After Wall Street yields are on the blockchain, what role does Pendle play?

Source: Dune@entropy_advisors

Introduction

Pendle is one of the core platforms for on-chain fixed interest rate strategies, leveraged yield trading, and yield amplification. The previous wave of Pendle adoption was mainly driven by yield farming: users purchased YT to amplify potential airdrop rewards, thereby increasing protocol demand.

But Pendle has not lost its value as yield farming enthusiasm waned. In theory, yield trading itself can accommodate investors with different risk and return preferences: some want to lock in fixed returns, others are willing to accept floating yield fluctuations, and some prefer to leverage specific yield exposures.

More importantly, Pendle has recently demonstrated a clear ability to migrate underlying assets: from primarily crypto-native yields to expanding into RWA-related yield assets. This transforms it from a short-term trading venue within the yield farming cycle into a more comprehensive on-chain interest rate market capable of supporting multiple types of yield assets.

Source: Pendle

The crypto market has experienced a cycle dominated by crypto-native yields: mainstream strategies like flash loans, restaking yields, crypto basis trading, etc.

But now, if you look at Pendle’s top 10 assets, about 97% of their TVL underlying yields already have RWA attributes. Even large assets like USDe now include some RWA exposure, such as USTB (BlackRock BUIDL tokenized US debt fund) and USDm (US Treasury bonds). Meanwhile, more diverse RWA yield assets have emerged on Pendle, such as apxUSD / USDat backed by MicroStrategy STRC, USDai supported by AI compute infrastructure, and reUSD backed by reinsurance protocols.

Why do these RWA yield assets all need Pendle?

The core reason is that they lack a distribution mechanism to convert “floating yield products” into “fixed interest rate tools”, which are what institutional funds truly need.

For institutional capital, the “predictability” of returns is often more important than simply high APY.

Treasury managers, when allocating funds, typically need to evaluate maturity, cash flow arrangements, and yield stability in advance. Therefore, they find it difficult to accept a product whose funding rate fluctuates daily with the market, even if it has a high historical yield.

Take sUSDe as an example: if an institution plans to allocate $10 million, it cares not just about today’s APY but whether it can lock in a relatively clear return range over 3,6, or 12 months.

This is where Pendle’s value lies: it splits and prices the originally floating, uncertain RWA yield into tradable, fixed-term yield instruments.

Otherwise, many RWA protocols, despite having institutional-grade underlying assets, still offer products more suited to retail markets, making it hard to truly attract large-scale institutional capital.

How to verify from data: Does Pendle improve the distribution efficiency of RWA yield assets and grow TVL?

Source: DeFiLlama, Etherscan

This article reviews the top ten RWA underlying yield markets on Pendle, focusing on apxUSD, USDG, reUSD, and USDat, with key findings as follows:

Pendle as an early distribution and growth engine

Most assets show positive TVL growth after integrating with Pendle, and many projects chose to complete Pendle integration early in their asset launch. apxUSD, USDat, and reUSD all launched Pendle simultaneously with their yield assets, indicating that project teams view Pendle as an important post-listing growth and distribution channel. This strategy is especially suitable for projects with token issuance expectations or those wanting to split via PT / YT to meet different risk appetite users’ yield trading needs.

Data shows that since integration, apxUSD’s TVL increased by +1690%; reUSD by +185%; USDat by +82%. While Pendle may not be the sole reason for TVL growth, the fact that multiple RWA projects chose early Pendle integration reflects its importance as a yield asset distribution channel.

USDG was integrated later in the asset development process but still saw about +53% TVL growth post-integration. This integration was accompanied by weekly incentives distributed to YT and LP holders, indicating Pendle’s role not only as a yield trading market but also as an effective scenario for project teams to promote user adoption and incentivize distribution, especially attracting users to stake additional rewards via YT.

PT / YT structure reflects market’s pricing preference for “certainty vs. flexibility” in yields

reUSD and USDG have more PT traders, indicating the market perceives their underlying yields as more stable and predictable, closer to fixed on-chain assets. reUSD’s underlying comes from reinsurance protocols, USDG from government bonds, both with relatively clear cash flow paths and lower volatility, so users prefer buying PT at a discount to lock in maturity yields rather than staking YT for upside.

In contrast, USDat and apxUSD have more YT traders, related to their underlying STRC assets. Compared to government bonds or reinsurance yields, STRC yields are more strategy-driven and influenced by market conditions, capital flows, and strategy execution, offering higher flexibility and uncertain upside. Therefore, users often buy YT not just for basic yield but to amplify exposure to future yield increases, activity incentives, or strategy outperformance.

Source: DeFiLlama, Etherscan

Of course, not all projects integrated with Pendle generate positive flywheel effects. For example, NUSD, which derives yield from sUSDs and OTC arbitrage, saw about a 33% decrease in TVL after Pendle integration, with weak PT / YT trading activity; savUSD, backed by delta-neutral crypto assets, only grew about 2% in TVL post-integration.

Thus, Pendle is more accurately a yield distribution and trading channel. Its core role is to diversify yield asset trading methods, not to guarantee TVL growth alone. Whether a project can develop a growth flywheel depends ultimately on the attractiveness of its underlying assets, market promotion, capital access, and effective utilization of Pendle’s PT / YT mechanisms.

How large is the market size and growth potential for Pendle × RWA?

Source: Pendle, DeFiLlama, SIFMA

Currently, Pendle’s penetration into the RWA yield market remains early-stage. The main RWA yield assets on Pendle are still concentrated in traditional fixed income products like money market funds, bonds, private credit, and emerging yield assets such as DAT dividends and AI infrastructure lending. Overall, this segment contributes about $1.12 billion in TVL. The on-chain RWA market value that can be “Pendle-ized” (split into yield components) is approximately $20.8 billion, meaning Pendle captures only about 5% of the market, with significant room for growth.

Compared to traditional markets, the potential is clearer. According to SIFMA data, the US fixed income market’s outstanding is about $49.6 trillion; the global fixed income market totals around $145 trillion. In contrast, the on-chain RWA is still in very early stages. (1) (2)

Of course, not all fixed income will go on-chain, but the parts that require composability, cross-border circulation, secondary liquidity, and yield re-packaging will be prioritized. The assets most likely to be tokenized are those with friction in traditional systems: high cross-border subscription thresholds, long redemption cycles, high minimum investments, etc.

In the short to medium term, Pendle will first target high-fit on-chain RWA yield assets such as money funds, short-term bonds, private credit, structured yields, and new cash flow assets; long-term, if more traditional fixed income is tokenized and yields are distributable on-chain, Pendle could become a core secondary infrastructure for on-chain fixed income markets. The current 5% capture rate indicates early-stage, but also highlights two main growth drivers: expanding on-chain RWA volume and increasing Pendle’s penetration into split-yield assets.

Which assets are suitable for Pendle tokenization?

To list on Pendle, the fundamental prerequisite is that the asset must have splittable yield attributes. That is, the asset must generate yield continuously and be structurally divisible into principal (PT) and yield (YT). Assets with no yield (e.g., pure stablecoins) or where yield cannot be independently extracted cannot form Pendle’s core trading structure.

Second, the yield must have a certain degree of predictability and continuous accumulation over time. Pendle’s pricing relies on expectations of future yields (implied APY), so the yield must be modelable (e.g., staking, RWA interest rates, mature funding/basis arbitrage), rather than one-off or highly stochastic returns. Additionally, the yield should accrue over time continuously, not through discrete or event-driven distributions.

On the infrastructure level, the underlying assets should have sufficient scale and market demand to naturally form trading pairs on fixed and leveraged yields; otherwise, liquidity support will be difficult.

Based on these criteria, on-chain bonds, money funds, private credit, and other yield-bearing assets will be important expansion directions for Pendle.

As for crypto funds, real estate, stocks, and other assets, the key is whether their yields can be sustained, quantifiable, and smoothly transferred on-chain. For example, stock dividends, rental income, or strategy yields from crypto funds only qualify if these cash flows can be stably accumulated and distributed on-chain, enabling their split into principal and yield.

The interest rate trading infrastructure after RWA perpetualization: Boros

Source: Boros

Boros is Pendle’s funding rate trading market, allowing traders to convert the floating funding rate in perpetual contracts into tradable, fixed interest rate instruments. Simply put: Boros = on-chain perp funding interest rate swap market.

As more RWA assets are tokenized into perpetual contracts, this trend becomes almost inevitable. The unique mechanism of perpetuals is that funding rates maintain the peg between perp prices and spot/reference prices.

This is where Pendle Boros enters. When traders participate in RWA perps, the question is no longer just “will the asset price rise,” but:

How to avoid floating funding erosion of trading returns?

Boros enables traders to hedge or lock in funding rates, transforming uncertain floating funding costs into predictable fixed costs, making RWA perp trading more transparent and manageable.

Source: X@skyquake_1

In April, the US-Iran conflict and the Strait of Hormuz supply crisis caused WTI futures curve to enter extreme backwardation, with front-month and back-month oil prices diverging rapidly. This led to large-scale basis trades and funding distortions in on-chain oil perps. The case of CL oil perpetuals vividly demonstrates why Boros is important. (3)

Initially, this looked like a standard basis trade: WTI spot was at a clear premium, with front-month futures around $113.10 and back-month around $98.70, a spread of $14.40 (~12.7%).

Since trade.xyz’s oil perpetuals predicted that during rollovers, the futures would switch from front to back month, theoretically the perpetual price would adjust from near $113 down to about $99. Traders could short the oil perp and go long CME futures, waiting for the arbitrage to converge.

But the real problem soon emerged.

As more traders saw this seemingly certain arbitrage, they all rushed to short the perpetuals. In crypto perpetual markets, increasing short interest doesn’t directly compress the futures spread but causes the perpetual market to become imbalanced. The result is that funding rates plunge into extreme negative territory, and short perpetual traders start paying high funding costs.

This is where Boros’s role becomes critical.

Source: Pendle

In this case, the trade appears as a simple oil spread arbitrage, but the real variable affecting profit and loss is funding rate.

Looking at Pendle’s team’s tweets at the time, one trading team had shorted the perpetuals and faced a funding rate close to -303% annualized breakeven, while Boros allowed them to lock the rate at about -114%. This means Boros doesn’t just slightly reduce trading costs; it transforms a highly uncertain floating funding cost into a pre-lockable, calculable, and manageable fixed cost.

This also confirms a broader trend: perpetuals are becoming a new venue for institutions to perform basis trades, but to do so effectively, they need funding rate risk management capabilities.

Boros’s role is to provide an infrastructure similar to interest rate swaps in traditional finance for on-chain perpetual markets.

As more real-world assets—oil, gold, FX, interest rate products, stock indices—are tokenized into perpetuals, similar structural basis and funding rate distortions will become more common. Boros will gradually evolve into a core interest rate trading layer for on-chain derivatives of real-world assets.

What trends are driving Pendle to become the foundational infrastructure for RWA yield trading?

First: Regulatory restrictions on stablecoin yields may actually strengthen Pendle’s position

Source: X@stacy_muur

Here, analyst Stacy Muur’s view is that the GENIUS Act and CLARITY Act could make Pendle the default venue for stablecoin yield trading. The core reason: capital will always flow toward higher yields. (4)

Source: Pendle

Looking at yield spreads, traditional bank savings accounts offer annualized yields around 0.01%, while centralized exchanges’ USDC rewards are about 3.5–4%; Pendle’s PT products, like PT-USDG, which are based on government bond yields, can reach about 5.3%. (5)

This yield differential is a key reason capital flows from banks and exchanges into on-chain markets. Of course, this premium also carries on-chain risks, including liquidity crises, smart contract risks, protocol risks, and market price fluctuations.

Regulatory changes could amplify this trend. The GENIUS Act bans stablecoin issuers from paying interest or yields to holders, mainly targeting issuers, not exchanges or DeFi. The CLARITY Act could extend restrictions to “digital asset service providers,” meaning exchanges like Coinbase and Kraken offering USDC yield might face increased regulatory pressure.

Pendle’s advantage is that it doesn’t rely on a single issuer or exchange paying interest directly to users. For example, with PT-USDG, the fixed yield comes from market discovery and market discounts in permissionless AMMs, not from a promise of interest by an issuer. Therefore, if stablecoin issuers and centralized exchanges’ yield products are restricted, Pendle could become one of the few markets still offering dollar-denominated fixed yields on-chain.

Second: A “bridge layer” between permissioned RWA and permissionless DeFi is gradually forming.

Traditional RWA assets often have strong compliance attributes—KYC, whitelists, investor qualification checks—making direct access to open DeFi protocols like Pendle difficult. But a new solution is emerging: through intermediaries, packaging, or synthetic stablecoins, the yields of real-world assets can be re-packaged into composable on-chain yield assets.

For example, yields from government bonds, money funds, private credit can be wrapped into yield-bearing stablecoins or synthetic dollars, then entered into Pendle, split into PT and YT, creating a market for fixed and floating yields.

This means Pendle doesn’t necessarily need direct access to every permissioned RWA product but can serve as a secondary yield trading layer for these “RWA yield-packaged assets,” fulfilling on-chain demand for fixed income, interest rate trading, and yield management.

Meanwhile, the launch of Boros further broadens Pendle’s long-term horizon. Pendle founder TN Lee mentioned that Boros is not limited to funding rates; as long as reliable oracles provide interest rate data—be it government bond yields, Libor, rental yields, staking yields, or other percentage-based yield indicators—these can be incorporated into trading. This greatly expands Boros’s potential use cases and further opens Pendle’s growth ceiling as an on-chain interest rate trading infrastructure for real-world assets.

Third: Adoption and penetration of on-chain RWA perpetual contracts are increasing.

The market is moving toward a “everything can be traded on-chain” phase, with various asset classes being tokenized and traded via perpetual contracts. Whether it’s xStocks, Ondo Finance, or other platforms exploring stocks, ETFs, commodities, they all push traditional assets into on-chain trading.

As more RWA assets are perpetualized, funding rate will become an unavoidable core variable. For institutional traders, it’s not just about asset prices but also about the costs and gains driven by funding rate fluctuations.

As shown in the previous crude oil trading example, during extreme market sentiment, geopolitical events, or weekend low liquidity, funding rates can fluctuate wildly, significantly impacting trading returns.

In other words, if more stocks, commodities, bonds, and other RWA yields are traded as perpetuals on-chain, Boros will have the opportunity to become the risk management layer for funding rate risks in these on-chain RWA perpetual markets.