ADD PT-stETH as collateral to mint peUSD

Voting ended about 2 years agoSucceeded

Introduction

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 Pendle’s AMM.

Pendle brings the TradFi interest derivative market into DeFi. In traditional finance, interest rate swaps are the biggest market in the world at >$500T. PT is the equivalent of zero-coupon bonds while YT is the equivalent of coupon payments. Pendle is positioning itself to become a core infrastructure for on-chain yield trading.

Proposal Summary

Pendle is proposing Lybra DAO to accept PT-stETH (maturity on 26 Dec 2024 and 25 Dec 2025) on Ethereum as collateral to mint peUSD.

We believe PT-stETH will be a unique addition for the following reasons:

Healthy Liquidity Source for peUSD. The two proposed PT-stETH pools have a combined liquidity of $36M, making them ideal sources of collateral for peUSD.
Accelerate peUSD’s adoption. PT-stETH holders have a different profile compared to stETH holders. Pendle users are generally more active in pursuing different Defi strategies to maximize yield. Enabling PT-stETH as collateral will help to drive peUSD’s adoption among different user segments.
Higher Yield than stETH. Holders of PT-stETH can enjoy higher yield compared to stETH holders. This is possible when users purchase PT-stETH and lock in an implied yield (fixed yield) that is higher than the future yield of stETH.
Price Stability. PT-stETH’s value is tightly correlated with its underlying asset, stETH which is the most widely adopted LSD in the market.

Performance and Growth

Pendle’s overall TVL is currently at its ATH of $230M, of which PT-stETH pools contribute $68M (~29% of Pendle’s total TVL). PT-stETH is the top asset on Pendle in terms of liquidity and trading volume.

The two proposed PT-stETH pools on Ethereum have a combined liquidity of $36M, making them a good source of liquidity for peUSD. Individually, PT-stETH maturing on 26 Dec 2024 has liquidity of $11M while PT-stETH maturing on 25 Dec 2025 has a liquidity of $25M.

Our public analytics dashboard: https://analytics.pendle.finance/

Incentives and Benefits to Lybra

Net Positive to the Ecosystem stETH and wstETH collectively contribute the majority of collateral on Lybra. Likewise, stETH is the top asset on Pendle contributing to 29% of our TVL. Rather than limiting stETH holders to deposit into either one of our protocols, we should build on our synergy and develop a partnership that allows stETH holders to benefit from our complementary offerings. We believe this proposal will create a net positive impact to both protocols (in terms of TVL), Lybra and Pendle users (through unlocking an additional layer of utility and yield strategies) as well as the wider LSDfi community (strengthening LSDfi narrative).
Other LSDs to offer as collateral Aside from stETH, Pendle also supports a range of leading LSDs. This includes rETH, swETH, ETHx, sfrxETH, oETH and wBETH. Subject to Lybra DAO’s approval, the PT tokens of these LSDs can be new sources of liquidity as collateral on Lybra too, further contributing to peUSD’s growth and adoption.

Token Mechanisms

PT-stETH is a non-rebasing LSD. PT-stETH represents the principal portion of stETH and can be redeemed 1:1 for stETH at maturity. Since the yield component (staking rewards from stETH) has been separated, PT-stETH can be acquired at a discount compared to stETH. The value of PT-stETH will approach and ultimately match the value of stETH on maturity.

Due to its mechanics, the value of PT-stETH is tightly correlated with the value of stETH. At maturity, the price of 1 PT-stETH is equivalent to 1 stETH. Details on how PT is minted can be found here: https://docs.pendle.finance/ProtocolMechanics/YieldTokenization/SY

Security and Audits

Pendle smart contracts have been audited by Ackee, Dedaub, Dingbats, and some of the top wardens from Code4rena. All of Pendle’s smart contracts are open source.

The complete list of audit reports can be found on our Github repo: https://github.com/pendle-finance/pendle-core-v2-public/tree/main/audits

Oracles and Price Feeds

We have deployed our own oracle for PT-stETH which are used by multiple third party Dapps such as money markets and yield optimisers.

Details of our oracle can be found here: https://docs.pendle.finance/Developers/Integration/PTOracle

Risks

Depeg of underlying stETH: The value of stETH although pegged to an ETH value that can be redeemable, is still subject to market forces that might cause temporary depegs from its actual value. Arbitrageurs are fast to capture this inefficiency but nonetheless, this can cause liquidations to users as the price of stETH and PT-stETH fluctuates
Redemptions: PT-stETH is redeemable for stETH with a 1:1 ratio at maturity. Users that wish to exit their PT-stETH position before maturity can either sell into Pendle’s AMM or by matching their PT-stETH with an equivalent amount of YT-stETH to redeem stETH. However, during extreme market conditions, the liquidity of PT-stETH pools might fluctuate wildly, potentially impacting users' ability to exit their PT-stETH positions.
Slippage: Based on current liquidity, slippage when selling $1M worth of PT-stETH in a single transaction ranges between 0.8% to 1.2%. Note that the price-impact range will fluctuate based on the future liquidity of PT-stETH pools.

Links:

Website: https://app.pendle.finance/ Documentation: https://docs.pendle.finance/ Github Page: https://github.com/pendle-finance Twitter/X: https://twitter.com/pendle_fi DefiLlama: https://defillama.com/protocol/pendle CoinGecko: https://www.coingecko.com/en/coins/pendle

For more details please refer to discussion on Discord

Off-Chain Vote

Yes, PT stETH as collateral

1.32M esLBR42%

1.82M esLBR58%

Quorum:313%

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Timeline

Nov 28, 2023Proposal created

Nov 28, 2023Proposal vote started

Dec 05, 2023Proposal vote ended

Dec 05, 2023Proposal updated

Introduction

Proposal Summary

Pendle is proposing Lybra DAO to accept PT-stETH (maturity on 26 Dec 2024 and 25 Dec 2025) on Ethereum as collateral to mint peUSD.

We believe PT-stETH will be a unique addition for the following reasons:

Healthy Liquidity Source for peUSD. The two proposed PT-stETH pools have a combined liquidity of $36M, making them ideal sources of collateral for peUSD.

Accelerate peUSD’s adoption. PT-stETH holders have a different profile compared to stETH holders. Pendle users are generally more active in pursuing different Defi strategies to maximize yield. Enabling PT-stETH as collateral will help to drive peUSD’s adoption among different user segments.

Higher Yield than stETH. Holders of PT-stETH can enjoy higher yield compared to stETH holders. This is possible when users purchase PT-stETH and lock in an implied yield (fixed yield) that is higher than the future yield of stETH.

Price Stability. PT-stETH’s value is tightly correlated with its underlying asset, stETH which is the most widely adopted LSD in the market.

Performance and Growth

Incentives and Benefits to Lybra

Net Positive to the Ecosystem stETH and wstETH collectively contribute the majority of collateral on Lybra. Likewise, stETH is the top asset on Pendle contributing to 29% of our TVL. Rather than limiting stETH holders to deposit into either one of our protocols, we should build on our synergy and develop a partnership that allows stETH holders to benefit from our complementary offerings. We believe this proposal will create a net positive impact to both protocols (in terms of TVL), Lybra and Pendle users (through unlocking an additional layer of utility and yield strategies) as well as the wider LSDfi community (strengthening LSDfi narrative).

Other LSDs to offer as collateral Aside from stETH, Pendle also supports a range of leading LSDs. This includes rETH, swETH, ETHx, sfrxETH, oETH and wBETH. Subject to Lybra DAO’s approval, the PT tokens of these LSDs can be new sources of liquidity as collateral on Lybra too, further contributing to peUSD’s growth and adoption.

Token Mechanisms

Security and Audits

Pendle smart contracts have been audited by Ackee, Dedaub, Dingbats, and some of the top wardens from Code4rena. All of Pendle’s smart contracts are open source.

Risks

Depeg of underlying stETH: The value of stETH although pegged to an ETH value that can be redeemable, is still subject to market forces that might cause temporary depegs from its actual value. Arbitrageurs are fast to capture this inefficiency but nonetheless, this can cause liquidations to users as the price of stETH and PT-stETH fluctuates

Redemptions: PT-stETH is redeemable for stETH with a 1:1 ratio at maturity. Users that wish to exit their PT-stETH position before maturity can either sell into Pendle’s AMM or by matching their PT-stETH with an equivalent amount of YT-stETH to redeem stETH. However, during extreme market conditions, the liquidity of PT-stETH pools might fluctuate wildly, potentially impacting users' ability to exit their PT-stETH positions.

Slippage: Based on current liquidity, slippage when selling $1M worth of PT-stETH in a single transaction ranges between 0.8% to 1.2%. Note that the price-impact range will fluctuate based on the future liquidity of PT-stETH pools.