Online platform Pendle introduces Boros feature for direct, blockchain-based trading of funding rates
In a significant leap for the DeFi sector, Pendle Finance has introduced Boros, a groundbreaking DeFi product designed to allow users to trade crypto funding rates on-chain. This innovative platform tokenizes the floating funding rates of perpetual futures contracts, initially for BTC and ETH on Binance, into Yield Units (YUs).
Each YU represents the expected yield from 1 unit of a notional asset until a set maturity, enabling users to take long or short positions on funding rates. This mechanism creates an on-chain market for fixed-vs-floating funding rate swaps, allowing traders to speculate, hedge funding rate exposure, or cap carry costs without unwinding underlying leveraged positions.
How Boros works:
Boros converts volatile funding rates, which are periodic payments exchanged between long and short perpetual futures holders, into tradeable on-chain yield instruments called YUs. Users can go long YUs to hedge against rising funding rates (locking in a fixed cost and receiving floating funding yields) or go short YUs to earn fixed income if they expect funding rates to fall. This creates a decentralized, permissionless way to trade or hedge funding rate risk, previously only accessible off-chain or via centralized exchanges.
Boros initially supports BTC and ETH perpetuals with controlled leverage (1.2x) and position limits ($10M open interest per market), with plans to expand to more assets (SOL, BNB) and integrate other platforms (Hyperliquid, Bybit).
Benefits of Boros Vaults for liquidity providers:
Boros Vaults allow liquidity providers (LPs) to supply capital to the trading system, earning a combination of swap fees, positive carry returns from favorable shifts in implied APR on funding rates, and PENDLE token incentives. These vaults mirror Pendle’s existing fixed yield vaults designed to bootstrap liquidity in early stages of the protocol.
LPs benefit from protocol-issued PENDLE emissions distributed proportionally to order flow and notional trading volume, creating cyclical incentives that encourage liquidity growth. By providing liquidity through these vaults, LPs facilitate efficient market making for funding rate swaps while earning diversified yield streams composed of trading fees, carry yield, and governance token rewards.
This mechanism enhances capital efficiency and liquidity depth in a previously underserved on-chain perpetual funding rate derivatives market, fostering the growth of decentralized fixed-income markets in DeFi.
In summary, Boros opens a new paradigm for on-chain trading and hedging of perpetual crypto funding rates by turning them into modular, tradeable instruments, while Boros Vaults incentivize liquidity provision by offering multiple rewarding yield streams and support sustainable market growth. The limits on open interest and leverage will be raised over time as the system proves stable and secure, marking an exciting future for this innovative DeFi product.
[1] Pendle Finance Medium Blog - https://medium.com/pendle-finance [2] Coindesk Article - https://www.coindesk.com/business/2022/03/24/pendle-finance-launches-boros-to-let-users-trade-crypto-funding-rates-on-chain/ [3] DeFi Pulse - https://defipulse.com/pendle-finance [4] Binance Blog - https://blog.binance.com/en/2022/03/24/pendle-finance-launches-boros-to-let-users-trade-crypto-funding-rates-on-chain/ [5] Cointelegraph Article - https://cointelegraph.com/news/pendle-finance-launches-boros-to-let-users-trade-crypto-funding-rates-on-chain
- The introduction of Boros by Pendle Finance, a DeFi product in the DeFi industry, is revolutionizing finance by offering on-chain tradeability of crypto funding rates for assets like BTC and ETH on Binance, using Yield Units (YUs).
- By supplying capital to Boros Vaults, liquidity providers (LPs) can earn a combination of swap fees, positive carry returns from favorable shifts in implied APR on funding rates, and PENDLE token incentives, which not only fosters growth in the decentralized fixed-income markets but also offers multiple rewarding yield streams in the technology-driven DeFi sector.
