Table of Contents
Toggle
Funding Rate Trading Market — Boros
As a pioneer in on-chain yield trading, Pendle has long been committed to productizing and structuring various cryptocurrency yield products. Following the establishment of the PT (fixed yield) and YT (floating yield) markets in V2, the launch of Boros further opens up a brand new yield product — the funding rate. In the trading process between spot and perpetual contracts, the funding rate plays a key role as an incentive mechanism; however, it has long remained unproductized or excluded from on-chain yield strategies. The advent of Boros aims to fill this gap.
YU Asset Model: Turning Funding Rates into Tradable Commodities
Boros introduces a new asset type called Yield Units (YU), where each unit of YU represents the funding rate yield of the underlying asset (such as BTC or ETH) over a fixed period. Users can stake on the future changes of the funding rate and profit through the following two operations:
- Long YU (going long): Pay a fixed rate (Implied APR, priced by the Boros market), and receive the funding rate (Underlying APR, the actual funding rate on the exchange).
- Short YU (going short): Receive a fixed rate (Implied APR, priced by the Boros market), and pay the funding rate (Underlying APR, the actual funding rate on the exchange).
This design allows users to engage in arbitrage trading or hedging operations based on market expectations. For example, when the future funding rate is expected to be higher than the market consensus fixed rate, users can go long on YU to capture the intermediate spread. Currently, support for BTC and ETH perpetual contract funding rates has been launched, with plans to expand to SOL, BNB, and integrate with trading platforms like Hyperliquid and Bybit.
In terms of mechanism design, Boros adopts an Orderbook matching structure and combines it with a Vault mechanism to provide initial liquidity, allowing liquidity providers (LP) to earn fees and PENDLE rewards. However, most current Vaults have already reached their limits, and future expansions will be gradually released according to YU trading volume.
Addressing Hedging Pain Points at the Protocol Level
Boros not only provides new tools for retail traders but also plays an important role at the protocol level. Taking the stablecoin protocol Ethena as an example, its TVL has surpassed $9.7 billion, employing a delta-neutral strategy to maintain the price of its stablecoin USDe. This strategy requires holding both spot and short perpetual positions, and while the price spread has been hedged, it still exposes the protocol to the risk of funding rate fluctuations. The funding rate hedging tool provided by Boros will enable Ethena to effectively counteract the revenue erosion caused by negative funding rates during market downturns.
Potential Expansion of Pendle’s Revenue Sources
If the PT/YT market leans towards savings and allocation-type assets, Boros serves as a trading and hedging-oriented interest rate product. As a source of perpetual contract rates with a global daily trading volume exceeding $150 billion, the open trading of funding rates on-chain is expected to significantly expand Pendle’s use cases and revenue sources.
