Will Penpie Win the Pendle War? | TKX Weekly

by @Guaaronnnn
editor @FriedWagyuu

Under the LSD narrative, Pendle has become one of the DeFi projects with the fastest growth in terms of TVL. This is not only due to its innovative product but also its robust tokenomics. We have explored Pendle before. As Pendle grows, its ecosystem is developing, and several projects are competing for a piece of Pendle’s governance and yield. Today, we will explore Penpie, the project that has the highest TVL among its competitors.

Intro

Penpie is a DeFi platform that enhances the user experience on Pendle by providing yield and ve tokenomics boosting services. It allows users to lock PENDLE tokens to gain better governance rights and yield benefits, effectively maximizing investment returns.

Penpie introduces mPENDLE, a liquid token that boosts PENDLE rewards and flexibility for users. As users convert their PENDLE to mPENDLE, the original tokens are locked as vePENDLE on Pendle Finance, increasing Penpie’s governance and APY.

If Pendle is Curve, then Penpie wants to be Convex.

How it works

Protocols such as Penpie, Stake DAO, and Equilibria are in fierce competition for vePENDLE governance control. This race is defined by accumulating PENDLE tokens, but what does vePENDLE control offer these platforms? Let’s break it down:

1. Income from Yield Tokens (YT): vePENDLE holders enjoy a 3% share of YT’s interest income. Moreover, a slice of the yield from mature, yet unredeemed PTs also goes to vePENDLE holders.
2. Swap Fee Revenue: If a vePENDLE holder votes in a pool, they receive 80% of that pool’s swap fees.
3. Control over LP Pools: With vePENDLE, holders can direct the APR of each LP pool. This allows them to earn bribes from other DeFi projects such as Lido, and Frax, among others.
4. Enhanced APR: An APR multiplier applies to all LP deposits.

In this scenario, having more vePENDLE equips protocols like Penpie with capabilities:

1. LP Mining Boost: With more vePENDLE, Penpie can enhance mining for LPs, allowing for an increase in the collection of service fees.
2. Emission Incentive Control: Penpie can guide emission incentives to certain liquidity pools, which currently control over $100M of TVL.
3. Revenue from ‘Bribes’: Protocols competing for dominance in the Ethereum liquid staking market offer ‘bribes.’ Penpie can benefit from these bribes, which aim to increase the TVL of respective pools.

In conclusion, accumulating vePENDLE is not just a race for governance control; it is also a strategic move to tap into various income streams and influence the dynamics of the DeFi market.

PNP token

PNP is the token of Penpie. Penpie users can lock their PNP tokens to obtain an equal amount of vlPNP, a locked version of the PNP token that allows for yield and participation in Pendle & Penpie’s governance. The voting power Penpie gains through vePENDLE is distributed to vlPNP holders, enabling cost-effective involvement in Pendle’s governance.

From here you can see the relationship between Penpie and Pendle is exactly the same as Convex and Curve, the value accumulates to vlPNP.

Revenue

The distribution of boosted Pendle reward yield from liquidity farming is as follows:

• 83% is allocated to liquidity providers.
• 12% is allocated to mPENDLE.
• 5% is allocated to vlPNP holders as mPendle.

When compared to Equilibria, Penpie is more generous to liquidity providers, as the revenue share for Equilibria is only 77.5%. If nothing changes, LP would be more likely to stay with Penpie.

Data

Currently, the Pendle war has not yet ended as Penpie and Equilibria both still own a similar amount of PENDLE. Equilibria owns slightly more than Penpie.

Thoughts

The flywheel effect will kick in based on the effective model that Convex has gone through. Although it is still too early to say who will be the “Convex” of Pendle between Penpie and Equilibria, there is no doubt that whoever wins the war will help Pendle grow, whether in terms of TVL or its token.

The reason behind Convex’s success is that Curve provides actual value to users, and the same principle applies to Pendle. Without value, its ecosystem will be unsustainable and eventually break down, regardless of how robust ve-tokenomics may be.

Reference

https://dune.com/coumarin/pendle-war
https://docs.penpiexyz.io/
https://twitter.com/ViNc2453

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