Pendle is a derivative product protocol used to lock in the interest rate of products with volatile interest rates by setting a specific maturity period. Let's explain this with a real-world example for better understanding:

Let's proceed with Ethena (USDe) as an example. As of August 26, 2025, if you pledge your USDe to obtain sUSDe, you can earn an annual return of 8.54%. However, this return is not fixed; it may decrease or increase over time. Pendle is a derivative product protocol that comes into play precisely at this point.

If you wish, you can take advantage of Pendle's sUSDe market, which is set to expire on November 25, 2025. If you take your sUSDe and evaluate it on Pendle, you will receive two tokens: PT and YT. PT tokens will be delivered and can be exchanged for USDe when the maturity date of November 25, 2025, arrives. The current price is $0.9781. This means you are purchasing USDe at a discount, effectively earning a 9.17% annual return.

So what does YT do? YT represents the returns you will earn from the Ethena protocol. These returns could be points earned from Ethena's loyalty program or the sUSDe yield you would normally earn. If you believe the sUSDe yield will fall below its current rate of 8.54%, you can convert your tokens to PT in the coming period. If you think the points in Ethena's loyalty program will become more important by November 25, 2025, you can also invest by purchasing YT tokens. 

However, there is one point to note here: When the term expires, just as PT tokens will be converted to USDe, YT tokens will also lose their value and drop to $0. So, in a way, when you invest in YT tokens, you are burning your money and earning various returns from Ethena until the maturity date. You can think of those burning their money as transferring their funds to people who want a fixed interest rate.

Now let's look at the PT tokens of various stablecoins on the Pendle protocol:

The table above is sorted by maturity dates. The table shows that the highest liquidity is concentrated in USDe and sUSDe. The main reason for this is the Aave markets created in collaboration with Aave, Pendle, and Ethena. In other words, users can borrow again by pledging their preferred PT-USDe and PT-sUSDe tokens as collateral on Aave to earn fixed interest. Aave's limit of $2,400,000,000 for PT-sUSDe and $1,800,000,000 for PT-USDe has been filled.

Users deposit their PT-sUSDe and PT-USDe tokens into Aave to use them as collateral. They can then activate Aave's “efficiency mode (e-mode)” feature and borrow up to 93.70% of the value they provide. The interest cost payable when borrowing USDe has averaged 7.63% over the last month. In this case, when PT-USDe, which currently has a yield rate of 14.02%, is purchased and used as collateral, capital can be increased by paying only 7.63% interest. It is possible to purchase PT-USDe again with the USDe obtained and increase the return amount once more. Let's calculate the effective return rates we will obtain when we perform this cycle from one to five times and theoretically perform it an infinite number of times:

First, let's prepare the mathematical formula we will use to make this calculation.

$S_N = P \cdot (1 + L + L^2 + \cdots + L^N) = P \cdot \frac{1 - L^{N+1}}{1 - L}$

$S_N$ = Total Deposit Amount

$P$ = First Initial Capital

$L$ = LTV Rate

$B_N = P \cdot (L + L^2 + \cdots + L^N) = P \cdot \frac{L \,(1 - L^N)}{1 - L}$

$B_N$ = Total Borrow Amount

$E_N = S_N \cdot r_s - B_N \cdot r_b$

$E_N$ = Effective APY

$r_s$ = Supply Interest Rate

$r_b$ = Borrow Interest Rate

Using this formula, we must determine a safe LTV ratio so that liquidation does not occur when the USDe price deviates by $1. If this ratio is set at 90%, liquidation will not occur even if the USDe price drops to $0.95. The investment return rate and the interest rates paid on borrowed funds will be used as the rates given in the example above.

In this case, the effective return rates obtained when the number of cycles varies between one and five, and when theoretically infinite cycles are performed, are shared in the table below:

Let's examine the most prominent wallets using this cycle. We will discuss the second-largest wallet with PT-USDe-25SEP2025 collateral maturing on 25.09.2025. The address 0xDb…82 initially deposited 51 million PT-USDe-25SEP2025 tokens as collateral. It then borrowed USDC and USDe and deposited another 41 million PT-USDe-25SEP2025 collateral. In subsequent transactions, an unlabeled address obtained PT-USDe-25SEP2025 tokens, which were again deposited as collateral. Without evaluating the following transactions, let's calculate the effective APY rate from the 51M and 41M investments:

Total PT-USDe-25SEP2025 obtained: 92,000,000

Fixed PT interest earned in the first transaction (51M) (12.08.2025): 15.18%

Fixed PT interest earned in the second transaction (41M) (15.08.2025): 13.97%

Total weighted PT interest earned: $13,469,500

Interest amount paid in the debt transaction (41M): 41,000,000 * 7.57% = $3,103,700

Net return: $10,365,800

Effective APY: 20.32%

If only 51 million PT-USDe-25SEP2025 tokens had been held, the interest rate would have been 15.18%, but thanks to this cycle, the interest rate has been increased to 20.32%.

At the same time, the third largest wallet among the holders of PT-USDe-25SEP2025 tokens deposited as collateral to Aave is associated with the second wallet. This wallet has performed the cycle 15 times thanks to the smart contract it created in a single transaction. You can access the link to this ingenious transaction on the block explorer here.

Before the transaction took place, 19.5M PT-USDe-25SEP2025 tokens were held as initial capital. After this amount went through the cycle 15 times within the same transaction, the final amounts are as follows: The total amount deposited as collateral is 137M PT-USDe-25SEP2025. The total amount borrowed is 122.11M USDe. To calculate the effective APY, we need to find the fixed interest rate of PT-USDe at the time the transaction took place. We can find this by going to the date the transaction took place on the Pendle interface. The date the transaction took place is August 12, 2025, 01:31 PM UTC, and we can see on the Pendle interface that the interest rate on that date was 15.18%.

In this case, the value of 137M PT-USDe-25SEP2025 at that time is calculated at a rate of 1 PT-USDe-25SEP2025 = 0.9833 USDe, which is 134,712,100 USDe. The annual interest income calculated at this rate will be $20,449,296. The interest cost of borrowing USDe for the last week is an average of 7.54%. In this case, the annual interest cost payable will be $9,207,094. In this case, the net return rate obtained will be $11,242,202.

We mentioned that the initial capital used was 19,500,000 PT-USDe-25SEP2025. Again, calculated at the same rate, this amounts to $19,174,350. The effective interest rate is calculated by dividing the net return obtained by the initial capital. In this case, the effective APY amount obtained is 58.63%.

As seen, when the cycle is performed 15 times, the APY rate approaches the amount it could reach if performed nearly infinitely.

Pendle is a derivative product protocol used to lock in the interest rate of products with volatile interest rates by setting a specific maturity period. Let's explain this with a real-world example for better understanding:

Let's proceed with Ethena (USDe) as an example. As of August 26, 2025, if you pledge your USDe to obtain sUSDe, you can earn an annual return of 8.54%. However, this return is not fixed; it may decrease or increase over time. Pendle is a derivative product protocol that comes into play precisely at this point.

If you wish, you can take advantage of Pendle's sUSDe market, which is set to expire on November 25, 2025. If you take your sUSDe and evaluate it on Pendle, you will receive two tokens: PT and YT. PT tokens will be delivered and can be exchanged for USDe when the maturity date of November 25, 2025, arrives. The current price is $0.9781. This means you are purchasing USDe at a discount, effectively earning a 9.17% annual return.

So what does YT do? YT represents the returns you will earn from the Ethena protocol. These returns could be points earned from Ethena's loyalty program or the sUSDe yield you would normally earn. If you believe the sUSDe yield will fall below its current rate of 8.54%, you can convert your tokens to PT in the coming period. If you think the points in Ethena's loyalty program will become more important by November 25, 2025, you can also invest by purchasing YT tokens. 

However, there is one point to note here: When the term expires, just as PT tokens will be converted to USDe, YT tokens will also lose their value and drop to $0. So, in a way, when you invest in YT tokens, you are burning your money and earning various returns from Ethena until the maturity date. You can think of those burning their money as transferring their funds to people who want a fixed interest rate.

Now let's look at the PT tokens of various stablecoins on the Pendle protocol:

The table above is sorted by maturity dates. The table shows that the highest liquidity is concentrated in USDe and sUSDe. The main reason for this is the Aave markets created in collaboration with Aave, Pendle, and Ethena. In other words, users can borrow again by pledging their preferred PT-USDe and PT-sUSDe tokens as collateral on Aave to earn fixed interest. Aave's limit of $2,400,000,000 for PT-sUSDe and $1,800,000,000 for PT-USDe has been filled.

Users deposit their PT-sUSDe and PT-USDe tokens into Aave to use them as collateral. They can then activate Aave's “efficiency mode (e-mode)” feature and borrow up to 93.70% of the value they provide. The interest cost payable when borrowing USDe has averaged 7.63% over the last month. In this case, when PT-USDe, which currently has a yield rate of 14.02%, is purchased and used as collateral, capital can be increased by paying only 7.63% interest. It is possible to purchase PT-USDe again with the USDe obtained and increase the return amount once more. Let's calculate the effective return rates we will obtain when we perform this cycle from one to five times and theoretically perform it an infinite number of times:

First, let's prepare the mathematical formula we will use to make this calculation.

$S_N = P \cdot (1 + L + L^2 + \cdots + L^N) = P \cdot \frac{1 - L^{N+1}}{1 - L}$

$S_N$ = Total Deposit Amount

$P$ = First Initial Capital

$L$ = LTV Rate

$B_N = P \cdot (L + L^2 + \cdots + L^N) = P \cdot \frac{L \,(1 - L^N)}{1 - L}$

$B_N$ = Total Borrow Amount

$E_N = S_N \cdot r_s - B_N \cdot r_b$

$E_N$ = Effective APY

$r_s$ = Supply Interest Rate

$r_b$ = Borrow Interest Rate

Using this formula, we must determine a safe LTV ratio so that liquidation does not occur when the USDe price deviates by $1. If this ratio is set at 90%, liquidation will not occur even if the USDe price drops to $0.95. The investment return rate and the interest rates paid on borrowed funds will be used as the rates given in the example above.

In this case, the effective return rates obtained when the number of cycles varies between one and five, and when theoretically infinite cycles are performed, are shared in the table below:

Let's examine the most prominent wallets using this cycle. We will discuss the second-largest wallet with PT-USDe-25SEP2025 collateral maturing on 25.09.2025. The address 0xDb…82 initially deposited 51 million PT-USDe-25SEP2025 tokens as collateral. It then borrowed USDC and USDe and deposited another 41 million PT-USDe-25SEP2025 collateral. In subsequent transactions, an unlabeled address obtained PT-USDe-25SEP2025 tokens, which were again deposited as collateral. Without evaluating the following transactions, let's calculate the effective APY rate from the 51M and 41M investments:

Total PT-USDe-25SEP2025 obtained: 92,000,000

Fixed PT interest earned in the first transaction (51M) (12.08.2025): 15.18%

Fixed PT interest earned in the second transaction (41M) (15.08.2025): 13.97%

Total weighted PT interest earned: $13,469,500

Interest amount paid in the debt transaction (41M): 41,000,000 * 7.57% = $3,103,700

Net return: $10,365,800

Effective APY: 20.32%

If only 51 million PT-USDe-25SEP2025 tokens had been held, the interest rate would have been 15.18%, but thanks to this cycle, the interest rate has been increased to 20.32%.

At the same time, the third largest wallet among the holders of PT-USDe-25SEP2025 tokens deposited as collateral to Aave is associated with the second wallet. This wallet has performed the cycle 15 times thanks to the smart contract it created in a single transaction. You can access the link to this ingenious transaction on the block explorer here.

Before the transaction took place, 19.5M PT-USDe-25SEP2025 tokens were held as initial capital. After this amount went through the cycle 15 times within the same transaction, the final amounts are as follows: The total amount deposited as collateral is 137M PT-USDe-25SEP2025. The total amount borrowed is 122.11M USDe. To calculate the effective APY, we need to find the fixed interest rate of PT-USDe at the time the transaction took place. We can find this by going to the date the transaction took place on the Pendle interface. The date the transaction took place is August 12, 2025, 01:31 PM UTC, and we can see on the Pendle interface that the interest rate on that date was 15.18%.

In this case, the value of 137M PT-USDe-25SEP2025 at that time is calculated at a rate of 1 PT-USDe-25SEP2025 = 0.9833 USDe, which is 134,712,100 USDe. The annual interest income calculated at this rate will be $20,449,296. The interest cost of borrowing USDe for the last week is an average of 7.54%. In this case, the annual interest cost payable will be $9,207,094. In this case, the net return rate obtained will be $11,242,202.

We mentioned that the initial capital used was 19,500,000 PT-USDe-25SEP2025. Again, calculated at the same rate, this amounts to $19,174,350. The effective interest rate is calculated by dividing the net return obtained by the initial capital. In this case, the effective APY amount obtained is 58.63%.

As seen, when the cycle is performed 15 times, the APY rate approaches the amount it could reach if performed nearly infinitely.