ~199.3K on Kyber in trading volume over the last 30 days. Most of the current PENDLE liquidity resides in the form of a PENDLE-wETH pool with liquidity currently valued at $873.5K.
Pendle Finance would like to deepen the liquidity for the PENDLE token on Ethereum to support low slippage transactions. Furthermore, Pendle intends to provide voting incentives to the pool via Hidden Hand, namely through the vlAURA market. Pendle is aiming at incentivizing votes with approximately $8,000 worth of PENDLE per vlAURA voting cycle (every two weeks).
Lastly, Pendle would like to be a part of the continued growth that Balancer has been experiencing and to capture the upside of what is to come to the Balancer DEX (e.g. technology, partnerships, integrations).
Specifications
Governance: Pendle’s governance is powered by Vote-Escrowed PENDLE, or vePENDLE. vePENDLE enables protocol governance by allowing PENDLE holders to channel protocol incentives to desired pools.
Oracles: The PENDLE token does not use any oracles.
Audits: The Pendle codebase has been fully audited by reputable auditors, including some of the top wardens from C4, and all flaws have been addressed. Nonetheless, users are advised to exercise caution and deploy funds prudently.
Centralization Vectors: The core protocol is designed to be decentralized and permissionless. Protocol assets are only accessible by the users and not by any other entities. There is a governance role (currently a multisig) that could set the protocol fees, which have a hard cap set in smart contracts. The PENDLE token is not upgradeable, pausable, and does not have any blacklisting capabilities.
Market History: PENDLE has been live since April 2021 on Ethereum.
Sushi Pool: 0x37922c69b08babcceae735a31235c81f1d1e8e43
Kyber Pool: 0xaed94908236484f69ad4f748BfB856B378BE21E8
Value: Upon approval, this gauge will be the primary liquidity pool for PENDLE on Ethereum and drive value to Balancer through trading volume and rewards via bribes.
Contract: PENDLE on Ethereum 0x808507121b80c02388fad14726482e061b8da827
Links:
- Website: https://www.pendle.finance/
- Documentation: https://docs.pendle.finance/
- Github Page: Pendle · GitHub
- Communities: Twitter, Discord, Telegram
Link to Pool: 0xFD1Cf6FD41F229Ca86ada0584c63C49C3d66BbC9
Link to Gauge: 0x190AE1f6EE5c0B7bc193fA9CD9bBe9b335F69C65
Specification
#1
The DAO Multisig 0x10A19e7eE7d7F8a52822f6817de8ea18204F2e4f will initiate a transaction to the Authorizer 0xA331D84eC860Bf466b4CdCcFb4aC09a1B43F3aE6 calling grantRole with the following arguments:
role: 0xf49d7ffb5922642adc9f29cfb52b2214e81e0b0e54e9cd1e9f70439f0011f368
This corresponds with the role for calling add_gauge on the gaugeController as seen here .
account: 0x10A19e7eE7d7F8a52822f6817de8ea18204F2e4f
This allows the DAO Multisig to directly add gauges to the controller.
#2
The DAO Multisig 0x10A19e7eE7d7F8a52822f6817de8ea18204F2e4f will interact with the AuthorizerAdaptor at 0x8F42aDBbA1B16EaAE3BB5754915E0D06059aDd75 and call performAction with the GaugeController at 0xC128468b7Ce63eA702C1f104D55A2566b13D3ABD for the target(address) argument and using 0x3a04f900 followed by the gauge address 0x190AE1f6EE5c0B7bc193fA9CD9bBe9b335F69C65 and the corresponding gauge type for the data(bytes) argument.
data(bytes) : 0x3a04f900000000000000000000000000190ae1f6ee5c0b7bc193fa9cd9bbe9b335f69c650000000000000000000000000000000000000000000000000000000000000002
#3
The DAO Multisig 0x10A19e7eE7d7F8a52822f6817de8ea18204F2e4f will initiate a transaction to the Authorizer 0xA331D84eC860Bf466b4CdCcFb4aC09a1B43F3aE6 calling renounceRole with the following arguments:
role: 0xf49d7ffb5922642adc9f29cfb52b2214e81e0b0e54e9cd1e9f70439f0011f368
This corresponds with the role for calling add_gauge on the gaugeController as seen here .
account: 0x10A19e7eE7d7F8a52822f6817de8ea18204F2e4f
This removes the ability for the DAO Multisig to directly add gauges to the controller.