Pendle, a Decentralized Finance yield platform, is overhauling its governance and reward architecture by replacing vePENDLE with a new liquid staking token named sPENDLE. The move is pitched as a necessary step to boost adoption and broaden participation across the protocol’s user base, addressing long-standing friction points in the previous design.

In a Monday post, Pendle announced that sPENDLE will become the protocol’s primary governance token as vePENDLE is phased out. The project frames sPENDLE as a liquid staking instrument that combines fee accrual with governance participation, while integrating a 14-day withdrawal window intended to balance liquidity with stability for stakers and voters alike.

Staking with sPENDLE will go live on Tuesday, with vePENDLE locks scheduled to pause on Jan. 29. A snapshot of user vePENDLE balances will then be taken to facilitate the switchover, after which the new governance structure under sPENDLE will be rolled out in full. Pendle has framed the upgrade as a natural evolution in tokenomics designed to address prior limitations and unlock new opportunities for PENDLE holders and the broader ecosystem.

Data from DeFi Llama places Pendle among the larger DeFi protocols by total value locked, ranking as the 13th-largest platform with nearly $3.5 billion in TVL. The statistic underscores Pendle’s entrenched position in the DeFi landscape and sets the stage for how a redesigned governance framework could influence usage patterns and liquidity flows across its markets.

Better tokenomics a possible boon for Pendle users

Pendle notes that even with strong platform growth over the years, vePENDLE created notable barriers to broader adoption. The long lock-up periods meant many users could not retrieve funds until the specified times elapsed, which dampened liquidity and limited dynamic participation in governance. While the vePENDLE model intended to foster long-term loyalty, it did not fully realize that objective.

The new design with sPENDLE addresses this by allowing withdrawal following a 14-day unwind period, or immediate withdrawal for a 5% fee. By introducing liquidity into the governance token, Pendle aims to lower the friction that previously deterred casual users from engaging in voting and reward processes. The move also responds to criticisms that the old token was not interoperable enough; vePENDLE was non-transferable, restricting its utility across other DeFi platforms.

To enhance cross-platform utility, sPENDLE will be integrated with a range of DeFi ecosystems, enabling uses such as restaking and broader participation in multi-protocol strategies. This approach is intended to widen the token’s applicability beyond Pendle’s own vaults and yield strategies, aligning governance incentives with real-world DeFi activity. For broader context, restaking themes have increasingly featured in DeFi discussions as platforms seek to lock in long-term security while providing liquidity to users elsewhere in the ecosystem.

Another key shift is governance complexity. The old system required active weekly engagement to earn governance rewards, a structure Pendle described as both intricate and exclusive. In practice, rewards tended to concentrate among vePENDLE holders who possessed the know-how to navigate the voting mechanics and market dynamics, leaving a large swath of users on the outside. Under the new framework, governance rewards hinge on participation in “critical” Pendle Protocol Proposals (PPP). If there is no PPP to vote on, holders remain eligible automatically. When PPPs do exist, supporters who vote are eligible for rewards, but the emphasis is on meaningful participation rather than constant, low-value engagement.

In addition to simplification, Pendle plans to implement a buyback mechanism: up to 80% of protocol revenue could be allocated to repurchasing PENDLE tokens to be distributed as governance rewards. This approach seeks to rebalance incentives, ensuring that governance remains accessible while maintaining a clean revenue-backed path for distributing value to stakeholders.

Overall, the transition signals a broader aspiration within Pendle: to balance governance rigor with usability, expanding participation without sacrificing the integrity of the protocol’s incentives. The upgrade is designed to unlock cross-chain and cross-platform potential for the Pendle ecosystem, reduce barriers to entry for new users, and position the protocol to capture a larger share of DeFi’s evolving governance landscape. As with any major tokenomics shift, precise outcomes will unfold over the coming months as users convert vePENDLE balances, participate in PPP voting, and engage with sPENDLE-enabled restaking and liquidity opportunities.