Pendle’s vePENDLE governance decay and sPENDLE shift

Pendle has retired its multi-year vePENDLE lockups, replacing them with sPENDLE staking that cuts withdrawal timelines from years to 14 days. This shift directly addresses the "complex" voting mechanics that previously concentrated rewards among a small subset of users while over 60% of markets remained unprofitable. The protocol generated more than $37 million in revenue in 2025, yet participation sat at roughly 20% of total supply, the lowest rate among comparable veToken models. By introducing a liquid staking alternative, Pendle restores composability for holders who can now deploy tokens across eligible DeFi integrations while remaining active for reward distribution. Existing vePENDLE balances convert into boosted sPENDLE with multipliers up to 4x based on remaining lock duration, calculated from a snapshot scheduled for Jan. 29.

Resetting incentive structures

The new model redirects protocol revenue toward token buybacks and introduces an algorithmic emissions model expected to reduce overall emissions by roughly 30%. Previously, 80% of V2 fees went to vePENDLE holders, but this design failed to distribute value evenly due to concentrated voting power and manual gauge allocation. Now, 80% of remaining trading fees and all YT yield fees fund open-market PENDLE buybacks, with repurchased tokens distributed exclusively to active sPENDLE stakers. Fees aggregate biweekly, and the buyback contract executes purchases hourly via TWAP during the subsequent week. Since sPENDLE launched, the protocol repurchased over 2.8 million PENDLE, spending a cumulative $4 million. This volume accounts for 1.6% of the current circulating supply of approximately 173.6 million tokens. Annual inflation has dropped 78% compared to the start of the year, hovering around 0.5%, which means total buyback volume now surpasses new annual supply by more than three times.

Critics like Curve’s Michael Egorov called the transition a mistake, arguing it undermines the time-preference signals inherent in vote-escrow systems. However, the data suggests otherwise: Pendle’s TVL neared $1 billion recently, driven largely by liquid restaking tokens and real-world assets. The protocol expanded to BNB Chain and began offering RWA products, allowing users to leverage off-chain yields through PT and YT splits. While some pools still rely on subsidies from high-performing assets like Ethena, the broader ecosystem benefits from reduced friction. You already know the basics of yield splitting; the critical change here is that liquidity providers no longer need to sacrifice years of capital to access fee distributions. The question remains whether this flexibility will attract enough new participants to sustain volume if speculative points farming fades.