By JAE, PANews

Pendle, innovating on-chain yield trading with its PT/YT mechanism, is expanding its reach into the trillion-dollar derivatives market. On August 6, 2025, its new product, Boros, launched, enabling on-chain tokenization and hedging of perpetual contract funding rates for the first time, marking a pivotal strategic shift for Pendle from a "yield management protocol" to "DeFi interest rate infrastructure."

Over the past year, Pendle has achieved explosive growth, with TVL exceeding US$10 billion. It is no longer limited to splitting existing profits, but is committed to building a complete on-chain yield curve.

Nansen once pointed out: "Pendle is becoming the interest rate infrastructure in the DeFi field." The birth of Boros is a core piece of the puzzle to realize this ambition.

Boros Core Mechanism: Funding Rate "Interest Rate Derivatives" Market

Pendle built a new platform, Boros, on Arbitrum. Its core function is to convert the highly volatile funding rates in perpetual swaps into tradable tokenized instruments—Yield Units (YUs). Each YU represents the right to earn income from one unit of the collateralized asset (e.g., BTC/ETH) over a specified period (e.g., 1 YU-ETH represents the notional value of 1 ETH until maturity). Boros's mechanism is inspired by the YT (Yield Token) in Pendle V2, which represents future income rights, and its logic is similar to TradFi's interest rate derivatives.

Boros has created a floating-fixed funding rate swap market, allowing users to hedge risk or bet on rising or falling funding rates, tailored to their needs. Boros provides an effective on-chain tool for users with risk hedging needs. Users exposed to funding rate risk in the perpetual swap market through spot-perpetual basis arbitrage or Delta-Neutral strategies can offset their exchange funding rate exposure by paying a fixed rate and receiving a floating rate on Boros, thereby earning a profit or locking in maximum holding costs by fixing the funding rate.

Similarly, Boros has created a new trading product for users with trading needs. Users can predict future funding rate trends and profit from funding rate fluctuations by going long on YU or shorting it. It's worth noting that the volatility of perpetual contract funding rates is much higher than the volatility of its price over the same time period.

The Pendle team believes that risk management is the primary focus in the early stages, so Boros has adopted a cautious risk control strategy, with the open interest (OI) capped at US$20 million in notional value and the leverage ratio controlled at 1.4x.

Targeting Market Pain Points: Injecting Stability and Efficiency into DeFi

In the crypto market, derivatives trading volume is much higher than spot trading volume.

Perpetual contracts are the main trading products, with an average daily trading volume of approximately US$1 trillion.

Looking at the structure of TradFi's derivatives market, interest rate swaps account for the vast majority of trading volume. Perpetual swaps are the cornerstone of crypto asset derivatives, and the closely related funding rate derivatives market is poised to become one of the largest emerging markets in the DeFi ecosystem.

However, the high volatility of funding rates and the lack of effective on-chain hedging tools are long-standing "pain points" in the DeFi derivatives market, which not only increases users' risk exposure, but also limits the entry of incremental funds and the stability of DeFi strategies.

The emergence of Boros is particularly important for Delta-Neutral protocols. These protocols typically rely on funding rates to maintain returns, creating a strong demand for stable returns and risk hedging. For example, Ethena boasts over 10 billion in total value (TVL) and issues a stablecoin called USDe, which is backed by volatile assets such as BTC, ETH, and LST. To achieve Delta-Neutral conditions, Ethena uses collateral as a spot position and opens a short perpetual swap position on the exchange to hedge against price fluctuations.

While Ethena maintains a Delta-Neutral position, it still has to bear the funding rates charged by exchanges, which also provide a source of revenue for Ethena. When the funding rate is positive (long OI > short OI), Ethena profits because longs pay the funding rate to shorts. However, when the funding rate is negative (short OI > long OI), Ethena loses money. In these situations, Boros acts as a critical "shock absorber," helping to mitigate the risks associated with negative funding rates and smooth the yield curve.

TN Lee, co-founder and CEO of Pendle, emphasized: "Hundreds of billions of dollars in perpetual contract market trading volume are recorded every day, but there has never been a scalable, permissionless on-chain method to hedge or trade funding rates. Boros will change the status quo." Infrastructure-level supplementation may also attract more incremental funds.

Value proposition: Enabling ecological win-win

Following Boros's release on August 6th, $PENDLE saw its price surge by over 40% within a week, approaching $6. This strong upward trend demonstrates the market's recognition of its potential.

Boros will enhance $PENDLE's value capture capabilities. 80% of protocol fees will be distributed to vePENDLE holders, solidifying vePENDLE's position as the core value capture module of the ecosystem. Boros fees accrue to vePENDLE, creating a powerful positive feedback loop. Increased Boros usage generates more fees for vePENDLE, which in turn generates more $PENDLE lock-up, further strengthening the incentive effect.

Boros has opened a dedicated Vault to limited partners (LPs), who can earn returns by providing liquidity to the funding rate swap market. This income comes from $PENDLE emission incentives, transaction fees, and favorable changes in the implied annualized rate of return.

Future Vision: Profit Layer Throughout On-Chain Finance

Initially, Boros only offers funding rates for BTC and ETH perpetual contracts on Binance. Future expansion plans include expanding to more mainstream perpetual contract platforms (such as Bybit, Hyperliquid, and Bybit) and highly liquid assets (such as SOL and BNB). Renowned market maker Caladan has stated that it is providing liquidity for Boros.

In principle, Boros can be integrated into the entire DeFi ecosystem and become a core interest rate module, which means that it is not only an independent DApp, but also a "Lego block" that can be seamlessly called by other protocols and is highly composable.

Boros's underlying architecture is designed to be highly scalable, potentially unlocking a wider range of variable income sources. Beyond DeFi protocol-based income, it can also integrate: 1) CeFi income products, such as CEX structured products; 2) TradFi income instruments, such as stocks, government bonds, money markets, and mortgage rates; and 3) RWAs, including tokenized credit and private debt.

Boros makes most forms of yield streams viable as tradable financial instruments and collateral, enabling DeFi to move towards a more complete on-chain interest rate market, improving capital efficiency and paving the way for risk-controlled leveraged strategies. In the long term, Boros has the potential to become a yield layer not only for DeFi but also for the broader tokenized finance ecosystem. When DeFi is able to replicate the core interest rate market of traditional finance, a true paradigm shift is imminent.