Pendle Yield Assets

Yield Assets in Pendle are usually derived from Yield-bearing assets( a general term that refers to any token that generates yiield ). When yield is tokenized, there's a maturity accosted to it. There are three (3) types of yield assets in Pendle.

1. Standardized yield token (SY) : This is the wrapped version of the underlying yield-bearing token. E.g: gDAI -> SY-gDAI. Pendle interacts with SY tokens to facilitate the deployment of two more tokens: Principal Token (PT) and Yield Token (YT). These two tokens would form the bedrock of yield on pendle.

2. Principal token (PT) : This is the principal portion of the underlying yield-bearing asset. They enable users earn a "fixed yield" on asset deposited. Upon maturity (usually a year), PT can be redeemed at 1 : 1 for the deposited asset. The PT token will be acquired at a lower price than the underlying asset. Hence, users get to aquire the underlying asset at the original price upon maturity, generating a fixed APY of 10%.

3. Yield token (YT) : It represents the yield component of the unserlying asset. Users get to claim monthly yield ( interest ) just by holding YT tokens, basically betting on the yield going up. This is called "longing the yield".

In essence, Pendle wraps yield-bearing assets into SY. SY is then split ( minted ) into PT and YT. Users can mint PT and YT by depositing yield-bearing asset into Pendle. These assets would be converted into yield-bearing assets, wrapped into SY tokens and then split into PT + YT. E.g: DAI -> gDAI -> SY-gDAI -> PT-gDAI + YT-gDAI.

Note that any point in time, before maturity, you can combine PT + YT to get the underlying asset. 1PT + 1YT = Underlying Asset.

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