Learn How to Grow Your Assets on Pendle Using Bitget Wallet!
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Bitget Wallet offers users a convenient way to participate in liquidity staking on Pendle, allowing users to tokenize and trade yield from various protocols, increasing flexibility and stability.
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Pendle's unique tokenization system helps users avoid impermanent loss by maintaining the integrity of principal and interest-bearing tokens until maturity.
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Bitget Wallet users can opt to either participate in conventional ETH staking or liquidity staking from the convenience of their mobile app.
Ever since Ethereum's transition to a PoS (Proof of Stake) network, staking has been an increasingly popular method for cryptocurrency holders to actively participate in network maintenance and earn rewards. In response to this rising demand, Bitget Wallet has taken the initiative to launch integrated staking features on the application, allowing users to earn passive income via the convenience of their mobile app.
Moving ahead, Bitget Wallet has taken additional steps in the staking field to launch ETH liquidity staking on Pendle, providing users with even more opportunities to earn yield and further capitalize on their assets.
In this article, we will be going over the basics of liquidity staking, how Pendle works, and how you may participate in liquidity staking on Pendle from the convenience of your Bitget Wallet.
What is Staking?
Staking is a fundamental concept in the crypto world that allows users to lock up their assets to support the operations of a blockchain network in exchange for rewards. Staking is most commonly associated with the Proof of Stake (PoS) consensus mechanism, where validators lock up cryptocurrency to participate in network operations. This shift aligns economic incentives with network security and sustainability, offering participants rewards for contributing to the network’s sustained operations.
Yield farming and liquidity pools, while similar, have distinct characteristics. Unlike staking, they primarily involve providing liquidity to decentralized finance (DeFi) protocols in exchange for yield. Staking offers passive income, enhances network security, consumes less energy, provides liquidity, and may yield higher returns in certain scenarios.
What is Pendle?
Pendle Finance, a pioneering platform within the DeFi ecosystem, is revolutionizing the way we think about yield tokenization. In a DeFi landscape where yield tokenization is yet to be fully realized, Pendle Finance introduces a groundbreaking approach. Through its native token, $PENDLE, the platform enables users to tokenize and trade yield from a diverse array of DeFi protocols, offering newfound flexibility and accessibility to yield-bearing assets. This innovative concept brings forth greater stability and mitigates the volatility often associated with traditional yield farming, marking a transformative shift in DeFi strategies and opportunities.
Pendle can be considered a combination of yield farming and liquidity mining, rather than traditional staking, for two primary reasons:
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Pendle allows users to earn rewards by providing liquidity to its automated market maker (AMM) pools. When users provide liquidity in the form of PT/SY tokens, they are essentially participating in yield farming. Users will receive rewards in the form of transaction fees, $PENDLE tokens, and income from the underlying assets.
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The process of providing liquidity to Pendle's pools and earning rewards is considered a form of liquidity mining. In this context, users are mining rewards by contributing liquidity to the platform.
While traditional staking typically involves locking up assets in a protocol to support network operations or earn rewards, Pendle instead focuses on yield-bearing assets, allowing users to tokenize, trade, and generate income from these assets, which aligns more closely with yield farming and liquidity mining in the DeFi space.
How does Pendle Work?
Pendle is a protocol designed to tokenize interest from various DeFi assets. Notably, the protocol separates interest-bearing tokens into principal and yield components. For example, it transforms stETH into SY-stETH through tokenization.
The SY token is further divided into two parts: PT (principal token) and YT (yield token).
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PT represents the principal amount, which can be redeemed upon maturity. For instance, owning a PT-stETH with a one-year maturity means users can exchange it for stETH worth 1ETH after that year.
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YT represents the current yield generated by the underlying assets, and users can claim it at any time. If a user owns 1 YT-stETH, and the stETH yield rate is 5%, the YT token will accumulate 0.05 stETH in one year.
The critical aspect here is that YT + PT = SY. This unique mechanism enables the creation of an automated market maker (AMM) pool with unilateral liquidity, where PT/SY is the default setup. This model leverages the YT+PT=SY relationship, allowing for efficient exchange of YT tokens within the PT/SY pool.
For example, when a user purchases Yield Token (YT), they send SY tokens. The AMM contract extracts SY from the liquidity pool to mint PT and YT, which are then sent to the buyer. Simultaneously, PT is sold for SY, returning it to the liquidity pool. In this way, Pendle simplifies trading the principal token PT and the income token YT in a single PT/SY pool.
It's crucial to note that both PT and YT tokens are time-sensitive, as they have expiration dates. PT's value increases with time to ensure a 1:1 exchange with underlying assets at maturity, while YT's value decreases over time as the period to maturity shortens.
Avoid Impermanent Loss with Pendle
Pendle's unique revenue tokenization system additionally helps users avoid impermanent loss, as we will explain below.
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Principal Tokens (PT): Representing the principal amount of underlying assets contributed as liquidity, the transaction value of PT will increase over time to ensure that it maintains a 1:1 ratio with the underlying asset(s) at point of maturity. In other words, PT tokens appreciate in value, mirroring the appreciation of the assets they represent. This means that as long as a user has provided PT liquidity and holds it until the point of maturation, losses will not be incurred, and the principal amount remains intact, allowing users to redeem it for the full value of the underlying assets.
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Interest-Bearing Tokens (YT): YT tokens, on the other hand, represent the interest generated by the underlying assets from the current moment until maturity. As time progresses and user's holdings approach the maturity date, the period during which interest can be generated becomes shorter. Consequently, the interest generated by YT tokens decreases over time. This decline in YT's value is a fundamental aspect of avoiding impermanent loss because it aligns with the concept of reduced returns as assets near maturity. By the time the YT tokens reach the expiration date, their value becomes zero.
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Position Value of Liquidity Providers (LP): The position value of liquidity providers is calculated as LP = PT + SY - YT, or LP = 2PT. If a user, as a liquidity provider (LP), holds their position until the point of maturity, they will effectively avoid impermanent loss. The combined value of PT and SY remains intact, while the value of YT, as it approaches zero, does not negatively impact the liquidity provider's position.
TL;DR: The avoidance of impermanent loss on Pendle is accomplished by ensuring that both principal tokens (PT) and interest-bearing tokens (YT) maintain their integrity until maturity. PT tokens appreciate over time to maintain a 1:1 ratio with the underlying assets, while YT tokens automatically decrease in value as the interest-earning period shortens. This approach guarantees that liquidity providers won't incur losses and can confidently participate in yield generation without the typical risks associated with impermanent loss.
Additionally, as an LP on Pendle, users can also earn income from various sources:
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Transaction fees generated by the liquidity pool;
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$PENDLE token rewards;
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Income from the underlying assets; and
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Incentives from the token project side (if available)
Pendle x Bitget Wallet
Bitget Wallet now includes the option to interact with Pendle from the convenience of its mobile app. The following is a comprehensive guide on how you can connect to Pendle and begin staking.
Zapping In
Step 1: Tap on "Staking" on your Bitget Wallet home page, and select on "One-click staking to earn more ETH".
Step 2: Connect to Pendle using your Bitget Wallet.
Step 3: Tap on "Add / Remove" and select the type of token you wish to stake. You may choose from a list of tokens in the drop-down list, including ETH, ARB, USDT, and more.
Step 4: Select the amount of tokens you wish to stake, and tap "Zap In".
Step 5: Review your transaction and tap "Confirm". You should receive a notification shortly after informing you of the successful transaction.
The Result: You are now providing liquidity into the Pendle pool! Note that you’re earning 4 different yield sources:
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Fixed yield from the Principal position (PT)
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Floating yield from the underlying yield-bearing asset
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Swap Fees
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$PENDLE incentives
On top of that, you are not exposed to impermanent loss and you can withdraw your assets anytime prior to maturity, see: Zapping Out on how to exit your position.
Zapping in Tokens from Different Mainnets
Bitget Wallet sets Arbitrum as the default mainnet when accessing Pendle due to higher APY and lower gas fees. However, if you wish to zap in tokens from other mainnets such as Ethereum, you may do so as well. This can be especially useful if you are considering contributing the stETH tokens you have obtained via traditional PoS staking on Bitget Wallet on the Ethereum blockchain. To do so, simply follow the steps below:
Step 1: After accessing Pendle from your Bitget Wallet, tap on the network selector icon at the top of your screen, and select your preferred mainnet from the drop-down list e.g Ethereum, BNB Chain, etc, and approve the connection.
Step 2: You will be presented with a range of various liquidity pools available to contribute to. You may either search for the liquidity pool you are looking for in the search field, or browse the list of available pools and sort the list in accordance to filters such as Highest TVL. Each pool provides different p.a rates, as well as maturity periods, so conduct your own research carefully before selecting your pool.
Step 3: Similar to the earlier steps, select the token you wish to zap in via the drop-down token selector, such as stETH, and proceed with the on-screen instructions.
Zapping Out
To remove your staked assets on Pendle, simply connect to the app once again and tap on "Add / Remove". Select "Zap Out" at the top and select "Approve LP wstETH". You may also select the type of token you wish to withdraw your assets in via the drop-down list.
Note that you will still retain all the yield and rewards that have been earned up to that point when you Zap Out, even before maturity.
Traditional Staking vs Staking on Pendle
Choosing between traditional staking and staking on Pendle depends on your investment objectives and risk tolerance. Let's compare both options.
Traditional Staking
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Conservative and Low Risk: Ordinary liquid staking involves locking up your crypto assets in a specific blockchain network. It's a conservative, low-risk strategy, typically associated with well-established blockchains that prioritize security and stability.
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Predictable Rewards: Staking in this manner also offers rewards as a fixed percentage of the staked assets, providing a more predictable income stream. You usually know in advance how much you can earn.
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Long-Term Investment: It's suitable for long-term, low-risk investment objectives. Traditional staking is straightforward and offers consistent rewards over time, while supporting network security.
Staking on Pendle
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Advanced and Dynamic: Staking on Pendle is more intricate and dynamic. It introduces revenue tokenization, allowing users to separate principal and interest components into interest-bearing tokens. This innovative approach offers an advanced strategy for managing your crypto assets.
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Potential for Higher Rewards: Pendle's market-driven approach enables users to speculate on future asset yields, potentially leading to higher returns.
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Short-Term Opportunities: Additionally, Pendle's mechanism empowers users to take short-term positions on yield. It's ideal for those looking to capitalize on immediate yield fluctuations and market opportunities.
Your choice therefore depends on your risk tolerance, investment horizon, and your willingness to explore the intricacies of revenue tokenization and market-driven yield speculation. Of course, both options are not mutually exclusive, as explained earlier. You may proceed to perform traditional staking on Bitget Wallet to obtain stETH, before opting to deposit this yield-bearing token into Pendle for additional yield.
Closing
This concludes our guide on Pendle and how you can interact with Pendle using Bitget Wallet! Do bear in mind to always conduct your own research and perform your due diligence whenever you interact with third-party DApps and platforms.
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