Chapter 1 - Introduction to Optimizing Yield

Course level: #beginner

Manage Your Yields

In DeFi, you can place your assets into a yield farming pool to receive an APY that fluctuates over time, just like token prices.

Yield fluctuates

APR often goes down… 😢

You rushed into a new pool with 100% APR and only to find out yields have declined to 10% the day after. Sound familiar?

💡 What if you can “fix” this yield?

If only I had more capital when APR goes up… 🤑

In a bull market, APR goes up and many of us find ourselves thinking “man, if only increase my capital”. While you can always leverage your assets by borrowing, managing collateral and avoiding liquidation can be a daunting affair.

💡 What if you can increase your yield exposure without liquidation risk?

Yield-bearing tokens

💡 Yield-bearing Token is an umbrella term that refers to any token that generates yield.

Examples:

  • Lido’s stETH and wstETH

  • Liquid restaking assets like EtherFi’s weETH, Renzo’s ezETH or KelpDAO’s rsETH

  • Staked stablecoin like Ethena’s sUSDe

  • LP Tokens (Balancer LP tokens, Uniswap LP tokens, Curve LP tokens, Aura pool tokens, etc)

Introducing Pendle

Simply put, Pendle lets you earn better yields to help you secure better certainty, better returns (i.e. higher APY 🔥)

You are going to master these DeFi magics in our Academy.

There are 2 main parts to fully understand Pendle.

  1. Yield-Tokenization

    In the next chapter, we will explain how Pendle wraps and split yield-bearing tokens into its principal and yield components, PT (principal token) and YT (yield token) respectively. This opens you up to various ways to optimize yields.

  2. Yield-Trading

    PT and YT can be traded via Pendle’s AMM. By creating a yield trading market in DeFi, Pendle unlocks the full potential of yield, enabling users to execute advanced yield strategies.

We will go through how to earn passive earning as well as active trading strategies with Pendle in the next chapters.

What can you do to earn better yields with Pendle

  • Passive earning

    • Fixed yield (e.g. earn fixed yield on stETH)

    • Earn extra yield without additional risks, using the same asset that you already own (e.g. provide liquidity with your stETH)

  • Yield trading

    • Long yield (e.g. bet on stETH yield going up by purchasing more yield)

    • Or, a mix of any of the all passive and active strategies, you are going to learn more on how to execute these strategies, including some advanced ones, in this Academy.

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