rswETH has landed on Pendle with the LRT pool racking up Pearls and EigenLayer Points in record time.
We were joined by Pendle Co-Founder TN to introduce the opportunities available with rswETH and explain how you can capitalize on them.
In case you missed it, here are the top questions from the event.
What is Pendle?
“Pendle is a protocol that allows users to tokenize and trade yield with yield bearing assets. Pendle strips away the yield from the underlying asset so that the Principal (PT) and Yield (YT) components can be traded independently. Aside from creating a tokenization of the yield bearing asset into PT and YT, Pendle is also an AMM that facilitates price discovery and operates the exchange of PT and YT between users. Our most interesting use cases have pertained to restaking and LSTs where users can express their views on how they see the yield movements subsequently.”
– TN, Pendle
What is rswETH?
“Swell’s native Liquid Restaking Token rswETH functions as a native way to restake into EigenLayer whilst also remaining liquid. The ETH underlying the LRT is staked into EigenLayer and you receive a receipt token back which you can use in DeFi. One way to utilize rswETH is by depositing in Pendle to trade the YT and PT, representing the access to leverage yield, points and fixed yield on ETH.”
– Abi, Swell
Why do you think LRTs make such a successful partnership with Pendle?
“Fundamentals aside, restaking is one of the biggest narratives this year largely because of the potential that restaking and EigenLayer offer. From a user standpoint, restaking is operating almost like the last stop for users to generate yield on ETH. I think this narrative is very sound and it's not hard for people to imagine the possibilities that EigenLayer can bring about through its innovation and mechanics.
On top of that we have points systems that generally appeal to users. The points system isn't new but when you couple that with a very hyped project such as EigenLayer, it can exaggerate the total hype that the project is due to receive. For one, points are quite easy to understand.
Pendle has created a marketplace for users to express their view on their opinions on points through the stripping of the yield bearing asset into PT and YT. The points and the yield will accrue to YT while, on the other hand, PT will give up all the potential earnings and yield for a fixed amount. The very interesting relationships between PT and YT cater to various different types of users and effectively resulted in very healthy traction in Pendle and the underlying over the past couple of weeks.”
– TN, Pendle
“At the moment Pendle has found a really nice niche in being an LRT market where both degens and whales go hand in hand, and I think the Pendle LRT pools have seen so much growth because it has satisfied both sides through a single market.”
– Abi, Swell
What is coming next with the Swell x Pendle collaboration?
“We want to explore ways to get the community interested in the asset. Out of all the pools right now, Swell currently has the highest multiplier in points which I think is relatively underappreciated by most of the communities. It will boil down to making people aware of the proposition of the asset and then putting out some ideas that users can follow quite easily in order to take a position, whether it be to lock in fixed yield, speculate on the APYs or points, or provide liquidity for relatively stable and safe earnings.”
– TN, Pendle
“The rswETH pool has the highest multiplier for points which means that the rswETH YT gives you the most amount of leverage in terms of being able to accumulate as many Pearls and with Swell. TGE is just around the corner so I see this as a very attractive opportunity for users to get in and accumulate as many Pearls as they can before TGE.
In addition to rswETH having the highest multiplier, we also have one of the highest liquidity pool yields. We will be looking to push that yield even higher by attracting more votes towards the pool through bribes. If you are a EQB or Penpie holder you can go and vote on the rswETH pool to get both bribes and Pearls.”
– Abi, Swell
How does the Pearl boost work for users who buy YT?
“Minting or holding rswETH entitles the user to a certain amount of Pearls. The rswETH multiplier is currently 4.5x so there are a lot more incentives for a user to get Pearl exposure through Pendle. If a user wants to accumulate more Pearls in anticipation of TGE, then buying YT is even a more aggressive play as this multiplier has significant leverage with no liquidation risk.“
– TN, Pendle
What is the downside of buying YT?
“The downside is that you are giving up on your ETH exposure for Pearls and EigenLayer points. There is a non-zero chance that the amount of earnings from all these points in the future could be worth less than the amount of ETH spent right now. Hopefully this isn't the case, but because of market forces and price fluctuations this is something that a user needs to be mindful of.”
– TN, Pendle
Is there a lockup period on Pendle or is there a disadvantage to exiting before the pool matures?
“There are no lockup periods for any pool on Pendle, however there is a maturity date that users should be aware of as there is a cost to exiting the pool prior to maturity. This cost could be negative or positive depending on the market value of the asset.
For example, if a user buys into PT with a maturity date of June 2024 and exits prior to that date, they are effectively selling back the PT into the pool in exchange for any other asset in the pool where the price is subject to demand and supply. This could however also be an opportunity for users to buy into PT at a modest price. If the price of PT surges, you can sell and profit from the trade. This is one of the more interesting use cases that a lot of users have not yet explored, but it has a lot of room for traders and speculators.
If you simply provide liquidity into the pool and hold until maturity there is no risk of impermanent loss however, if you withdraw prior to maturity you could potentially be subjected to some impermanent loss.”
– TN, Pendle
Do you get more YT when you buy closer to maturity or does the amount stay the same?
“You will get more YT when you buy towards maturity however these YTs have a limited amount of time to realise the yield or accrue points. Based on our early estimation, there is very little difference between buying early and buying nearing maturity unless the implied yield changes drastically along the way.”
– TN, Pendle
Thanks to everyone who attended the event!
To stay up-to-date with Swell, join our thriving community on Discord, Farcaster, DeBank, and X.
