[TEMP CHECK] Onboard Pendle PT tokens to Aave V3 Core Instance

[ACI]

[TEMP CHECK] Onboard Pendle PT tokens to Aave V3 Core Instance

Author: ACI

Date: 2024-12-10

Summary

This TEMP CHECK proposes to onboard Pendle PT tokens to Aave V3 Core Instance.

Motivation

Pendle allows users to split yield bearing tokens into principal (PT) and yield (YT) components. This opens the door to trading yield for the growing number of yield bearing tokens, and gives users additional options for yield farming strategies. A notable feature of the PT tokens is that at the maturity date, the value of the PT equals the value of the underlying asset and can be redeemed for the underlying. This means PT tokens, which can be bought at a discount within Pendle pools, represent the fixed rate part of a Pendle asset pair.

Pendle has seen extremely high growth this year, with current TVL of circa $4.5 billion. Along with this growth has come the desire for yield traders to borrow against their Pendle PT tokens. This represents a multi-billion dollar growth opportunity for Aave, without a large increase in risk if PT tokens are onboarded for already listed assets such as sUSDe.

We propose listing an initial PT token as a test use case to see user demand and work through the full integration of a PT token:

• PT-sUSDE-29MAY2025

In future we propose listing sUSDe and USDe PT tokens for new maturities as required.

Specification

PT-sUSDE-29MAY2025: 0xb7de5dfcb74d25c2f21841fbd6230355c50d9308

Risk Parameters

Risk parameters will be provided by Risk Service Providers in the ARFC discussion thread.

Useful Links

https://docs.pendle.finance/ProtocolMechanics/YieldTokenization/PT

Disclaimer

ACI is not directly affiliated with Pendle and did not receive compensation for creation this proposal. Some ACI employees may hold Pendle tokens.

Next Steps

1. Collect community & service providers feedback on this TEMP CHECK.
2. Escalate the proposal to TEMP CHECK Snapshot.
3. Publish ARFC to gather community and Service Providers feedback.
4. Escalate the proposal to ARFC snapshot stage if feedback is positive.
5. If the ARFC snapshot outcome is YAE, publish an AIP vote for final confirmation and enforcement of the proposal.

Copyright

Copyright and related rights waived under CCO

[oneski22]

any consideration into instead listing Yearn’s Auto Rolling PT vaults so that new maturities don’t need to be listed?

Potential for a great collaboration between 2 big DeFi Teams.

Yearn Vaults

[EzR3aL]

I’m generally supportive of this Temp check but really want to see risk opinion.
My concern is with listing these token we are basically listing a derivate of a derivate. As sUSDe is basically the underlying asset of the perp/futures trade.
What kind of death spiral could happen? Just trying to think about possible scenarios.

[orangeman]

The hypothesis of Aave thus far when listing assets is that anyone can liquidate borrowers using flash loans and on-chain liquidity.

Given the low (or no) liquidity on chain of PT tokens, what is the assumption for this being a safe step?

[Hubert]

Nice one!!
Makes total sense imo. I guess it’s just a bit of UI management to follow the expirations etc.

[corn]

yPT’s are going to be the easiest way for ACI to onboard PT’s as collateral.

yPT’s have a single consistent address to deposit to, they don’t require any swaps from the user side, and have gas-less perpetual auto-rolling across maturities.

For oracle functionality, we can use the pricePerShare of the Yearn V3 vault or alternatively just check the underlying value of the PT token held by the strategy.

To address a comment above, the Aave collateral supply limit should always be chosen such that the Pendle AMM liquidity is sufficient for liquidations.

We’re happy to work with ACI and communicate regularly about when rollovers happen if anything needs to be addressed at those intervals.

All the yPT’s can be found here: https://pendle.yearn.space/

[ACI]

The current proposal has been escalated to TEMP CHECK Snapshot.

Vote will start tomorrow, we encourage everyone to participate.

[Emilio]

This proposal is lacking on a variety of aspects:

• Pricing of the PT is unclear
• No risk analysis has been given
• Listing pendle tokens on the main market is just another way of further increasing Ethena exposure, with further additional smart contract risk
• Some legitimate questions in this thread havent been answered

In general, i think this proposal is unfit for a tempcheck snapshot as not much has been disclosed on how the DAO should safely proceed in onboarding this asset. Consequently i will be voting against it and i urge any other risk averse holder/delegate to do the same.
I will be reevaluating my position once more data and clarity is provided.

[gabavineb]

Liquidity for the bluechip PTs is relatively thick, especially for PT-sUSDe-May2025.

For context: you can sell $20M worth of PT-sUSDe-May2025 with ~1.46% price impact right now

[gabavineb]

In my opinion, there are two biggest risks for PT-sUSDe on top of sUSDe:

1. Liquidity for selling PT-sUSDe into sUSDE: liquidity should be good enough for liquidating good amounts of PT-sUSDe when liquidations happen. Higher liquidity will mean a more stable PT-sUSDe price as well.
2. Pendle smart contract risks.

For 1: the Pendle AMM pools have concentrated liquidity specifically designed for trading yields. For reference, the current 84M AMM pool is currently able to support selling 20M worth of PT-sUSDe-May into sUSDe with just 1.46% price impact.

For 2: The current Pendle V2 core contracts have been live since November 2022 with zero smart contract issues so far. It has supported a TVL of at least 1.9B since March 2024, with a peak of 6.7B TVL. In terms of audits, the contracts have been audited by 8 auditors, including SpearBit and ChainSecurity (audit reports are here: pendle-core-v2-public/audits at main · pendle-finance/pendle-core-v2-public · GitHub)

[ACI]

Thank you everyone who participated in the discussion.

Following Snapshot monitoring, the current TEMP CHECK Snapshot ended recently, reaching both quorum and YAE as winning option with 615.4K votes.

Therefore the TEMP CHECK has passed. Nevertheless, as there’s some feedback and suggestions, we will shortly escalate the proposal to ARFC and encourage everyone to continue participating in the proposal and discussion.