Pendle x Global Dollar Network: Scaling Institutional Yield in DeFi

This article is brought to you by Pendle Finance.

The tokenized RWA market surpassed $10 billion by Q3 2025, driven largely by institutional demand for on-chain fixed income and private credit. US Treasuries alone account for over $7 billion of that figure, while fiat-backed stablecoins reached a combined market capitalization exceeding $224 billion earlier in the year.

This growth is supported by regulatory frameworks such as the US GENIUS Act, Singapore's Payment Services Act, and the EU's Markets in Crypto-Assets (MiCA) regulation have given institutions greater confidence to deploy capital on-chain. Major financial players from BlackRock to Franklin Templeton have launched tokenized Treasury products, signaling that the infrastructure connecting traditional finance and decentralized finance is maturing rapidly.

Within this landscape, two protocols occupy distinct but complementary roles. Paxos provides the regulated infrastructure and issues USDG on behalf of the Global Dollar Network, a stablecoin backed by high-quality reserves. Pendle Finance provides the marketplace where that stablecoin's yield can be traded, hedged, or locked in. Together, they represent a bridge between the predictability of traditional fixed income and the efficiency of blockchain-based markets.

Global Dollar (USDG)

Global Dollar (USDG) is a US dollar-backed stablecoin issued by Paxos Digital Singapore. Launched in November 2024, USDG maintains a 1:1 peg with the US dollar and is backed exclusively by high-quality liquid assets, primarily cash deposits and short-term US Treasury securities. Reserves are managed by leading bank partners including DBS Bank, Dreyfus, Standard Chartered Bank, and Banking Circle,  and Paxos publishes monthly reserve reports to maintain transparency.

What distinguishes USDG from many other stablecoins is the Global Dollar Network (GDN), an open network of enterprises including Kraken, Robinhood, Galaxy Digital, Anchorage Digital, OKX, and Mastercard, working to drive stablecoin adoption. The GDN distributes over 90% of the economics generated from USDG's reserve assets back to participating partners based on their contributions to liquidity and adoption, rather than retaining all reserve income within the issuing entity.

USDG is currently available on Ethereum, Solana, and Kraken's Layer 2 network Ink, and has expanded into the EU market as a MiCA-compliant stablecoin accessible to over 450 million consumers across 30 countries.

For the purposes of yield trading on Pendle, USDG's reserve composition is the critical detail: because USDG is backed by US Treasuries and cash equivalents, its reserve yield effectively reflects short-term US government rates, the closest thing to a "risk-free rate" available in traditional finance.

Pendle Finance: Liberating Yield Through Tokenization

Pendle Finance is a decentralized protocol that enables users to tokenize and trade the yield generated by crypto assets. The protocol has settled over $69.8 billion in fixed yield and has facilitated billions of dollars in total value locked (TVL), establishing itself as the largest yield trading platform in DeFi.

While Pendle initially gained traction through liquid staking tokens like stETH, stablecoin yield has become the dominant category on the platform. By Q3 2025, stablecoins accounted for over 80% of Pendle's locked liquidity, up significantly from earlier periods when staking derivatives led inflows. This shift reflects broader market demand for dollar-denominated, lower-volatility yield strategies — the kind of predictable returns that institutional allocators and conservative DeFi users gravitate toward. 

Because stablecoin yields are denominated in dollar terms, they offer a more direct comparison to traditional fixed-income products, making them particularly relevant for users seeking bond-like exposure on-chain. The integration of assets like USDG reflects this trajectory: bringing regulated, real-world yield sources into Pendle's marketplace.

At its core, Pendle addresses a problem familiar to anyone who has participated in DeFi: yield rates are variable. Staking rewards, lending rates, and stablecoin interest fluctuate based on market conditions, protocol incentives, and capital flows. Pendle gives users the tools to manage that variability by separating yield from principal and making both components independently tradeable.

How It Works: SY, PT, and YT

Pendle's yield tokenization process follows three steps:

Standardized Yield (SY): When a user deposits a yield-bearing asset, such as staked ETH (stETH) or a stablecoin like USDG, Pendle first wraps it into a Standardized Yield (SY) token. The SY standard ensures compatibility with Pendle's automated market maker (AMM), regardless of the underlying protocol or asset type generating the yield.

Principal Token (PT): The PT represents the principal value of the deposited asset. It usually trades at a discount to the underlying asset because it does not accrue yield. At maturity, PT can be redeemed for the full value of the underlying asset, meaning the discount at purchase effectively locks in a fixed rate of return. This mechanism is conceptually similar (but not the same) to a zero-coupon bond in traditional finance.

Yield Token (YT): The YT captures all the yield generated by the underlying asset from the time of purchase until the maturity date. YT value decays toward zero as maturity approaches, since there is progressively less yield left to collect. Users who expect yields to remain high or increase can purchase YT to gain leveraged exposure to that yield.

Both PT and YT are tradeable on Pendle's custom AMM, which is specifically designed for time-decaying assets. The AMM provides price discovery that accounts for approaching maturity dates and offers lower slippage compared to general-purpose AMMs.

V2 and Boros

Pendle currently offers two main product lines. Pendle V2 is the core platform for spot yield trading, where users interact with PT and YT tokens across a range of yield-bearing assets. Pendle Boros, launched on Arbitrum in early 2025, extends the protocol into leveraged margin trading of yield initially focusing on funding rates from perpetual futures markets on exchanges like Binance and Hyperliquid. Boros enables users to hedge or speculate on funding rate movements with capital efficiency, expanding Pendle's addressable market beyond on-chain yield sources.

Integration of USDG on Pendle: Bringing RWA to Scale

The integration of USDG on Pendle connects a regulated, Treasury-backed stablecoin with Pendle — an open marketplace for yield trading or hedging. This combination addresses a specific gap in DeFi: institutional investors and conservative treasury managers have had limited options for accessing fixed-income strategies on-chain.

Global Dollar Network provides the asset layer: a stablecoin whose reserves generate yield from US government securities under prudential regulatory oversight. Pendle provides the market layer: a protocol that can split that yield into tradeable components, allowing participants to express a view on interest rates or simply lock in a return.

For institutions, the appeal of Pendle's PT tokens is straightforward. Purchasing PT-USDG at a discount and holding to maturity functions much like (but not the same as) buying a short-term Treasury bill: the user knows the return in advance and is not exposed to yield variability. This mirrors the fixed-income instruments that traditional finance professionals are already accustomed to, which can lower the barrier to entry for institutional DeFi participation.

Putting It into Practice: PT and YT USDG

With the launch of the USDG pool on Pendle, users have two primary strategies available.

Strategy 1: Fixed Income with PT-USDG

Buying PT-USDG allows a user to possibly lock in a fixed rate of return. Because if PT trades at a discount to the underlying USDG, the difference between the purchase price and the redemption value at maturity represents the user's yield.

For example, if PT-USDG is trading at $0.95 and the pool matures in six months, the user would receive $1.00 worth of USDG at maturity, a fixed return on the initial investment. This approach suits users who want predictable returns without exposure to fluctuating yield rates. It is conceptually similar (but not the same) to purchasing a discounted Treasury bill and holding it to maturity.

Strategy 2: Yield Speculation with YT-USDG

Buying YT-USDG gives a user the right to collect all the variable yield generated by USDG's underlying reserves until the pool's maturity date. The trade is profitable if the total yield collected exceeds the cost of purchasing the YT.

This strategy appeals to users who believe that short-term US Treasury rates, and therefore USDG's reserve yield, will remain elevated or increase. Because YT provides exposure to yield on a larger notional amount than the cost of the token itself, it offers a form of leverage on yield movements. However, YT value decays to zero at maturity, making timing and yield expectations critical factors.

Getting Started

Users can access the USDG pool by navigating to the Markets tab on the Pendle app and searching for USDG. From there, the interface allows users to select either PT or YT and execute their chosen strategy.

The Pendle Earn interface under Pools also offers a simplified view for users who prefer a more streamlined experience.

Conclusion: The Future of On-Chain Fixed Income

The integration between Pendle and Global Dollar Network through USDG illustrates a broader trend in decentralized finance: the infrastructure for institutional-grade, on-chain fixed income is taking shape. Regulated stablecoins like USDG provide the trust layer: reserve transparency, prudential oversight, and fiat redeemability. Yield trading protocols like Pendle provide the market layer: the ability to split, price, and trade yield in a permissionless environment.

As the tokenized RWA market continues to grow and regulatory frameworks solidify across major jurisdictions, the combination of regulated digital assets and composable DeFi protocols is positioned to serve an expanding set of users, from DeFi-native traders seeking better yield management tools, to institutional treasuries exploring on-chain fixed income for the first time.

Disclaimer: This article is only for informational purposes and should not be taken as financial or any other advice. Always do your own research before investing in any cryptocurrency.

This article and the Principal Tokens (PT) and Yield Tokens (YT) referenced herein are not directed at, and are not intended for, persons located in the United States or the European Union, or any Excluded Person as defined in Pendle's Terms of Use (url: https://docs.pendle.finance/pendle-v2/TermsOfUse).