Today I will talk about Pendle Finance which is a DeFi platform born in 2021 and with a very complex operation. I'll start by saying that it is a Yield platform equipped with a time-decaying AMM (concentrated liquidity with minimum impermanent loss), liquidity pools, governance tokens (Pendle, vePendle) and is multichain (Ethereum, Arbitrum, Optimism, Mantle, BNB Chain).
Pendle is a revolutionary platform because it separates what has been deposited (liquidity) into two tokens:

1) Capital (Principal Token=PT)
2) Yield (Yield Token=YT)

This separation allows LP to employ various strategies to maximize profits, such as having fixed returns on an asset and speculating on future return changes. The PT represent the capital that guarantees the return (they are released upon maturity, regaining the original asset). YT tokenize rights to future returns until a pre-determined expiration date, allowing speculation on them. Imagine having an asset such as 1 aETH (by Aave) or 1 rsETH (by Renzo Protocol) and depositing it on Pendle. PT is represented by 1 rsETH deposited, while YT is the tokenization of the return that your deposit generates (for example 5% on the liquidity deposited up to a certain maturity). LP can use their YT by providing liquidity to Pendle AMM and earn additional trading fees and protocol rewards (in Pendle tokens). Furthermore, YT holders can perform a traditional interest rate swap by selling their YT tokens to obtain what has accrued up to that point (this is if they believe that the yield may decrease over time). On the other hand someone could buy that yield (YT) without depositing on Pendle, exposing themselves to it (future changes). Once the expiration date has passed, YT tokens no longer yield. The user must decide whether to redeem before expiration (pool/zap/zap out) or renew the asset to set a new expiration date.

EXAMPLE
Assume you deposit ETH, you will get PT and YT tokens.
1) You could sell the PT-ETH (they represent your deposit) to obtain immediate liquidity in ETH or other cryptocurrencies, maintaining the right to future returns with YT (the asset you deposited is sold but you remain exposed to its return. If you If you withdraw from the platform to sell the asset directly you would lose the return). If you hold YT ETH, you will accrue interest as time passes.
2) However, you could also sell YT-ETH to obtain immediate liquidity, giving the right to future returns to buyers of your YT-ETH. You get what you have gained up to that point. A user might believe that the future return of that asset will be higher so he buys your YT at a discounted price in theory. Buying and selling is also useful for arbitrage.

MARKET
In the “Market” section you can see several key terms such as “Maturity”, “Underlying APY”, “Implied APY”, “Fixed APY” and “Long Yield APY”:

1) Maturity refers to the expiration date of the token's yield period. In other words, it is the date on which the accrued return on Principal Tokens (PT) and Yield Tokens (YT) will be fully realized and the user will be able to collect the full amount

2) Underlying APY (Annual Percentage Yield) refers to the annual rate of return that the underlying asset is generating. This is the rate of return that is actually earned from the underlying asset

3) Implied APY is the annualized return obtained by taking into account the current market price of the Yield Token (YT). The Implied APY reflects the market-based expected (future) return and may differ from the Underlying APY due to supply and demand dynamics. If the Implied APY is significantly higher than the Underlying APY, it could be an opportunity to buy YT. If you believe the higher Implied APY is realistic, you may decide to purchase YT to benefit from higher returns. If you think the market is too optimistic, you may decide not to buy YT or sell the ones you own

4) Fixed Apy is the guaranteed return by holding PT until maturity

5) Long Yield APY is the return (approximate and theoretical) buying YT at the current price (considering that APY remains constant at the current value)

MARKET POINTS
It is possible to provide liquidity on pools of well-known platforms that generate points in addition to yield (Eigenlayer, Ethena, Karak, Swell Network, Puffer, EtherFI, KelpDAO, etc), exposing yourself to leverage on those too. For more info: Best Restaking Platforms: Eigenlayer

GOVERNANCE TOKEN
Like almost all DeFi platforms, Pendle Finance has its own token called Pendle. If it is staked, you receive vePendle which guarantees governance power regarding the future of the protocol (which tokens to add, which pools to boost, etc).

Please do not use Pendle if you do not understand how it works. Its operation is completely different from the Yield Farming platforms of DeFi1.0 and DeFi2.0. DYOR.

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