Pendle Finance has emerged as a trailblazer in the digital economy, transforming on-chain yield into a tradable asset class. Founded in 2020, Pendle was the first protocol to enable trading in tokenized future-yield contracts on an automated market maker (AMM) system. In simple terms, Pendle allows holders of yield-bearing assets to lock in future yield upfront or sell it, while giving traders a way to speculate on or hedge future yield streams without requiring the underlying collateral.
Over several years of careful development, the Pendle team built a thriving ecosystem at a time when few others believed such markets could thrive on-chain. Today, Pendle is the leading on-chain yield-trading protocol, supporting a growing ecosystem of institutional and retail users seeking predictable yields and sophisticated rate markets.
This in-depth analysis explores the mechanisms behind their success, from product evolution to institutional adoption, and examines how a strategic security collaboration with Cantina underpins their resilience at scale.
From Yield Tokens to Funding Rates: Pendle’s Product Evolution
Pendle V2: Tokenizing Yield
The core product of Pendle, V2, centers on yield tokenization. The protocol splits yield bearing assets into two tokens: a Principal Token (PT) representing the fixed principal and a Yield Token (YT) representing the variable yield. Using a combination of a custom time-based AMM and orderbook system, Pendle allows users to trade these tokens, effectively swapping fixed and floating rates in DeFi. This innovation turns the unpredictable yield of DeFi into tradable fixed income instruments, enabling several key use cases:
- Fixed Yield for Investors: By selling the YT or buying PT, a user locks in a fixed yield upfront, much like buying a bond, and gains certainty in an otherwise volatile yield environment.
- Leveraged Yield for Traders: By buying YT, traders can take directional bets on future yields, amplify exposure to high yield opportunities, or arbitrage yield differentials across markets.
- Yield Curve Formation: Pendle markets help price yield over different maturities, introducing an on-chain yield curve analogous to bond markets. This brings maturity structure to crypto rates, which is vital for a more mature DeFi ecosystem.
Pendle V2 launched in 2023 and unified the protocol design with Standardized Yield (SY) wrappers. This fixed earlier fragmentation and allowed any yield bearing asset, from lending interest to staking rewards, to be listed in Pendle markets. This standardized approach quickly unlocked product market fit. As the team says, "if there is yield, the asset can be Pendle'd." By adapting to whatever the dominant yield narrative is, be it staking ETH, BTC yield, or stablecoin interest, Pendle infrastructure can swiftly support new opportunities. This flexibility proved decisive; as competing fixed income projects pivoted or shut down, Pendle’s focused strategy made it the dominant venue for on-chain yield trading.
Boros: on-chain Funding Rate Trading
In August 2025, Pendle expanded its product suite with Boros, a first of its kind platform for trading perpetual funding rates on-chain. Funding rates, the periodic payments between long and short positions in perpetual futures, are a massive facet of crypto markets, but until Boros they were only indirectly tradable on centralized exchanges. Boros changes that by introducing Yield Units (YUs), a position that represents the realized funding yield on 1 unit of notional over a period. Traders on Boros can go long or short on funding rates in a fully on-chain environment:
- Going Long Funding Rate: Pay a fixed rate to receive the floating exchange funding rate, profitable if funding rates rise.
- Going Short Funding Rate: Receive a fixed rate in exchange for paying the floating rate, profitable if funding rates decline.
By tokenizing funding-fee flows in YUs, Boros lets perpetual traders hedge or speculate on funding costs without altering their positions on exchanges. At launch, Boros supported BTC, BNB and ETH perp funding from major venues, with plans to add markets like SOL and integrate more exchanges over time. Notably, Pendle took a measured approach with Boros to ensure stability by capping initial open interest and limiting leverage. This deliberate pacing prioritizes risk management and system validation before scaling up, a prudent strategy for a novel derivatives platform.
In a few short months, Boros began showing strong traction. By the end of 2025, Boros had already facilitated roughly $5.5B in notional volume with $80M open interest, contributing around $730K annualized in protocol revenue. Put in context, this is only 0.1% of the total crypto perps market, highlighting enormous upside as on-chain rate trading grows. Pendle estimates that even a 10× increase in Boros OI could boost overall protocol fees by 15%, diversifying revenue beyond yield markets. In other words, Boros opens a new growth vector for Pendle, one less dependent on raw TVL and more tied to trading volumes and volatility.
An Institutional Lens: Adoption, Integration, and Impact
The rapid growth of Pendle in 2024 and 2025 signals that it has tapped into significant demand from more sophisticated DeFi participants. In 2025 alone, Pendle recorded all time highs across key metrics, reflecting accelerating adoption by not just retail users but also funds and professional desks.
Surging TVL and Volume
Pendle’s Total Value Locked averaged $5.8 billion in 2025, up 79% year over year, reaching a peak of $13.4 billion at its height. Over $47.8 billion in trading volume flowed through the protocol in 2025, a 36% YoY increase. This makes Pendle one of the top 15 DeFi protocols by TVL and underscores the depth of its markets.
User Growth and Revenue
More than 155,000 new users joined Pendle markets in 2025, driving protocol revenues to an estimated $40 million annualized. By revenue, Pendle now ranks among the highest grossing DeFi protocols, yet some analysts noted its market valuation still lagged its earnings growth, suggesting an undervalued opportunity as it enters 2026.
Adoption by Large Players
Crucially, these numbers are not fueled purely by yield farming retail users, but increasingly by institutional caliber participants. According to the Pendle team, the surge reflects uptake by funds, treasuries, hedging desks, and professional traders who need predictable yield exposure and standard interest rate products. In practice, crypto hedge funds and trading firms have started using Pendle to execute complex strategies. For example, Edge Capital packages sophisticated trades using Pendle PTs to secure fixed yields. Meanwhile, decentralized stablecoins like USDe and USDS leverage Pendle yield markets to optimize their treasury yields. These examples highlight how Pendle infrastructure is being adopted as a building block for institutional DeFi strategies.
Integrations and Ecosystem
Pendle has actively integrated with other protocols to broaden its reach. It forged partnerships with major DeFi platforms including Ethena, Aave, Euler, and Morpho. Aave, for instance, greenlit using Pendle PTs as collateral in its lending markets in 2025, enabling yield bearing stablecoin strategies that helped drive Pendle TVL upwards in tandem with Ethena growth. These integrations give Pendle distribution channels and provide other protocols new yield tools, a win win that cements Pendle as foundational infrastructure. As one analysis noted, distribution and integration density form Pendle’s moat; deep liquidity across maturities and wide support in DeFi platforms make Pendle harder to dislodge.
Resilience and Trust
Pendle performance through volatile markets has also built credibility with larger investors. It has demonstrated resilience during downturns by retaining 93% of liquidity through a major pool maturity and seeing most funds roll over into new yield pools. Such stability, even amid broader liquidity rotations, has bolstered investor confidence. As the Pendle CEO noted, "Trust is very important when it comes to large investors and liquid funds, and these metrics signify trust towards the protocol." In short, consistent fundamentals are translating into reputational capital that appeals to institutional users who prioritize reliability over hype.
Security as a Collaboration: A Case Study in Active Defense
From the outset, Pendle treated security not as a one time checklist item but as an ongoing, collaborative effort. Given the sheer scale of value at stake and the critical role Pendle plays in the yield markets, the team implemented one of the most rigorous security programs in the industry. This multi layered approach includes repeated audits, community sourced reviews, fail safe mechanisms, and a comprehensive partnership with Cantina that spans multiple initiatives.
Bug Bounty Ecosystem
Recognizing that security is an ongoing journey, Pendle made a bold move by launching a massive bug bounty ecosystem with a total reward pool of $2,500,000 hosted on the Cantina platform. This commitment is split across two dedicated programs to ensure specialized coverage for their distinct product lines:
- The Pendle Bounty ($2,000,000): A long standing program live since June 2024, focusing on the core Pendle V2 smart contracts across all deployed chains.
- The Boros Bounty ($500,000): A targeted program launched in September 2025 specifically to secure the new Boros funding rate engine.
This structure allows Pendle to incentivize white hat hackers to continuously probe both their established infrastructure and their newest innovations. The focus is squarely on preventing any loss of user funds or protocol insolvency, with rewards commensurate with the immense value secured by the protocol.
Beyond Bounties: Smart Contract Audits
In addition to these continuous bounty programs, Pendle utilizes audits on Cantina to conduct deep dive security assessments. The team has successfully completed multiple engagements, including an audit of pendle-core-v2 and the Boros one concluded in July 2025. These time-bounded, expert-led assessments complement the open-ended nature of bug bounties, ensuring that complex logic is scrutinized by dedicated security researchers.
Solving the Signal to Noise Challenge: The Cantina Experience
For a protocol securing billions, the challenge of a bug bounty is often not the lack of reports, but the sheer volume of them. A multi million dollar reward pool naturally attracts a flood of submissions, ranging from critical insights to automated noise. This creates a resource bottleneck where internal engineers risk being buried in triage rather than fixing bugs.
The collaboration with Cantina addresses this through robust platform mechanics rather than manual intermediaries. By leveraging bounty deposits, AI driven filtering, and a researcher reputation system, the platform effectively eliminates low quality noise before it reaches the queue. This allowed the Pendle team to handle incoming reports directly without being overwhelmed by spam. The efficiency of this high signal workflow led the Pendle team to describe the bug bounty experience on Cantina as "second to none."
A Partnership Built on Results
This feedback highlights how a well run security program significantly speeds up the discovery to fix cycle. Pendle has built a resilient security posture that grows in step with its TVL. The collaboration serves as a model for how organizations can leverage security initiatives without being overwhelmed by it.
Looking Ahead: 2026 and Beyond
As we enter 2026, Pendle Finance sits at the nexus of some of the most exciting developments in crypto finance. The team vision for the coming years is both ambitious and far sighted, aiming to push Pendle from a DeFi niche leader to a mainstream, cross domain yield platform.
Bridging DeFi and TradFi Pendle is actively working to extend its reach beyond the crypto native sphere. A major 2026 focus is the Citadels program, an effort to package Pendle yield products in forms that traditional institutions and new markets can adopt. This involves tackling hurdles like regulatory compliance, KYC/AML integration, and legal structuring so that institutional investors can access Pendle fixed yields within their requirements. The team is already in discussions with potential partners to build these bridges, and they have cited collaboration with projects like Ethena to find pathways connecting on-chain yields to the broader financial world. The long term goal is clear: all yields, on-chain or off chain, should become tradeable on Pendle. By positioning itself as a unified yield marketplace, Pendle is shooting for a truly expansive TAM.
Scaling to New Heights
In the nearer term, analysts see ample headroom for Pendle growth within crypto itself. After crossing the $13B TVL milestone in 2025, some project Pendle could reach $20B+ in TVL within the next 1 to 2 years given continued adoption. This could be driven by new yield opportunities, the maturation of interest rate derivatives demand, and tokenized real world yields starting to come on-chain. Pendle strategy of listing any asset with yield means it stands to benefit from major DeFi trends. Its recent permissionless listing feature will also encourage more communities to add their yield assets to Pendle without friction, expanding the menu of markets and drawing in new users.
Balanced Revenue Streams
With Boros now live, Pendle is on course to diversify its revenue between yield-based fees and trading fees. Historically, Pendle's revenues were heavily tied to its TVL. Going forward, Boros trading-driven fees are expected to counterbalance that cyclicality. As more users trade funding rates or other interest swaps on Boros, Pendle can earn from volume and volatility, not just deposits. This should make the overall business more robust across market conditions, evolving Pendle from a single-stream yield protocol into a multi-product, full-stack fixed-income platform.
Conclusion
Pendle’s story so far illustrates what it takes to bring a traditionally conservative financial concept like fixed income into the bleeding-edge world of DeFi. It required innovation, resilience, and a relentless focus on building trust through security and performance. The result is a protocol that has not only achieved significant technical milestones but also earned credibility among both crypto natives and forward-looking institutions.
As a case study in DeFi success, Pendle demonstrates the importance of holistic execution: strong technology and products, strategic market positioning, strong community and institutional relationships, and an uncompromising security mindset. By collaborating with platforms such as Cantina for continuous security validation, Pendle signals to its users and partners that it will never grow complacent in protecting value. This ethos, combined with Pendle's market leadership in yield trading, positions it as a key piece of infrastructure for the future of finance.
With its thoughtful leadership and collaborative approach, Pendle is well on its way to making "any yield, any rate" available to anyone, anywhere, securely and transparently. That is a vision we at Cantina are proud to support, and one that bodes well for the maturity and growth of decentralized finance as a whole.
Secure Your Future
Innovation at the scale of Pendle requires security that can keep pace. If you are building the next generation of financial infrastructure, ensure your defenses are as robust as your vision. Contact Cantina today to launch a comprehensive security program tailored to your needs.