Inside Pendle: Yield Engineering, the Kelp Hack Post-Mortem & the Boros Bet

So there's a very crowded short on the hyperlquid side pushing the funding rate down to extreme levels like negative 600% levels and a lot of people want to hedge that funding exposure. Wasn't even a smart contract hack. Um the attacker was able to spoof a message on the validator network and know exactly which validator network to attack. uh to give you a perspective the liquidity that we can handle uh you can swap more than $10 million on Pendle with very minimal price impact and I don't think you can see any other trading platform support trading of that size a little bit contrarian given that I'm in crypto but I do think there's lack of regulations and uh enforcements uh in this space it took us a long time to find product market fit. A good few years actually.

>> Hey Dan, uh welcome to Beyond the Yield. Happy to have you on board. Um what a crazy week, right? Um what a crazy start of the week. So first of all, yeah, how have been you handling it so far?

How has it been going for you? >> Yeah, uh pretty good on my side. Thanks for having me. Uh it's definitely been a roller coaster week uh start of the month actually. We what resolve drift and uh kelp uh in one go.

Uh but I think the kelp hack is the most interesting one. I've been following it um top to bottom. Uh uh yeah, as much as I can and just trying to gather as much insights as possible because uh this hack is much more sophisticated than uh what most people uh understand. But yeah, I I digress. That's mostly what's been on my mind right now.

And uh for context, I lead the growth and marketing team on Pendle. Pretty much told everyone um slow down on the marketing front for this week because all attention is not going to be on us. It's going to be on the very fast development of the RS saga and its potential contagion across the board. So yeah, something that we're monitoring very closely as well. Yeah, it makes completely sense.

I guess everyone's minds are now on it like looking how it develops. There are news coming it in every couple hours or so. So yeah, definitely something evolving. Maybe we can touch base on that a bit more later. But to begin with, I would suggest maybe you could give like a short intro about yourself.

How did you end up in crypto? Um yeah, what made you come to Pendle and like overall your journey in Pendle so far? So maybe we can start with that. Yeah, sounds good. Uh, pedal was actually my first crypto journey.

Um, excuse me. Uh, I liked it from its uh was an interesting idea because uh I was pretty much into finance uh back then and um I was pitch that is a new protocol letting people trade interest rates or yields um uh in crypto and uh found that pretty fun challenge. So that's how I got to join Pendle and uh we have uh then Pendle launched like good few months uh seven eight months after that. Um and I've been leading the growth team pretty much ever since the Pendle uh protocol v1 launched uh back in 2022. So you've been basically from the beginning, right?

Um with Pendle since the launch. Um so I guess like the first question is like um what led you to such successful launch and then growth, right? Because like Pendle now is like one of the major DeFi protocols in the space. So what would you call the main success factors that led to such growth like did you believe it since the beginning that it will be s so big or what or you were also surprised like what were you seeing that what were you seeing back then uh about what would make Bendle so special? >> Yeah, I wouldn't say we had a successful launch.

The launch was actually pretty It took us a long time to find product market fit. A good few years actually. Um, and if you were to ask me to pinpoint in a specific uh reason or a specific, you know, turning point, I don't think I'm able to name one. Uh, and if you ask me if I'm surprised at the success, not really. um or rather uh to give you a bit of sense of perspective on where I'm coming from.

I or rather the Pendle protocol the Pendle team we kind of believed that uh interest rate management or interest rate swaps in general um will be a mainstay in crypto. People would want to have more control over their exposure to yield. Either they want more of it or they want to hedge it or like get fixed yield. That's exactly what Pendle does, which I think we're going to get through um later hopefully. But the idea is instead of being purely just exposed to yield, you should be able to manage the yields.

And that was kind of like the core thesis. And uh we tried a lot of different flavors of uh of such an idea. um either creating different training campaigns, different uh supporting different kinds of asset or creating like you know different UIs for different products but I would say it's a culmination of a whole lot of different experiment which led to uh sometimes seeing an exponential growth just a little bit and then if you have enough of that you end up with a protocol um over a billion dollars in uh TVL to give you a bit more context we start off with penalty which saw very little success but it gave people a glimpse of what could possibly happen. It also gave us a glimpse of what could possibly happen. And then uh we supported asset called Wonderland uh which is a uh Olympus D fork or avalanche supported that which gave like 10,000% API which was fun to trade but liquidity was kind of and then we figure out all the problems uh with that and then kind of concluded that panel v1 is the problem.

So we decided to rebuild the architecture to a much better protocol. Then we launched PDL V2 and then PL V2 also saw pretty low traction because pretty much the same product as Pendle V1 but a much better tech stack than NL V2 launched. Um took us a while to figure out what asset worked on Pent. we supported the LST um not sure if you remember like there's a rocket ETH um and all the other ETH assets um uh that that came out and then there's like balancer uh an AMM that supported all of the different uh uh LSTs um RD ST and all the ES and then they created AMM and then there's Aura which is like a protocol that built on top of balancer just kept building on top of the stack then that gave us a glimpse of success another exponential growth We support GLP um from GMX on arbitum and then they gave us another round of exponential kick because there was another hype asset and then we continued to do that until the eventual tipping point will be points. We supported trading of points asset that was supported id layer and uh a bunch of other points asset that was a final piece of growth to reach where we are right now.

>> Okay, that's very interesting. Um and so like Pendle at its core it's um explaining it to non um Trafi people might sometimes seem a bit hard right because you're trading not just tokens but you're trading the yield of the tokens and I'm curious you mentioned that you had quite some barriers initially with adoption was it because people weren't aware of like how to use this uh model effectively or was it uh because the yields were not attractive or just the market wasn't ready because of some other reason. So curious how you see what prevented you from adopting growth earlier because like obviously this can be useful tool for hedging as you mentioned for trading yields right. So it it sounds like as it should be an overnight success almost like >> could be anything. I mean if we knew well what exactly was the problem we would have you know been successful since day zero.

Again, honestly, I don't know, but I could tell you exactly what assets and exactly what moment gave us some level of growth. Um, there was no success overnight, I would say. And it's just a very consistent small wins that, you know, if you compound them again and again exponentially, they eventually end up being they eventually look like gain overnight success in the last exponential growth. Um but I would say uh the constant iterations were constant education and also constant consistent app development and uh different flavors of asset listing uh to be able to support more and more kinds of assets uh on Pendle that's one side the most more recent growth will be on the vertical integration side things so uh we able to support points asset which are offchain you know shenanigans that we can figure out how to tokenize and support. Um we also have started that's the vertical integration downwards and the upward integration was to get our assets like our pendle pts and the fixed yield portion of the assets to be supported in a lot of different money markets.

Um we a lot of assets went to A and a lot of different money markets eventually but I would say that effort was started since pendal V2 was launched and only saw success two and a half years to three years later when uh uh people start figuring out how to use this. Um so I would say it's kind of like we just work on everything and just make sure see what sticks because I don't think running a startup you can really pinpoint on one specific problem and tackle that one problem. a few sardos maybe have that exact problem but uh yeah definitely not our case. >> Yeah, makes sense. Um you already briefly touched on what's growing right now like Walt's curators ecosystem um integrating with D5 protocols but I wanted to speak more about um in the beginning of the year uh several months ago you announced this um big scary mind map right with all the initiatives all the focus points that uh you really see most perspective in.

So uh maybe you can briefly walk us through that. what are the main items uh that you chosen to focus on and maybe some reasoning why exactly these items why do you believe in this growth because there are a lot of different things right starting from um yeah borrows growth but then also going into AI uh highway to centralized exchanges and stuff like that right so maybe like you can uh walk through some of the main items explain why do you think they are so important like what's the overall big vision for Pendle like where do you see it grow its growth further and uh yeah just to help understand like uh where the market is potentially heading to >> it's a pretty big and scary mind map but the highlevel idea is pretty simple um we want to make the best yield trading experience possible and we want to create the tools for you to be able to do Now there are uh a few ways uh uh problems that we see to achieve that. Now one pendle is scary and complex and I don't think there's a way for us to fix that impression for most people. Uh because by the nature of the product it is complex. um we can simplify to a couple of words but then usually the follow-up questions is when you start to see layers of product complexity but we can simplify it by just abstracting the idea away from you completely and just tell users that they can get fixed yield through pen how do we do that just have a separate UI that just wraps all the complexity behind the scenes and just wrap it into a simple product it's fix you and that's pretty much it um but then that also bes the question like who would come for this?

Uh and I think the main competitor uh for such a product or rather the easiest group of people for us to siphon will be the earn product users on centralized exchanges like binance earn um earn and other earn products. They're earning like two to two to four percent in yield in their earn products and they have billions in deposits and we want >> which is given which is nets given the current opportunities in the yield market right like it's really low. >> Yeah. Uh and we can provide a much higher yield than that and we want to make it simple for them to deposit into pendal and that's the whole idea and we're just going to call it highway to the sexes. That's our uh u uh the idea of the project which is basically what they have to do is to send the money from the sex into a contract address and then we'll do everything for you then turn it into fix and then once it's done we send it back to um your sex account.

It is as simple as that. So it's as simple as just clicking deposit onto a sex earn product. Uh and we want that to be a feature that we showcase on uh Pendle as well. Um now aside from that uh there are a lot of people who use who get access to fix on Pendle PT and these are the more sophisticated users and they take those PT as put it in put them into lending market as collateral borrow some funds and then buy back PT. Think of it as like a leveraged exposure to fixed yield on Pendle.

Uh these are on the more advanced side of things. Why don't we make that one click for users instead of having to do it manually which will take a long time and also takes a lot of effort for you to monitor all the uh uh the position. So you want to make it one click. Yeah, it's very simple idea like that which uh created the idea of you know one click PT uh looping. Um we also have this idea of that uh our liquidity should not be constrained by how much TVL that we have.

Ideally our liquidity by default should be infinite and how do we get to that state because we want to make trading experience as seamless as possible. Um and then what we found was that we introduced a limit order system a couple years ago. Uh and for the pools that are very successful, majority of the volume actually comes from limit order and our limit order was not incentivized at all. What if we can figure out a way to incentivize people to park limit orders and to get all pools into the state where we um see our most successful pools are in which is most of the trades go through limit order and the liquidity depth that we can uh handle through such uh through limit orders was much deeper and that was the whole idea. So we said okay we can technically achieve something like an infinite liquidity depth if we figure out how to incentivize people to move in that direction.

So we created uh limit order incentives and um uh we want we want to create something called universal limit order where you can park limit order um across multiple pools with the same asset. And again there's much more initiatives to it but this is kind of what we did. uh that is one of the branches that we've already done and uh and I can tell you for sure uh that has been working pretty well. To give you a bit more context, we just launched an asset called USDG by Paxus. Um, uh, which is an RWA asset.

Um, and, uh, to give you a perspective, the liquidity that we can handle, uh, you can swap more than $10 million on Pendle with very minimal price impact. And I don't think you can see any other trading platform support trading of that size. Um and pendal can easily support you know yields of uh of that size without diluting your yield position that much actually or rather without diluting your position yields at all. Uh and yeah that's kind of uh uh what we're looking to achieve on the infinite liquidity side. Now on the on this big scary mind map there's a lot of other things like you know crosschain pts which is you know pts don't have to exist in one chain you can exist in every chain out there.

Basically, Solana people want that we provide on uh Ethereum. We don't have to restrict to only Ethereum. We should be able to bridge the assets elsewhere and the fixes should be there as well. PT should be able to use as collateral in every money market out there, not just his home chain. Again, all of these initiatives um just idea is to make sophisticated traders lives easy and also the n traders life easier just to be the best in class yield trading protocol.

That's kind of the gist of the big scary mind. That's that's a lot of to unpack. Uh but basically maybe to begin with uh like you mentioned so as you said Pendle is a very complex protocol right like comparably complex uh to let's say a or lending protocols where you just park your uh stables and you earn yield. Um it's as simple as that. uh but uh and Pendle was created for more sophisticated traders uh as you mentioned initially like uh it was created for hedging potentially and this these are very advanced financial instruments which require advanced knowledge right but at the same time now you're mentioning that you want to go into like a more um user friendly way where um I guess more users can use Pendle directly rather than indirectly that uh you become kind of the lending protocol yourself.

You become the exchange kind of right because as you mentioned USDG like you can execute really large uh exchange orders. So um my question would be like how do you see um building for the these the most advanced users versus building for everyone to use because uh sometimes you know you can find your niche in these high value uh users who are using it only for advanced strategies but in other times you want to grow to gain like more retail activity more liquidity and stuff like that. So yeah, just where you see Pendle growing uh in the coming um months or even several years. >> To clarify to clarify on your questions, uh Pendle did not start off catering for complex users. It's kind of like if you go to a bank and you ask for a fixed deposit, they give you a like 3% fixed deposit.

It is a simple product on the users end. What they do behind the scenes to enable that 3% fix. You have no idea how complicated it is. kind of what it's like. We never strive and pride ourselves to be a complicated product.

No, no, it's like we build the product and it's ideally catered for everyone. Um the complex user should know how to use it and the the people who are less sophisticated should also know how to use it. No, I want to preface that. Then second on trying to be a money market and exchange for yourself. That's that's not what I meant, but more like building a product suite that helps you do whatever you want to do with the money markets with the uh uh w with everything else easy.

So for example, you can swap into any of pendal fix yield with any assets like uh that just makes the I the flow of okay if I want to buy this asset I let's say I want to buy PT USDG I don't have to get USDG from an exchange uh and then get PT on Pendle. No, we can help you route anything and then route it to PT PTU SDG, but doesn't mean uh does doesn't mean that we're building it ourselves, but it's more like we're leveraging all the tools that other people has built to enable uh to make your life easy. And that's kind of what we built. Just build the tools to makes make people life easy to come into Pendle. Um and again, same thing like uh for fixed seal, they don't have to know how we enable fix seal.

They just need to know that they're getting fixed seal through pendulum and uh and create like a whole separate interface for that. and then a whole different user flow for people to go get. Same thing for leverage shield. To your question on where we see this direction growth s just like anything else most of the growth will happen from sophisticated users and bigger funds but most of your mind share and attention would come from the retail side. So we should ideally work on both.

Um but I do see that our growth trajectory moving forward will be the same. Most of the money will come from funds and institutions and bigger players because that's where the money is and uh most of the attention and the hype come from the retail side. So you have to build for both. >> Makes sense. And you've already mentioned institutions and I've seen you've been finding quite um nice growth in the RWA space uh especially with some recent launches of like um uh of RWA based yield products right like the yields uh on the some of these tokens are really great uh I think couple days ago I saw some of them are reaching 15% and even for um so maybe overall like how do you see the RWA space evolving from firsthand experience by integrating with these protocols where do you see the main growth factors and uh yeah how has it been going for you so far with all these like new instruments in the D5 space >> yeah generally pretty good um RW space is definitely growing uh I can say for sure that as a protocol that supports these asset and directly interfacing with these underlying protocols on RWA.

A lot of funds are moving towards the RWA space. Uh mainly because it's technically a pretty simple product. What you're doing is bringing the yield that is offchain and you're bringing it onchain and tokenizing that is not a complex mechanism. It's not it's not like you're building a from scratch. Just building the yield offchain and you're building it on chain.

The difficult this usually is lies on the legal front. Um but that is a different challenge that most D5 protocols uh don't uh don't have and uh um I think a lot of protocols I think the growth is good because you're basically bringing external money into DeFi. Um so it's a good trajectory for us. I know a lot of people don't like it because it def it they claim that it beats the ethos of uh self- sustaining crypto and DeFi ecosystem, but I think that's a really close-minded uh way of thinking of the industry. But yeah, I think we are in a pretty good shape to see more institutional capital flowing into uh DeFi mainly because of RWAS also because of the name association that people can and people trust uh traditionally.

So I think we're in a very good spot and I think the growth uh over the next coming few weeks months should likely come from uh the RWA space. >> Uh do you have any favorite RWA use cases so far? I saw you're like uh for example um allowing to uh trade micro strategy yield from uh from their stock, right? Uh also some other different RWA use cases. So do you have like any ones where you see the most potential um to gain more and more adoption in the space?

I don't really have any winners in mind, but I would say that the STRC narrative is pretty cool. Um for context, it's a preferred stock of one of STR one of strategy preferred stock that uh is soft packed to $100 that gives dividends of somewhere above 10 to 11%. Um depending on the price of STRC uh but yeah, I do find that asset is pretty cool and people have figured out ways to bring it onchain in many different flavors. Uh for now, that's probably the meta. Uh but I just like anything else in crypto.

It's not a permanent meta. So I I'll see where it goes right now. But for now, that is one interesting thing. U second interesting thing will be Paxos USDG um which is a uh sort of like T- bill/goldbacked um dollar by Paxos and global dollar network. That one is that asset is also pretty cool on Pendle uh offering pretty high yields, but I don't think it can compete against uh the STRC related uh yields.

I think the fixed seal that we're offering is the outputs of 15% on a somewhat stable coin uh related asset. So um yeah, I think that's kind of like my take on uh the RMA space for now. STRC sounds like a perfect uh defy DGEN product which can be looped very nicely and like used onchain, right? This is what crypto people love the most. >> Yeah, but I wouldn't say it's really that den.

It's just a way for them to raise capital, right? I mean like any company can issue a preferred stock that behaves a certain that behaves in this specific way. Um I mean MSTR right now trading above NAF means that it is quite unlikely for them to raise funds from uh issuing more MSTR also because they have obligations on ex existing MSTR stockholders and they wouldn't want to dilute the existing stockholders. So they've been issuing a lot more preferred stocks um in different flavors like SRK, SRF, SRC. Um and I think STRC is the one that caught a little bit more attention because it's uh cumulative dividend distributed monthly and uh asset that is roughly trade on $100 par where dividends distributed on.

So pretty cool asset but I wouldn't say is that DGEN actually. Um yeah. >> Yeah. Just maybe like packaged very nicely uh for DJ activity. Um yeah I wanted to shift maybe more attention also you've been recently um developing a new product uh with its own name which is Boros right um really interesting uh product um can you explain um maybe briefly what it does why did you decide to launch it why as a separate brand not a sub like not a under a pendal brand just overall Maybe you can explain your vision behind it.

>> Sure. One sentence on what it is. It is basically an interest rate swap and that's pretty much it. Uh if you don't know what it is, it's very simple. If you have a floating rate uh exposure is an a fixed a rate that is floating and uh changes all the time, you can swap it to a fixed rate and uh vice versa.

You can swap uh floating a fixed rate into a uh floating rate. uh this idea is not new at all. It is a very what one of the biggest uh industry industries in uh trafi or just finance in general uh for people to swap their interest rates. Um the idea is you can pay a fixed rate in exchange for a floating rate or pay a floating rate in exchange for a fixed rate. It is as simple as that.

Um uh why we decided to launch it is because we found limitations on 102 uh which is we can't support funding rates or offchain rates for example and the leverage is not high enough. Um so we decided to start and then and basically it's not an interest swap model per se for kind of v2. Yeah. So we decided to rebuild it and then build uh Boros and then uh and we figured that Boros the identity and the product is very different from what Pendle V2 is offering. It is still part of yield management but the way that it achieved that is completely different.

Um so we decided to call it a completely separate name but then we also figure it doesn't really deserve a separate token. Uh because one they'll be too greedy on our side and two uh it would be very difficult for us to manage two different tokens. at the same time as as one company. It's kind of like why doesn't Apple release a new company when they launch a new product line like iPad, you know, and an iPhone or AirPods. They technically could be individual companies, but it's not still part of the same product.

Um, so that's kind of the same idea as well. So Pendle is like an umbrella company and you have a few layers of tools and tools of yield management that you can use. Yeah, that's panel B2. Uh, and Boros. >> Okay.

I've seen you've been getting quite some traction with volumes spiking even like more than 100 million a day uh during some days, right? Um, and it's been live for what, like several months, right? It's not that long ago since you launched. So, uh, what led to this like growth right away uh from inception, right? like what's what made it so successful?

What did you I'm maybe also interested like did you by yourself identify this need or were your users pendal users requesting such features to actually be able to trade the uh funding rates on different exchanges because as you mentioned but this is a product which stratfi has adopted since ages ago right but like it never got traction in the defi space so um yeah what led to you deciding on this specific launch and getting such huge traction right away. >> I wouldn't say our traction is that big actually. Uh to give a bit more context, our the interest rate swap market is in the trillions in uh traditional finance compared to the spot market and we are tiny compared to the uh crypto spot market. So uh it's a long way to go. Um but yeah I would say what gives the first glimpse of success right now um interestingly will be different from the pendle v2 side uh on the bor side it is more institutional driven um but I also say because of the pendal brand there's some level of trust association there so some of the institutional players are comfortable playing in bors immediately already um but that said uh I think it is also a product that resonate with a lot of people one of our biggest recent success would be on the oil markets uh that we support.

Basically to give context there is a big backwardation in oil futures contract meaning the longerdated futures contract are at a big discount compared to the shortdated uh futures contract and what people are doing on hyperlquid is basically short the hyperlid uh oil market and then long the futures longdated futures contract and this gap will basically close. So there's a very crowded short on the hyperlquid side pushing the funding rate down to extreme levels like negative 600% levels and a lot of people want to hedge that funding exposure because if you're short and the funding is negative 600% you're basically paying 600% APR and uh a lot of people are coming into borrows to be able to hedge that position which is what everyone does in traditional finance when they want to hedge against interest rate exposure. Let's say if you're a company that is exposed to uh you know real estate uh or inflation rate for example and if you're highly exposed to that you want to be able to hedge against that rate so you open swap on that position. Same thing on Borus. A lot of people are exposed to the oil funding rate and they're not running the strategy.

They're looking to hedge that. Same thing is if you are uh running a basis trading strategy for example where you um have spot position short on short an asset to earn the funding rate assuming funding rate is positive you want to hedge that uh funding rate position. You can do that on borrowers as well. Um but I would say the recent success came from the oil markets and uh we got extra attention uh on that front. That's really interesting how you frame it.

It's like a second order hedge, right? Because people usually go to hyperlquid to make the first order hedge as you mentioned like you're longing oil but then shorting it uh at the same time to hedge and then you're coming to borrows to do a second order hedge just to avoid paying these high interest rates because of how many players are actually uh participating in the space. >> Exactly. Yeah, that's what I would say. Nice.

Um, you also like briefly mentioned about like token. Um, you've recently had a transition from uh BE Pendle to S Pendle. Um, so first of all, yeah, what led you to this decision to transition? Why why did you decide that? And then uh maybe you can explain how Pendle token is abstracting everything that happens within Pendle within borrows.

How do you see even more products being launched under this one token? So what's the vision for the token itself? >> Uh pretty simple. Uh I wouldn't go too much in details on the uh on the data because it's going to take like 20 minutes. Um I shared a lot of that already uh in the past.

So if uh listeners are interested they can look it up. But the idea is out of all the VE system Pendle is the worst performing one in terms of participation. Um yeah we had like 20% of our supply participated in BD pendle we were offering yields of like upwards of 40 to 50% and the participation is very low because the barrier of entry is way too high. Uh you need a two-year lock for that which is a little bit ridiculous. Um so we decided to transition away from uh that model into espendle.

There's a lot more reasons behind that. Uh we were overpaying for incentives. We were overpaying on a lot of things but then it was a big overhaul and now our emissions were cut by more than half. Um now that we are moving to a much leaner approach into economics and uh uh emissions uh you know this the how we direct emissions were significantly improved as well because back then when v during v pendle times were very poorly managed. Um now that we are on S Pendle uh we see that participation improved quite significantly actually from 20% to almost half of the pendle supply.

So that's good uh and we save uh a lot in pendle emissions. So we're not spending as much to retain our TVL uh traction. That's kind of at a high level where we are right now. Regarding products and revenue uh structure, we are not going to launch new tokens for Boros obviously and uh all revenue for Boros will eventually flow back to Pendle and exactly what shape or form we have no idea and haven't decided yet and I think it's a little bit too early for us to decide right now. Um but the whole idea is the value at and all the revenues that we earn should eventually flow back to Pendle holders and that's the core thesis of the product the idea of tokconomics and regarding new products for pendle uh no plans for that yet for now.

>> Okay. Do you think VE model is not working overall because yeah a couple years ago industry was shifting more and more towards the V model longer lockups um it allowed yeah to make tokens more sticky but we've seen recently that uh there were more than couple protocols shifting from this V model to different staking so what are your general thoughts on where the protocol tokens are going to. >> It doesn't work for us. It kind of we pendal allowed people to channel incentives where they are supposed to go. That is assuming the people who are deciding on where the incentive should go are smart.

But the thing is people are not and people are not active in your governance 247. Um, and you can't expect decisions to be rational and uh um at least for Pendle, it wasn't uh in our favor. That's what I would say. Yeah. Um it might be working for some other protocols.

Uh but I would say not for Penville. Uh to give a bit more context, right? We were offering such crazy high yield because the protocol revenue was growing so much. But then the people who are participating in the pool were it's only 20% of the total pendal supply was locked and a good chunk of that is the pendle team members because we know the protocol and we put a whole lot of our pendle into v pendle and we're not and then and then we are the one earning the growth the protocol revenue which is a little bit stupid because ideally we want every pendle token holders to enjoy this that also makes us when we pitch pendle token to institutions and funds it's very difficult for them to invest in pendle because our revenue is being distributed to V pendle which is something that they cannot participate in because funds have a liquidity mandate like they have investors that they have to answer to and then they can't lock for two years. So basically if a protocol revenue is not reinvested in a company or it's not being distributed as dividends basically the protocol is not earning revenue then because they're not entitled to receive any of those and it's not being reinvested in the company.

So valuation wise it's quite a difficult to pitch to any funds out there uh because they can't participate in uh such a system. It's kind of like unfortunate reality we live in. Uh but uh that model wasn't working well for us. Yeah, that's kind of why I was >> completely >> Yeah, makes sense. Um okay u shifting from toen uh would like to uh shift our focus to the current hot topic uh vault right curation and u everything around it.

Of course spend has been very successful in the vault space. uh a lot of uh protocol a lot of curators are using it to boost yields um to actually uh even hedge yields right for looping strategies um and stuff like that. So um yeah, how do you see like first of all maybe when did you notice this uh that Pendle fits so well within the world creation market and then um how where do you see Pendle fitting it fit fitting in this entire space because of course there are a lot of like moving parts and a lot of different protocols involved in the entire uh chain. So yeah, like where do you see Pendle uh fitting in within this entire risk curation market? >> I I would like to say we're not involved in any of the curation side of things.

Uh we just we are just a tool and uh we tokenize yield varing assets into PT and YT. PT is a fixed yield. YT just earns all the remaining yields uh all the yields of the underlying asset there and anyone can build on top of us and we can build on top of anyone and our job is to make sure the tools are easy to use. Uh Pendle is easy to use and uh anyone can build on top of us and that's kind of like uh our job. So uh we are not involved in any of the uh curation or even uh building of these things.

But I would say at the end of the day, if you're running a business that uh that tokenizes yield, you want your assets to be integrated into these pools. So we work with the respective protocols to get our assets listed uh on their end. But the risk management side and how exactly uh these things get listed on the underlying asset obviously it's up to the underlying uh respective protocols uh decision to uh to figure out. >> Yeah. Uh but at the same time you're also trying to build uh some tools around it like you mentioned like oneclick looping right.

I guess this would fit for some of the curators really well. So it's still as you mentioned like you're just providing the infrastructure but you want to make your infrastructure as easy to use as possible. So uh maybe you see some other potential growth factors in this space. Um do you see do you overall maybe are you still seeing growth in risk curation or is it more like uh because of some recent events that uh people are becoming more careful and avoiding to put more funds into that. So what's your insight from infrastructure provider side of view?

>> Yeah, I I honestly have no idea what what's going on the risk curation side. Um uh yeah, and we're not we're not frankly not involved in risk curating at all. We provide assets if they if the respective uh integrators want to use a curator to look into the risk metrics of our assets. Yeah, we have a list of documents and a list of um um things for you to look into on our uh risk factors of the protocol, but uh it's again up to the underlying protocols to figure it out. We we again we build the tools um uh to enable one click looping for example.

It's just how you then want to look. put up you put asset into a collateral into an underlying asset. You borrow deposit back into a pendle use that as a collateral again and you borrow again. At the end of the day this thing has to be supported on the underlying uh on like the money markets for us to build such a tool. Um so the risk is on the listing side of the underlying asset.

If they allow for this, even if we do not build the tool, people can already do a PT looping strategy. We're just making your life easier by creating a tool to help a 50 click process into two clicks. That's kind of what we do. So the risk curation sites on our end, but it's rather on everyone else that's building on top of us or below us. >> All right.

Um and yeah, of course, touching base on the recent events, um we saw resolve uh thing happened, right? We saw issues with player zero this week. Um Pendle has been successful so far in managing to avoid um any huge uh events uh in the space. What's your view on the risk management on making sure that um user funds are always safe, right? Um overall like what's your view on everything that's happening within the space and how you spend on managing to uh actually um avoid uh this from touching you?

>> We are really well takes we take security very seriously. That's that that's for sure. Um one thing that we pride ourselves in is that our product is very isolated uh in a sense that Pendle has deal tokenization uh and then we have the AMM the trading engine the limit order uh and also the uh the tokconomic side all of these are completely independent uh architecture that is that doesn't really uh uh it's not like if one part is compromised you can't really compromise the entire thing uh on pendle one thing that that's Um but we also take like small little things very seriously like multistake signing for example or uh u our uh validator architecture for our crosschain assets for example in kelp specific uh unfortunate scenario um yeah we we've had that uh idea uh risk you know we had that risk angle thought out >> um but at the end of the day uh you never know what you don't know I think we can do so much to prevent ourselves from being uh exploited and yeah try everything we can. Uh we have pretty solid audits in place as well. Uh I think yeah every we try everything we can.

That's all I want to say. And then just use best practices uh as often as possible. Don't don't use shortcuts and generally that goes a long way. My view on the space though uh it's a little bit I'm not sure. I think the the kelp situation is a little bit too fresh for me to have a view right now.

Um we are definitely undergoing a heavy internal audit to make sure that all of our systems and processes are not susceptible to such attack. For Kelp specifically, um it wasn't even a smart contract hack. Um, the attacker was able to spoof a message on the validator network and know exactly which validator network to attack and know exactly the list of RPCs to uh attack and dodo those that are uh uh they are unable to poison and they know that they're going to fall back to the to the nodes that they are able to poison which was a very interestingly suspic interestingly specific hack. Um but yeah, seems like it is that's what that's what the unfortunate situation that happened to kill. Again, at the end of the day, uh this could potentially be mitigated by having a rigid and robust internal process, but you never know when you do.

So, we are doing a heavy internal audit right now. >> Okay. Uh thanks for this. I definitely agree with your thoughts there. And maybe just to end on a positive end, um what do you think we are missing as a space for achieving an ever 10x growth in TVL uh in users and overall to grow up as a space rather than being this you know DGEN only uh space for high risk high reward um tokens or uh other instruments.

>> Yeah. Uh I might a little bit contrarian given that I'm in crypto but I do think there's lack of regulations and uh enforcements uh in this space. Um, at the end of the day, if you are in a space where there's no repercussion for you to do bad thing and everything lies on you to protect yourself, I think it is a very gorilla space that we're living in. And I don't think that you can extend this to um the normies because you can't expect the normies to protect themselves in every single way possible. I can't expect my grandma to sign transactions on a ledger, for example.

No way. Um so yeah uh putting down the barrier to entry is one but then in order to do that I think there should be repercussions for uh malicious actors I would say um kind of a contrarian view given that I'm in crypto but I being in this industry for a while my kind of perspective has changed a little bit more from uh completely independent uh uh you know industry for uh nerds to have a completely independent space to if you want if you really wanted it to grow, we need uh the the involvement of uh more you know governance and legal participations. That said, uh I do think that the underlying tech is good. the crypto text tech stack is just fundamentally better than non-crypto tech stack given how transparent things are and how things are very verifiable. Um so it is just a matter of time when we translate this tech stack out into the normal financial space.

Um yeah but I think the journey there is going to be long and pretty bumpy. >> Yeah. Nice. U thanks a lot for this. Thanks a lot for coming in.

Um maybe any final thoughts uh any uh anything to share where people can find you where they can connect with you. Um >> yeah uh I'm generally active in the Discord. So uh I mean you can shoot a DM the pendal intern once in a while. I'll check it out. Um uh or just hop on to our W the Pendle Discord and come hang out.

I'm there sometimes. >> Amazing. Thanks Dan. It was a pleasure having you here. uh wishing you best of luck.

Um and yeah, thanks for coming to Beyond the Yield. Cheers. Have a good one.