Binance Labs Announces Investment in Fixed-Yield Protocol Pendle Finance

Binance Labs, the venture arm of Binance, has announced an undisclosed investment in Pendle Finance, a DeFi application focused on yield tokenization.

The funding acquired by the Pendle Finance team will be channeled towards multichain expansion with a focus on “both retail and institutional users.”

Currently, Pendle Finance supports three blockchains Ethereum, Arbitrum, and BNB Chain.

Co-founder and CEO of Pendle Finance TN Lee said that he and his team will use Binance Labs’ “unparalleled expertise and resources” to grow their reach.

According to Binance Labs, Pendle’s fixed yield offering “will play a pivotal role in the project’s growth” as it is “traditionally the backbone of institutional hedging.”

Pendle Finance fixed yield–which is essentially a bond-like asset–splits a yield-bearing token like Lido’s stETH into two: a principal token (without yields) and the yield-bearing component. Users can buy the cheaper principal token portion at a discount, and then redeem it at a given maturity date to rake in yield generated.

Currently, Pendle Finance provides an annual fixed yield of 2.93% on Tether’s USDT and 5.37% on stETH.

Binance bets big on staking

Notably, nearly half of Pendle Finance’s deposits are in liquid staking derivatives (LSD) such as stETH and Frax’s FraxETH, per DeFiLlama data.

Liquid staking protocols have a combined value of $20.16 billion, significantly higher than lending protocols at $12.77 billion and decentralized exchanges at $12.07 billion.

“The LSDfi sector is currently experiencing a tailwind of which the size of the total assets has experienced exponential growth,” a Binance Labs spokesperson told Decrypt. “We view that LSD assets, as native yield-bearing assets, will be a core underlying asset of the decentralized finance landscape.”

LSDfi refers to the applications that put LSD tokens like stETH into use in DeFi applications for additional yields.

Pendle is Binance Labs’ second investment in the LSDfi sector, following a $10 million investment in Helio Protocol.

Binance Labs reported that it has generated roughly 10 times the returns from its investments, with its portfolio currently valued at $9 billion.

Its portfolio covers 200 projects from over 25 countries.