In DeFi, yield is dynamic. Pendle Finance Official introduces a mechanism to manage this unpredictability through Pendle Yield Tokenization. This guide breaks down the core components: the Principal Token (PT) and the Yield Token (YT).
Core Concept: The Splitting Mechanism
When you deposit a yield-bearing asset (like stETH or GLP) into Pendle, the protocol wraps it and then splits it into two new tokens:
Principal Token (PT): This represents the principal of your initial deposit. At maturity, PT can be redeemed 1:1 for the underlying asset. Trading PT below its face value allows you to lock in a Pendle Fixed Yield Strategy.
Yield Token (YT): This represents the right to all future yield generated by the principal until the maturity date. If you anticipate rising yields, buying YT is a direct way to speculate on that outcome.
This process is the foundation of the entire Pendle ecosystem, a core concept in any Pendle Earn Guide.
Step 1: Minting PT and YT
To start, you need a supported yield-bearing asset on a network like Pendle Finance Arbitrum.
Navigate to the "Mint" tab on the Pendle app.
Select the asset you want to tokenize (e.g., stETH).
Enter the amount and the maturity date.
Execute the transaction. Your wallet will now have PT-stETH and YT-stETH.
Step 2: Choosing a Strategy
Now that you have the tokens, you can implement a strategy.
Fixed Yield: Sell your YT immediately. The price you get for YT effectively locks in your yield upfront. You hold your PT to maturity to reclaim your principal.
Leveraged Yield: Buy more YT from the Pendle AMM. You are now exposed to the yield of a much larger underlying principal, a high-risk/high-reward play.
Understanding the interplay between these tokens is the key to mastering How to use Pendle Finance.
For a deep dive into the smart contract architecture and SDKs, refer to the Full Official Documentation.
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