As the conflict intensifies, all eyes turn to two key players, PenPie and Equilibria, as Stake DAO has limited traction in the vePENDLE space. In this article, Coincu addresses the current situation of the Pendle War.
Causes of the Pendle War
With its unique features and tools, Pendle enables users to maximize interest rates, increase returns during bull markets, and offer hedging plans during bear markets.
At its core, Pendle uses three main tools to achieve its goals. The first is the concept of yield tokenization, creating encrypted versions of tokens that yield yields on the Pendle platform. These yield tokens (PT and YT) are vital to participate in the Pendle ecosystem.
The second tool is Pendle’s Automated Market Maker (AMM), which allows users to trade the PT and YT yield tokens, allowing them to profit from fluctuating returns in response to token price movements and other market factors.
The third tool is governance, where Pendle uses vePendle for project management. This mechanism incentivizes projects to accumulate and acquire vePENDLE, triggering a governance battle in the DeFi market known as the Pendle War.
Pendle War is about projects competing for vePENDLE and trying to win over parent project owners to their own child projects. The appeal lies in the ability to acquire a significant amount of veTokens, giving them greater power to direct incentives, rewards and emission streams into the pools in their favor.
In the ongoing Pendle War, there is currently heated competition between two major projects, Equilibria (ePENDLE) and Penpie (mPENDLE), with others such as Stake DAO and Swell Network also joining the fray. Since the participation of further projects can be expected in the near future, the users will benefit from the optimized sources of income of these sub-projects.
Pendle’s success is evident in its steady inflow of funds, which is driving its Total Value Locked (TVL) to new all-time highs. According to Defilama, Pendle’s TVL has increased nearly tenfold year-to-date, growing from $15 million to an impressive $150 million.
In addition to TVL growth, the native token PENDLE saw a significant price increase despite the overall market being in a downtrend. The value of the token increased from $0.04 to around $1, an impressive 25x increase in the second half of 2023. Additionally, the listing of Pendle on Binance on July 3 drew additional attention and interest from the market.
Another factor driving Pendle’s growth is its association with the booming LSDFi (leveraged staking DeFi) array. As the TVL of LSDFi continues to rise, so does Pendle’s importance in this segment. Reports from reputable organizations like Binance Research have contributed to a surge in community attention for LSDFi and Pendle.
Pendle has created a new market in the crypto market, the DeFi Yield – Trading Protocol. Pendle allows users to strategize to earn profits from their own future winnings. Currently, Pendle is targeting LST (Liquid Staking Token) like sfxrETH and stETH. It can be said that Pendle is one of the leading platforms for the recent LSDfi trend to date.
Pendle’s veToken model has some of the following characteristics:
It can be seen that the vePENDLE model has many similarities with the veCRV model. The key point here is that Pendle must have a large revenue stream, which is currently evident when TVL and volume on Pendle are still growing very well.
This started a real war, the Pendle War. In this war, two names compete fiercely: Penpie and Equilibria. Now let’s take a closer look at this war to see who benefits and what project strategy will help them win the Pendle War.
Overview of Pendle War
PenPie and Equilibria are currently engaged in a heated battle for dominance in the Pendle War. The focus is on their vePENDLE holdings, with both projects accounting for a significant portion of this coveted asset, while Stake DAO lags behind with a mere 2.99 percent stake.
VePENDLE, an essential asset for yield optimization, serves as a battleground for PenPie and Equilibria, and understanding their respective approaches is crucial.
- PenPie, a robust yield farming platform, is deployed on both the Ethereum and Arbitrum chains. The vePENDLE amount on PenPie is calculated by combining the holdings of both chains, giving users the potential for higher rewards.
- On the other hand, Equilibria also operates on two chains, but calculates its vePENDLE amount exclusively on Ethereum. Although it offers a yield farming solution for vePENDLE holders, it lacks PenPie’s cumulative approach.
A brief introduction to PenPie and Equilibria:
- Developed by the Magpie team, PenPie aims to maximize profits for PENDLE holders. It leverages expertise from the successful Wombat Wars project for both BNB Chain and Arbitrum.
- Equilibria, on the other hand, offers PENDLE holders a platform to benefit from vePENDLE without worrying about frozen assets in the protocol.
The Battle Factors
In this Pendle War clash, several factors will determine the ultimate victor:
- APR of PENDLE Deposits: PenPie has a clear advantage in terms of profitability metrics for PENDLE depositors in the log. Its higher APR attracts users seeking higher returns.
- Holding the pen during AMM switching: The ability to hold the pen when users switch back to PENDLE on the AMM is a critical factor. Both platforms are evaluated in terms of their efficiency in this regard.
- Native Tokens for Liquidity Mining: The availability of the remaining native tokens to be used for liquidity mining will play an important role in attracting users and the Total Value Locked (TVL).
- Team Experience: The development teams’ experience in similar battles will be crucial to ensure a robust and reliable platform.
Current status
Both platforms currently have a comparable amount of vePENDLE. In addition to its sizeable vePENDLE holdings, PenPie has also established itself as a successful project on Camelot, the leading launchpad platform in the Arbitrum ecosystem. The token price has increased fivefold compared to the original IDO price, adding to its attractiveness to users.
While Equilibria offers a slightly better option for compounding Pendle earnings, it faces stiff competition from PenPie. Both platforms recently rolled out their native tokens, incentivizing to lure in users while keeping the TVL values the same.
Diploma
The Pendle War is in full swing as PenPie and Equilibria fight for supremacy in yield farming. The accumulated vePENDLE holdings, higher APR and PenPie’s successful track record provide a competitive advantage. However, Equilibria’s unique proposal to mitigate locked assets might also resonate with some users. As the war unfolds, factors such as user adoption, community support, and platform innovation will ultimately determine the winner in this highly competitive arena.
DISCLAIMER: The information on this website is intended as general market commentary and does not constitute investment advice. We encourage you to do your own research before investing.
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