Written by: Bootly
Recently, the "long-distance runner" in the DeFi field, Pendle, officially announced a significant update: the abolition of its long-implemented veTokenomics (voting escrow economic model) in favor of a more liquid sPENDLE.
This news quickly sparked heated discussions in the community. Curve founder Michael Egorov immediately questioned it, bluntly stating that "cancelling the ve model is a mistake." However, on the other hand, the market voted with real money—PENDLE's price rose by 11%.
As the absolute leader in the interest derivatives track, Pendle's "self-destructive" reform not only concerns the growth of its $3.5 billion TVL but also resembles a public trial of the core narrative of DeFi over the past three years: the model of exchanging "lock-up periods" for "loyalty" seems to have lost its effectiveness.
The Shackles of Locking: 20% "Minority" Governance
Despite significant revenue growth for Pendle over the past two years, the performance of its core governance asset, vePENDLE, has never fully synchronized with the explosive growth of the protocol.
The harsher truth is:
The "wealth gap" in rewards: The complex weekly manual voting system is extremely unfriendly to ordinary users, leading to rewards being concentrated in the hands of a few professional players.
The false prosperity of efficiency: Although Pendle's annualized cost-effectiveness ratio performs excellently—annualized costs of about $13.99 million and annualized revenue of about $13.83 million—when broken down to specific liquidity pools, it is found that over 60% of the pools are actually operating at a loss, with the protocol relying on the profits of a few core high-quality pools (like Ethena) to subsidize inefficient pools.
This "locking equals disconnection" non-transferability completely isolates holders from DeFi's most powerful feature: composability.
Algorithm and Buyback: Switching from "Manual" to "Autopilot"
Pendle's new solution, sPENDLE, essentially transforms the protocol from a "power game" to an "efficiency tool."
The most significant change is the release of liquidity: users no longer need to face years of lock-up, replaced by a 14-day exit period. If funds are urgently needed, a 5% fee allows for instant redemption. This "liquidization" approach grants the currently staked funds of about $127 million (accounting for 35.51% of market value) greater flexibility.
At the governance level, Pendle introduced two major "trump cards":
Algorithm-driven emissions: The reward distribution, once determined by manual voting, is now handled by algorithms. This model will automatically allocate based on the true contribution of the pools, expected to reduce overall emissions by about 30%.
Substantial buybacks: Up to 80% of protocol revenue will be directly used to buy back PENDLE and distribute it to stakers. Currently, the protocol's annualized income for holders has reached $11.06 million, with total fees exceeding $64.56 million; the buyback mechanism will make these earnings more directly impactful on token value.
Reform inevitably comes with a restructuring of interests. To appease those "old contributors" who have locked up for years, Pendle set a snapshot date of January 29.
According to the plan, existing vePENDLE holders can receive up to 4 times the sPENDLE bonus during the conversion. This bonus will linearly decay based on the remaining lock-up period, ensuring that those who truly support the protocol retain the strongest voice and profit rights in the early stages of the transition. This design cleverly alleviates old users' concerns about the "collapse of long-term consistency."
This change instantly made PENDLE feel "alive." The market clearly prefers liquidity assets that can be withdrawn at any time while still sharing in buyback dividends, rather than a distant "long-term meal ticket."
3. Controversy: Consistency or Liquidity?
However, many industry insiders are not optimistic about this approach.
The "opposition," Curve founder Michael Egorov:
"Revoking the voting escrow token economic model is a mistake. Designing it as 'degradable' from the start was also a mistake. In the long run, Pendle's actions are very poor—but more critically, when such operations become 'possible' in the mechanism, their occurrence becomes inevitable."
Sid Powell, co-founder and CEO of Maple, believes that long-term lock-up essentially "forces capital to stay," which often obscures the true risks of the protocol and leads to excessive concentration of power. Pendle's approach is "no longer forcing loyalty through lock-up, but attracting retention through yields."
The essence of this debate is: for a mature DeFi protocol, should its moat be "the scale of lock-up" or "the attractiveness of the product itself"?
In fact, Pendle is not an isolated case.
In the alternating bull and bear markets of DeFi over the past few years, a number of established protocols have already realized that loyalty gained through "lock-up periods" is essentially over-drafting the protocol's future.
PancakeSwap is one of the pioneers of this transformation. As early as the end of 2023, it began reforming the old system that required users to lock CAKE for up to four years. By introducing a flexible revenue share mechanism with veCAKE, PancakeSwap directly distributes 5% of protocol fees to stakers, no longer mandating years of immobility. By the end of 2025, despite facing multi-chain competition, its TVL has steadily rebounded and maintained around $2.3 billion, successfully attracting a large number of retail investors unwilling to be locked in for the long term.
Balancer's trajectory is also highly instructive; its veBAL model has long faced difficulties, with nearly 80% of tokens in a "non-active governance state," meaning the vast majority of holders only lock up without voting. In 2025, the team completely adjusted the incentive structure in the v3 upgrade: introducing short lock-up options and automated fee adjustments, transforming governance from a "task" into a tool for flexible participation. Within six months, the protocol's governance participation rate increased by about 40%.
A more radical experiment comes from the stablecoin protocol Ethena. Last September, it launched a "fee switch," directly distributing protocol revenue to holders of the liquidity token sENA, completely bypassing the complex voting escrow model.
These cases point to a new consensus: DeFi protocols are shifting from "forcing user binding" to "retaining users with tangible benefits." Locking was once a shortcut to maintaining data stability, but it also led the ecosystem into false prosperity. Now, protocols are more inclined to achieve real activity by lowering participation thresholds and improving capital efficiency.
The effectiveness of Pendle's transformation will be tested after the official end of vePENDLE locking on January 29. But regardless of the outcome, it has sent a clear signal to the industry: in the future DeFi world, excellent products should not make users "staking prisoners."
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