Members of the Aave DAO are currently casting their votes on a proposal to incorporate Pendle’s Principal Tokens into its V3 Core market.
This proposal, submitted on the web3 voting platform Snapshot on April 7, suggests the listing of an initial test asset for PT. Pendle (PENDL) is a decentralized finance protocol enabling users to split yield-generating tokens into two segments: Principal Tokens and Yield Tokens.
Principal Tokens reflect the actual value of the token and can be redeemed at full value upon maturity, making them comparable to fixed-income securities. Conversely, Yield Tokens grant holders access to the future earnings produced by the underlying asset.
The recommendation is to begin with one test token of PT for listing. While immediate onboarding is not proposed, the aim is to gauge user interest and ensure a smooth technical integration. To mitigate additional risks, the plan suggests starting with PT tokens associated with assets that Aave already supports, such as sUSDe.
Throughout the years, Pendle has seen its total value locked increase to over $3 billion as the appetite for tokenized yield trading rises. Alongside Pendle’s growth, the demand for utilizing PTs as collateral has surged. By allowing borrowing against PTs, Aave could leverage this trend, providing yield traders with innovative strategies and potentially unlocking billions in additional loan volume.
Aave plans to implement a unique pricing strategy known as the “linearly increasing lower bound” model to address the specific characteristics of PTs. After the integration is evaluated, Aave’s risk service providers will determine the risk parameters. While the test PT token won’t be immediately onboarded due to ongoing dialogues about related assets, the proposal sets the foundation for more extensive future support for PT tokens.
The Snapshot vote for this proposal began on April 7 and will conclude on April 11. Thus far, every one of the 6,500 DAO members who have participated in the voting has supported the proposal.
According to data from DeFiLlama, Aave’s V3 platform remains one of the largest in the DeFi space, boasting over $16.2 billion in total value locked and $9.9 billion in active loans. April’s inflows have already reached $1.3 billion, exceeding the $984 million recorded in March.