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@gotoalberto
Pendle.finance protocol has paused its contract, but do you know why this happened? Let me explain in this thread. https://thedefiant.io/news/defi/pendle-pauses-contracts-after-yield-protocol-penpie-suffers-usd27-million-exploit Fixed income protocols are exposed to unexpected behavior if the protocols built on top of them don't function correctly. An example is element.fi (now Delv), which operates in the same way as Pendle and in 2022 offered a fixed APR on MIM (a stablecoin from abracadabra.money). As you know, in these protocols, you deposit the bearing token and receive two tokens: principal (PT) and yield (YT). The PT allows you to claim the principal at the maturity date, and the YT allows you to claim the yield.
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gotoalberto
@gotoalberto
In the case of MIM (and also with Pendle and Penpie), the MIM principal could be bought for below its normal price, at $0.20, when its normal price was $1 (as it is a stablecoin), offering returns of more than 80% over a three-month period for buying the PT. The reason this happens is because people expect the PT to be worth zero at maturity due to the hack that affected the protocol. Pendle, after all, is a derivatives product, and it can be used to speculate on the future value of both the principal and the yield. Normally, we speculate on the value of the yield, but in these cases, the principal is the most important asset. Pendle has paused its contract as a precaution because Penpie represents a significant portion of its trading volume: $136M. However, using Pendle remains safe.
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