Compared with Pendle

Currently, Pendle is the most popular yield tokenization protocol on the market. Here’s a comparison of OutStake and Pendle, highlighting the advantages of OutStake and the problems it addresses:

1. Token Types and Composability

   • Pendle: The minted PT and YT have expiration dates. PT and YT are not standard ERC20 tokens but are closer to NFT. Throughout the operation of the protocol, Pendle deploys numerous PT and YT contracts for the same Yield-bearing Token with different staking expiration dates, leading to fragmented liquidity and limiting the composability and use cases of assets on Pendle. In particular, YT's value goes to zero upon expiration, further restricting its usability.

   • OutStake: The minted PT and YT are standard ERC20 tokens with no expiration date, allowing them to be freely integrated into other DeFi protocols. During the protocol’s operation, each yield-bearing token corresponds to only one YT and one PT contract, a design that enhances composability and flexibility. Importantly, OutStake introduces UPT, enabling liquidity to be shared across different yield-bearing tokens that are based on the same underlying asset. Furthermore, OutStake’s YT serves as a unique stablecoin pegged to yield rates, allowing users to take long or short positions on yield rates and lock in future yields.

2. Fixed Rate Yields

   • Pendle: PT has a negative premium that decreases over time, and the fixed-rate yield comes precisely from this negative premium of PT, i.e., the impermanent loss of stakers (LP) and the losses of users purchasing YT. Due to PT's negative premium, stakers who sell PT early incur losses, while holding it long-term ties up capital costs. As a result, the practical value of PT is significantly reduced, making it difficult to integrate into other DeFi strategies.

   • OutStake: SP represents the principal redemption right of locked yield-bearing tokens upon maturity. By purchasing and holding SP, users can obtain fixed-rate yields, with the returns derived from user demand exchanges rather than the losses of other stakers. While retaining fixed-rate yields, SP can further be split into UPT (an omni-chain stablecoin), thereby releasing the occupied capital cost and significantly improving capital efficiency.

3. YT Value

   • Pendle: The value of Pendle's YT is heavily influenced by protocol incentive points, causing a significant deviation between its price and the actual yield of the yield-bearing tokens. The protocol can arbitrarily manipulate YT through incentive points, posing a serious risk of centralization. Investors who purchase YT solely for yield will suffer significant losses, and the trade fees are very high, leading to low trading volumes of YT in the market and almost no composability.

   • OutStake: The value of Outrun’s YT is directly tied to the yield of the yield-bearing token and is not influenced by protocol incentive points, mitigating the risk of price manipulation. As a result, OutStake’s YT is more decentralized, exhibiting stronger financial characteristics and composability, allowing investors to trade interest rates solely by trading YT. In the future, incentive points will be directed to PYT (Points Yield Token), enabling users to independently trade incentive points through PYT, further enhancing market transparency and efficiency.

4. Staking Duration

   • Pendle: The staking duration is determined by the protocol, and users cannot freely choose the staking period.

   • OutStake: Users can freely select the staking duration, controlling the amount of PT minted. The staking duration is abstracted as SP, making the position expiration time a tradable asset, further increasing flexibility.

5. Staking Yields

   • Pendle: Pendle’s tokenized yield model does not bring additional real yields to stakers. Simply minting and holding PT and YT through staking does not generate any additional returns. If we consider AMM profits outside of Pendle’s tokenized yield model, it essentially becomes a bet between impermanent loss and market-making income. Profit is only achieved when market-making income exceeds impermanent loss. In reality, Pendle LP’s yields primarily come from Pendle’s token subsidies, with actual market-making income being largely negligible.

   • OutStake: OutStake’s tokenized yield model is fundamentally distinct from Pendle’s, providing stakers with additional real yields(as explained in the previous doc). Furthermore, as a omnichain stablecoin, UPT offers significantly better liquidity than interest-bearing tokens. When used for market-making, OutStake LP achieves higher returns compared to Pendle LP. Additionally, UPT can generate further profits in other DeFi scenarios (such as lending, external protocols, and other modules within the Outrun ecosystem). OutStake’s design is more sustainable, as it does not rely on protocol token subsidies.