Pendle Co-Founder: 'When the Student is Ready, the Teacher Will Appear'

In early June, Vu Nguyen, dressed in gray khaki shorts and a black long-sleeved T-shirt, visited the Ninety Eight office. As the co-founder of Pendle, a DeFi protocol that gained significant attention in 2023 with a growth rate exceeding 200%, he’s been a key figure behind its success. Pendle’s token is now listed on Binance Launchpool and has received investment from Binance Labs and Spartan Group.

Vu Nguyen, who prefers to maintain a low profile, often uses an avatar of a thoughtful monkey in media appearances.

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- You studied in Singapore from the age of 15, earned a degree in computer science, and worked at a major company in Singapore specializing in tokenizing gold on the blockchain. What led you to crypto and to founding Pendle?

Vu Nguyen: When I first graduated, around 2017, I was torn between pursuing blockchain or AI. After reading the Bitcoin whitepaper and understanding the potential of this technology to revolutionize the market—especially its ability to eliminate intermediaries—I decided to pursue crypto.

During the summer of DeFi in 2021, yield farming projects surged, offering interest rates that reached tens or even hundreds of thousands of percent. While many thought this phenomenon would be short-lived, I wondered if there was a way for users to receive sustainable interest rates.

The answer lay in the traditional market's interest rate swap feature, where people receive fixed, albeit lower, interest rates.

The blockchain financial market was bound to reach a point where there would be a need to buy, sell, and exchange interest rates. With this in mind, we decided to establish Pendle to anticipate this trend.

- 2023 was an explosive year for Pendle. Can you explain the reasons behind this strong growth, and share the project’s upcoming development plans?

Vu Nguyen: I believe there are two main reasons. First, the market has matured, creating a need for people to buy and sell high interest rates. When the tide rises, so does the boat.

Second, Pendle has remained steadfast in its vision, focusing solely on product development. The completion of Pendle V2, coupled with a bit of luck, coincided with the rising "tide."

We are enhancing our content to guide users on how to use Pendle and improving the UX so users don’t have to worry about the complexity behind the scenes. Additionally, Pendle is exploring other market needs to develop more products.

Our motto is: Focusing on yourself is the best way; there’s no need to worry too much about competitors.

- But Pendle doesn’t have many competitors in the market right now, right? What do you think the future holds for yield trading, both in decentralized and centralized spaces?

Vu Nguyen: If we specifically talk about the interest rate trading market, it’s true that most of the adoption is currently on Pendle. This might be because we launched in 2021, when the market in this area was still underdeveloped.

However, as the market becomes more attractive, I expect other participants will enter. There are already some forks of Pendle on another chain.

As the market grows, it’s possible that centralized versions of Pendle will emerge. However, there’s a unique feature in the decentralized world: compatibility.

For example, the PENDLE token is a bond asset that can be utilized across various platforms in DeFi, which is not possible with centralized versions.

- You mentioned that the market for interest rate exchanges has reached maturity. What’s driving this?

Vu Nguyen: As the market grows, interest rates fluctuate more over time, increasing the demand for buying, selling, and exchanging interest rates.

Recently, interest rates have risen due to the emergence of several protocols for liquid staking, restaking, and liquid restaking. This increases yield for users, as ETH staked in one protocol can be restaked in another.

Additionally, users receive another portion of yield through airdrop programs from restaking projects. These programs incentivize interest trading because they’re highly unpredictable—no one knows how much an airdrop point or token will be worth in the future. When two parties disagree on value, they trade, increasing the demand for buying and selling interest.

Read more: Spartan Group Co-Founder: ‘In Crypto, There Is No Free Lunch’

- Liquid restaking has expanded the market for buying and selling interest, but do you think it’s likely to disappear soon like many other market trends?

Vu Nguyen: Liquid restaking will always exist because those who hold assets like ETH or stablecoins are eager to increase their token holdings by restaking their staked assets. Additionally, this technology fuels market growth as restaking tokens serve as new primitive products in DeFi.

Perhaps the more relevant question is whether restaking activities will increase or decrease over time. This segment has recently surged due to the hype generated by new projects and airdrop programs.

However, the true value of this technology will only become evident when projects start using restaking tokens to secure their infrastructure. That’s when we’ll know whether the hype around liquid restaking aligns with its real value.

- Restaking projects use airdrop programs to attract users. Do you think this is a sustainable strategy? What incentives is Pendle using to grow its user base?

Vu Nguyen: User incentive programs exist on a spectrum—doing too little or too much isn’t ideal. Without a mechanism to bootstrap strong early development, a project may struggle, but allocating 80% of the total token supply to this is also unwise. There must be a balance, and I believe that, in the long run, the market will naturally find it.

Pendle's user incentive mechanism is inspired by Curve's veCRV; we have a similar system called vePENDLE. It's very beneficial for the project when users provide liquidity to Pendle pools.

In Pendle's liquidity pool, users trade, generating transaction fees, which in turn generate revenue for the project and create a flywheel effect.

Therefore, the action Pendle most encourages is providing liquidity. The challenge lies in determining how much PENDLE should be used as an initial reward.

At first, no one knows for sure, so we choose a level we think is appropriate and adjust over time. For example, if trading activity in a pool is at level 1 but we apply a level 10 incentive mechanism, it’s unbalanced and unhealthy. The key is to adjust accordingly based on market reactions.

- Pendle is built on Ethereum, and recently, ETH ETFs were approved. How does this affect Pendle?

Vu Nguyen: The approval of ETH ETFs signifies broader recognition of ETH as an asset class in the traditional financial market. This will likely lead to more capital flowing into ETH, increasing liquidity and interest from outside the crypto space.

It will also popularize staking products that generate yield for ETH. Currently, most of Pendle's trading activity occurs in ETH pools or ETH derivatives like restaking. So, as more people seek to buy and sell ETH interest, Pendle will continue to grow.

- What are your thoughts on the future of ETH EVM? Does Pendle plan to deploy on non-EVM chains?

Vu Nguyen: In the short term, the EVM ecosystem has a vast infrastructure, tools, and product developers, making it difficult to replicate elsewhere. For now, I believe chains will continue to operate on EVM.

In the distant future, you can think of a blockchain like an empire. If you look back in history, you see that empires rise and fall. So, at some point—whether 1-2 years or 100 years from now—ETH might no longer be dominant.

As for deploying Pendle on a non-EVM chain, it's not 100% off the table. It’s possible, but the timing and approach are something the team will need to consider carefully.

However, from a broader perspective, deploying on a non-EVM chain depends largely on the future of that chain and its tech stack. If we had a crystal ball that could predict that Solana will become an "ETH killer" or grow as big as ETH EVM, then regardless of the tech stack, projects would likely deploy on Solana.

- What do you think DeFi will look like in the near and distant future?

Vu Nguyen: In the short term, we'll likely see a surge of ideas, products, and derivatives from the traditional financial market making their way into DeFi.

This is a natural progression for any financial market. For example, as interest rate trading markets like Pendle develop, we'll see the emergence of interest rate derivatives.

Secondly, because DeFi differs fundamentally from traditional financial markets, there will be unique products that exist only in DeFi. For instance, perpetual futures are exclusive to crypto because the market operates 24/7 without maturity dates.

In the long term, the underlying infrastructure of any financial system will always have foundational layers like swaps, exchanges, and money markets. These layers are highly competitive because everyone is trying to innovate in this space.

This could lead to a scenario similar to traditional markets, where two dominant players, like Android and iOS, emerge, or one company may monopolize the market, much like Google with search engines. In DeFi, Uniswap is somewhat analogous to Google right now.

The newer, higher layers will be less competitive. For example, Pendle was founded in 2021 when no one else was doing what we were doing. These layers will continue to evolve, with more sophisticated and interesting products being built on top, but it’s hard to predict who will dominate.

- As interest rate trading markets like Pendle grow, leading to the emergence of interest rate derivatives, do you think having so many layers poses risks? What challenges do derivative products currently face?

Vu Nguyen: When you stake across multiple derivative layers, each with its own risks, the final product inevitably becomes the riskiest. For example, if you use a Renzo stake receipt to restake on another blockchain, any issues with that blockchain could affect users holding Renzo ETH tokens.

However, in crypto, everything happens faster and more efficiently. Unlike traditional financial markets, crypto is closer to a true free market, where failures occur rapidly, as we saw with FTX. In traditional markets, issues can be covered up, hidden, or bailed out, leading to bigger and more catastrophic failures.

As for derivative products, they currently face two main challenges. The first is a complicated user experience (UX). Crypto users unfamiliar with traditional financial options find them difficult to understand and are less likely to use them.

The second challenge is that many derivative products target users in the traditional financial market who are transitioning to blockchain, but the market has not yet reached a point where these users need these derivatives.

- Based on your experience building Pendle, what advice would you give to Vietnamese crypto projects?

Vu Nguyen: I've noticed more and more crypto projects emerging from Vietnam, which is a good sign, especially given the country's strong developer talent.

My advice for those working on projects is simple: if you don’t know something, ask—what’s the harm? There are many people in the market who have already walked the path you’re on, and they’re often willing to offer guidance.

If you clearly understand what you need to learn, you'll naturally find the right people to ask or someone who knows someone who can help. It’s like the saying, "When the student is ready, the teacher will appear."

- What about advice for retail investors?

Vu Nguyen: Spend more time learning the basics—at least have a fundamental understanding of how things work. This will help you avoid rug pulls or projects that are all marketing with no substance. A simple example is that if you're familiar with reading project documentation, you'll quickly spot when something doesn’t look right.

Secondly, when investing, pay attention to trends and hype. Combining this awareness with knowledge of the project’s features and mechanisms will help you invest more effectively. For instance, if two projects are equally hyped, but one has a better product and team, that's where you should put your money.

Additionally, there’s a part of DeFi that Vietnamese users should explore more—financial strategies to increase yields, like yield farming, looping, and delta-neutral strategies.

Trading is profitable, but it’s even better to have both skill sets: knowing how to trade coins and manage a good portfolio, and understanding tactics to increase those coins through effective farming.

Pendle is designed for that second part. We offer a variety of tools to help you implement effective financial strategies to grow your wealth.