Pendle yield splitting and DeFi liquidity risks

Pendle yield strategies and point losses

I see traders making a mistake by choosing PT over YT when chasing EigenLayer rewards. If you stake eETH in Pendle’s fixed yield pool, you lose all EigenLayer restaking points. This choice dictates your total returns. Pendle holds $5 billion in TVL as of Q2 2026, but the protocol recently faced an incident where an attacker minted and dumped PT and YT tokens. While the Pendle team asserts that all funds remain safe, the fact that an attacker successfully minted and dumped PT and YT tokens to manipulate the market still undermines the protocol’s security reputation. PENDLE dropped to $4.137 before recovering. In this 2024-2026 cycle, Pendle captures 50-60% of all DeFi yield trading. Users deposit yield-bearing assets like stETH or sUSDe to receive PT and YT. PT represents the right to redeem the original asset at maturity, while YT represents the right to all yield earned until maturity. For example, a 1,000 sUSDe deposit at 12% APY allows a trader to buy 1,000 PT-sUSDe at 0.917 of par. This trader earns $83 profit from a $917 investment at 9.05% annualized. Alternatively, a trader can sell PT to keep YT for leveraged yield speculation, or sell YT to keep PT for fixed yield lock-in.

Liquidity crunches and protocol exploits

DeFi security remains fragile, as the industry lost nearly $2 billion this year. Loopscale lost $5.8 million in April because its RateX-based pricing system failed, representing 12% of its total value. Loopscale co-founder Mary Gooneratne confirmed an attacker secured under-collateralized loans, affecting depositors to SOL and USDC Genesis vaults. Loopscale requested the return of 90% of the stolen assets and offered a 10% bounty to the attacker. Term Finance lost $1.5 million because a faulty tETH oracle update caused issues in its tETH markets. TenArmorAlert identified two suspicious transactions where an attacker spent a small amount of ETH to liquidate over 586 Treehouse collateral. These incidents follow Bybit’s $1.46 billion hack in February. Tim Haldorsson of Lunar Strategy questioned if DeFi yields justify these exploit risks compared to bonds. I find the Notional V2 liquidation model interesting. It allows liquidators to purchase up to 40% of an account’s collateral. Notional V2 uses fCash liquidation to handle accounts with positive and negative fCash in a single currency. It uses four liquidation types: local currency, collateral currency, local currency fCash, and cross currency fcash. If the spread between the three month oracle rate and the one year oracle rate widens, an account might become undercollateralized because the valuation framework must account for complex interest rate differentials. Does the complexity of fCash liquidation actually improve safety for large holders?

Pendle performance and market data

Pendle’s Q4 2025 metrics show a divergence between user activity and capital. Monthly active users grew 45.55% to 42.5k, yet the total value locked dropped 41.69% to $4.93 billion. Notional trading volume fell 42.02% to $13.52 billion. Fees dropped 15.73% to $8.03 million. Boros recorded over $6 billion in notional volume within five months of launch. The team plans to replace vePENDLE with sPENDLE, which offers a 14-day withdrawal period or instant redemption for a 5% fee. Up to 80% of protocol revenue will fund PENDLE buybacks distributed to sPENDLE holders. The protocol retains 10% for its treasury and 10% for operations. This follows a period where vePENDLE generated over $34 million in revenue. Cross-chain PT expansion has already pushed TVL to over $170 million across Unichain, HyperEVM, and BNB Chain.