How are finance decentralized? (Defi) work? In the Crypto For Advisors Bulletin today, Elisabeth Phizckerley and Ilan Solot and Marex Solutions was co -author of this piece on the mechanics of a transaction defining Ethena, Pendle and Aave and how everyone works together to create investment yields.
Then, Dj Windle breaks down the concepts and answers questions about these investments in “Ask an expert.”
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– Sarah Morton
Defi’s performance engines: Ethena, Pendle, Aave and Hyperliquid
In traditional finance, advisors are accustomed to products such as bond funds, monetary market instruments or structured notes that generate performance by recycling capital more efficiently. In decentralized finance (Defi)There is a similar idea, but completely driven by intelligent contracts, exploring how financial markets can work in Blockchain Rieles. There has been no shortage of experiments in the last six years, since the sector began; However, few have worked as well as the interaction between Ethena, Pendle and Aave. Together, these three protocols have created a self-reference cycle that channels more than $ 4 billion in compound assets. As space develops, the intertwined will probably expand even more, for example, integrating elements of hyperlycides and their new layer-1, hyperge. First, some definitions:
- Ethena: Like a monetary market fund that generates performance from futures.
- Pendle: as a link desk that divides that performance into “fixed” versus “floating” portions.
- AAVE: as a bank that offers loans against the crypto-national guarantee.
- Hyperliquid: like any encryption exchange for futures and spot trade, but completely in the chain.
The original PT Loop works more or less like this: it begins with Ethena, which emits USDE, a synthetic dollar supported by a combination of established and cryptography. Ethena uses deposits to implement delta-neutral strategies in futures contracts to generate performance, which is paid to the damn of the USDE. USDE status is winning around 9% at the end of August.
Pendle then take the USDE and break it into two parts: main tokens (PTS) and performance tokens (YTS). YTS represent the variable yield current (and any accumulated point) of the underlying asset – USDE in this case. While the PT represent the underlying value of the USDE, which Pendle sells with a discount (like a t-bill) Then he redeemed one by maturity.
Then, AAVE closes the loop by allowing investors to borrow against their PT deposits. Since PTs have a predictable redemption structure, they work well as a guarantee. So, the depositors often request USDC (For example)and recycle it again in Ethena to caress the new USDE, which flows again to Pendle, reinforcing the loop.
In summary, Ethena generates performance, packages the slope and takes advantage of it. This structure now represents most of Ethena’s deposits in AAVE and most of the total blocking value blocked (TVL)which makes it one of the most influential performance engines in the chain.
This steering wheel not only works because the yields are attractive, but because the protocols share a common base. The three are compatible with EVM, which facilitates integration. Each is designed to be completely in the chain and crypto-native, avoiding the units of the banks or assets outside the chain. In addition, they operate in the same “neighborhood” Defi, with overlapping user bases and liquidity groups that accelerate adoption. What could otherwise have continued to be a niche experiment has become a block of central construction of performance strategies in the chain.
The natural question is now if a fourth protocol will join, and hyperlichid has a strong argument to do so. Ethena uses hyperlichids as part of its performance generation strategy, and the USDE is already integrated into both Hypercore and Hyperge. Pendle has $ 300 million on TVL linked to Hypevm products, and its new Boros financing rate markets are a natural adjustment for future perpetual hyperlycides. Aave’s relationship with hyperlichid is more attempt, but the appearance of Hyperlend, a friendly bifurcation in Hypevm, points a deepest integration ahead. As hyperlichid expands, the system could evolve from a closed circuit to a broader network. The liquidity not only cycle within three protocols, but would flow directly to the markets of perpetual futures, deepening capital efficiency and remodeling of how performance strategies are built in the chain.
The Ethena-Pendle-Aave loop already shows how fast scaing defi when the protocols share the same environment. Hyperlichids could boost this model even more.
– Ilan Solot, senior strategist of global markets and digital assets, Marex Solutions
– Elisabeth Phizackerley, Macro Strategy Analyst, Marex Solutions
Ask an expert
Q. What does “compositional” mean in Defi?
TO. In traditional finance, products exist in Silos. In Defi, composability means that protocols are connected to each other as Lego Blocks. Ethena creates the performance, Pendle packages and Aave lend against him, everything in the chain. This makes growth fast, but it also means that risks can spread rapidly.
Q. What are the main tokens? (PTS) and performance tokens (YTS)?
TO. Pendle divides an asset into two parts. The main token (PT) It’s like buying a bonus with a discount and redeeming it later. THE PERFORMANCE TOKEN (YT) It is similar to a coupon, providing an income flow. It is simply a way of separating the principal from cryptographic performance.
Q. What is a “delta-neutral strategy”?
TO. Ethena uses this to keep her synthetic dollar stable. When sustaining cryptographic and shorten future future, profits and losses were compensated with each other. The configuration remains neutral in dollar and continues to generate a performance similar to neutral coverage fund strategies in the market, but in the chain.
– DJ Windle, founder and portfolio manager, Windle Wealth
Continue reading
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- The president of the SEC, Paul Atkins, has presented the vision of a “unified surface exchange where investors could exchange everything, from actions and tokenized bonds to cryptocurrencies and digital assets on a single platform.
