Introduction

Pendle Finance is a decentralized finance (DeFi) protocol that allows users to tokenize and trade the future yields of various cryptocurrency assets. Launched in 2021, Pendle has become one of the leading yield farming protocols.

By 2025, Pendle’s total value locked (TVL) had crossed $4.4 billion and achieved daily average trading volumes of $96 million (almost 100x increase). Following these remarkable achievements, Pendle is enhancing its platform and introducing new features to continue its dominance in the DeFi sector.

Overview of Pendle Finance

Pendle Finance is a DeFi protocol that enables tokenizing and trading future yields from yield-generating assets. It separates an asset into principal (PT) and yield (YT) tokens, allowing users to trade future yields as standalone assets and providing options for fixed returns or speculation on variable yields.

How Does Pendle Work?

Imagine you have a $1,000 staked ETH (stETH) that earns 5% annual yield. Instead of waiting a year to collect the yield, you use Pendle to split your stETH into two tokens:

• Principal Token (PT-stETH) – Represents your $1,000 stETH, redeemable at maturity.
• Yield Token (YT-stETH) – Represents the future yield (5% = $50 for the year), which can be sold immediately. You can also buy more YT-stETH at a discount if you expect yield rates to increase.

Key Features of Pendle Finance

Yield Tokenization

Users can deposit yield-bearing assets into the platform, which are then divided into two distinct tokens: Principal Tokens (PT) representing ownership of the underlying asset, and Yield Tokens (YT) representing the rights to future yield.

Automated Market Maker (AMM)

Pendle employs a specialized AMM designed to handle assets with time decay, facilitating the efficient trading of PTs and YTs.

Composability

Third-party protocols can integrate with Pendle’s infrastructure via Pendle Router and Hosted SDK.

For a comprehensive analysis of Pendle Finance, please refer to the in-depth article published by Gate Learn.

What is Pendle’s Zenith Upgrade?

The Pendle Zenith will include three core upgrades designed to expand Pendle Finance’s reach and contribute to its overall value. The upgrades are as follows:

• Pendle V2 Improvements
• Citadels
• Boros

Pendle V2 Improvements

Pendle V2, launched in 2022, introduced an advanced Automated Market Maker (AMM) to enhance the trading and management of tokenized future yields. Following its launch, notable improvements included greater capital efficiency, trading mechanics, and liquidity provision.

A major change was implementing the EIP-5115 standard, which allowed the integration of various yield-bearing assets for easier tokenization and trading.

The AMM in Pendle V2 improved capital efficiency up to 200x over Pendle V1, a model developed by Notional Finance. This allowed liquidity providers (LPs) to earn higher yields with less capital while benefiting from low-slippage trades and minimal impermanent loss.

Here’s a structured comparison between Pendle V1 and V2:

Pendle V2 has significantly contributed to the success of the Pendle protocol. While the team has continued to support it, the upcoming Zenith upgrade will introduce some updates.

100% Open Source

Third parties and community members heavily influenced Pendle Finance’s growth as a project. The team plans to make its technology available to other developers, enabling other protocols to create their markets.

Dynamic Fee Rebalancing for Liquidity Pools

Fees charged on trades will automatically adjust based on market conditions to keep the liquidity pools (LPs) at optimal performance.

vePENDLE Utility

vePENDLE serves as the governance token for Pendle Finance, and the platform intends to expand its utility beyond just on-chain voting. To increase the level of decentralization, all users will participate in governance, regardless of their token size.

Citadel - Exploring Non-EVM Ecosystems and Beyond

Source: Pendle Finance

The Citadel program plans to take Pendle out of the Ethereum ecosystem, into other chains and even institutional investments.

Exploring Solana, Ton, Hyperliquid Networks

Source: Pendle Finance

Pendle plans to tap into the fast-growing user base of these chains, providing one-click access to fixed yields. This expansion will allow new DeFi participants to engage with Pendle’s ecosystem.

Traditional Finance

Citadel will develop a KYC-compliant product tailored for institutional investors to access crypto-native fixed yields through a structured and regulated framework. A key aspect of this product will be working with partners like Ethena to create an alternative fundraising structure managed by regulated investment managers, ensuring compliance while expanding institutional access to Pendle’s yield offerings.

Shariah-Compliant Financing

Pendle will develop a Citadel focused on Shariah-compliant yield products to expand its institutional reach, catering to the Islamic finance sector, a $3.9 trillion industry spanning over 80 countries.

Boros

Source: Pendle Finance

Boros introduces a structured and scalable approach to leverage-based yield trading, allowing users to borrow funds to increase their investment size. A key feature of Boros is the tokenization of funding rates from perpetual futures contracts; regular payments made between traders to align contract prices with the market. These rates fluctuate frequently, posing risks for traders. Boros converts these funding rates into tradable tokens, enabling traders to hedge against volatility or speculate on yield movements.

With the perpetual markets handling $150 billion to $200 billion in daily trading volume, Boros unlocks access to a yield source far larger than Pendle’s current spot market.

Boros aims to consume all available yields across on-chain and off-chain markets, including CeFi, TradFi, and real-world assets (RWAs) in future versions. This positions Boros as a specialized hub for yield trading, expanding Pendle’s role in decentralized finance.

Potential Implications for Pendle Finance

Source: Pendle Finance

Pendle Finance aims to establish itself as the leading protocol for yield-related activities. As the DeFi industry increasingly attracts attention from traditional finance, Pendle is well-positioned to become the preferred platform for institutional adoption.

With the continued expansion of the Pendle ecosystem, the value generated is expected to drive growth in Total Value Locked (TVL) and positively impact the price of the PENDLE token.

The team also plans to implement a mechanism within Citadel and Boros to provide incentives for vePENDLE holders.

Conclusion

The Zenith upgrade is Pendle’s attempt at becoming the most accessible and attractive yield farming protocol on the most profitable blockchains. By expanding to non-EVM ecosystems, optimizing fees, and introducing products like Citadel and Boros, Pendle can capture new markets and enhance its utility.

With a focus on institutional adoption, Shariah-compliant products, and perpetual funding rate tokenization, Zenith sets the stage for Pendle to establish itself as a dominant force in the DeFi sector.