Three key changes in the era of sPENDLE and the deprecation of vePENDLE by Pendle

Pendle officially announces a major upgrade to its governance token system, replacing the existing vePENDLE with a brand-new liquid staking token sPENDLE. This is not only an adjustment to the token economic model but also a strategic shift reflecting the development stage of this $3.5 billion TVL DeFi protocol. The official core reason given is straightforward: the old design has become a bottleneck for development, limiting broader user adoption.

Why is vePENDLE being replaced

Three major pain points of the old mechanism

vePENDLE adopts the traditional vote-escrowed model, originally designed to encourage long-term commitment. However, in practice, it has revealed obvious limitations:

• Poor liquidity: Tokens are fully non-transferable during lock-up, freezing user funds and preventing use in other DeFi protocols or participation in re-staking scenarios
• High participation barriers: Long lock-up periods and complex governance processes discourage ordinary users, leading to governance power concentration among frequent participants
• Lack of interoperability: Cannot be integrated with other mainstream DeFi protocols like Aave, Curve, limiting token utility and ecosystem value

According to Pendle’s official statement, this mechanism is “no longer suitable” for the protocol’s current development stage. In other words, once the protocol scales from an experimental phase to mature operation, a more flexible and open governance design is needed.

How sPENDLE changes the game

Evolution across three dimensions

The newly launched sPENDLE differs fundamentally in mechanism design:

Liquidity dimension: Supports staking and governance participation, with a default unbonding period of only 14 days, and users can also pay a 5% fee for instant withdrawal. Compared to vePENDLE’s permanent lock-up, this greatly enhances fund flexibility.

Interoperability dimension: Pendle’s official indicates that sPENDLE plans to integrate with multiple DeFi platforms like Aave and Curve, making it a composable governance asset. This means sPENDLE holders’ tokens are not only governance credentials but can also generate additional yields across protocols.

Incentive mechanism dimension: Simplifies governance participation. Users no longer need to vote weekly; instead, they can express their stance in key PPPs (Pendle Protocol Proposals) to continuously earn governance rewards. This design avoids excessive concentration of governance rewards among high-frequency participants.

Transition timeline

According to official announcements:

• sPENDLE staking will go live this Tuesday (January 21)
• Additional locking for vePENDLE will be paused on January 29
• The system will snapshot existing vePENDLE balances for a smooth transition

Why is this upgrade so critical

Protocol financial performance supports the upgrade

This upgrade is driven by Pendle’s rapid growth. Data shows Pendle generated over $37 million in protocol revenue in 2025. Under the new structure, Pendle plans to allocate up to 80% of protocol revenue for PENDLE buybacks, with the repurchased tokens distributed as governance rewards to sPENDLE holders.

What does this mean? User governance participation is no longer just virtual voting rights but tangible buyback tokens. This “using protocol revenue to reward governance” model is increasingly mainstream in DeFi.

Reflection of ecosystem status

Pendle’s current total value locked approaches $3.5 billion, ranking among the top DeFi protocols globally. At this scale, a more mature governance mechanism is needed to handle complex ecosystem interactions. According to related news, Pendle has already integrated with projects like Plasma and Lista DAO, and the interoperability design of sPENDLE aims to strengthen these ecosystem connections.

Potential future impacts

Direct significance for users

The launch of sPENDLE will attract two types of new users: one is small to medium users discouraged by vePENDLE’s lock-up periods, now able to participate in governance and earn rewards; the other is DeFi strategists interested in interoperability, who can combine sPENDLE across multiple protocols.

Long-term significance for the protocol ecosystem

This upgrade reflects Pendle’s evolution from a “single protocol” to an “ecosystem hub.” By enhancing sPENDLE’s liquidity and interoperability, Pendle is building a more open and inclusive governance system, which should help attract more projects to build within its ecosystem.

Summary

Pendle replacing vePENDLE with sPENDLE appears to be a token upgrade, but fundamentally it is a rethinking of DeFi governance concepts. Moving from “long-term locking” to “flexible liquidity,” from “isolated governance” to “ecosystem interoperability,” this shift mirrors the maturity of the DeFi industry—successful protocols no longer rely on passive user commitments but instead gain participation through better mechanisms and tangible incentives.

For Pendle holders, key points are to observe how sPENDLE performs after launch: whether liquidity truly improves, how integration with other protocols progresses, and whether the new incentive models can genuinely lower participation barriers. These factors will determine if this upgrade can truly propel Pendle into the next growth phase.