GM 👋
SBF is finally found guilty of all 7 counts. But this won’t be over soon.
SBF-FTX saga will continue to remain present for a long time, and rightfully so.
The customer funds have to be returned, political donations have to be accounted for, and new regulations to avoid such criminal activities will be made.
In today’s newsletter, we’ll review Pendle Finance. They might break the crypto derivatives market with their unique product.
Let us know your thoughts on Pendle Finance here.
Pendle is a permissionless yield-trading protocol where users can execute various yield-management strategies.
Pendle is currently one of the best places to earn yield on your ETH.
The traditional derivatives market is estimated to be $600 trillion.
This is ~ 6 times that of the global stock market.
And more than 10 times that of the crypto market.
Derivatives allow risk to be moved from the risk-averse to the risk seekers.
Risk-averse get the stability of fixed rates, and risk seekers get the higher risks and much higher returns.
For DeFi to get bigger, there has to be a way to easily create derivatives and offer fixed rates of yield to users or institutions.
Instead of asking users to deposit USDC, they use yield-bearing assets and separate them into two components: Principal Tokens (PT) and Yield Tokens (YT).
PT represents the principal of the underlying yield bearing token and YT represents the yield of the asset.
This functionality provided by Pendle facilitates the tokenization and trading of fixed-rate yields, which can be utilized for a variety of purposes, including speculation and hedging.
Pendle even built its own AMM to handle the time decay factor of YT, which most existing AMMs can't handle.
Rather than using an order book system, they became AMM so that for derivatives with low liquidity, price discovery isn't an issue.
Price discovery becomes an issue when there is a small number of buyers/sellers (or liquidity) in the market.
As for fees, Pendle takes a 3% cut from YT's interest for its treasury and charges a 1% trading fee on its native AMM.
Of that 1%, 0.85% goes to liquidity providers and 0.15% to the treasury.
It's a pretty neat way to play around with yield-bearing assets without getting locked into long-term commitments.
This functionality provided by Pendle facilitates the tokenization and trading of fixed-rate yields, which can be utilized for a variety of purposes, including speculation and hedging.
Write a review on Pendle Finance.
Modulus: $6.3M
Modulus is bringing AI on-chain with ZK. It uses cryptography to verify that AI results weren’t doctored.
This is a special newsletter. Every week, we deconstruct the best crypto trends and share those insights with you.
