TL;DR:
- What we implemented: A Dynamic PT Oracle that delivers real-time, market-aware pricing for Pendle Principal Tokens using multi-venue data and time-value interpolation.
- Why it mattered: PTs make up most of Pendle’s $6B yield markets, but existing oracles had their limits in pricing them accurately or securely at scale.
- What it delivered: Safer leverage, fewer liquidation risks, stronger manipulation resistance, and smoother pricing for PT-backed strategies.
- Why builders should care: RedStone introduces a proven, scalable pricing foundation for complex structured assets, enabling new lending markets, collateral types, and yield products to launch with confidence from day one.
Today is an important step forward for DeFi’s fixed-income markets. RedStone is introducing the Dynamic PT Oracle, a pricing system designed for Pendle’s Principal Tokens, which now comprise the majority of the protocol’s $6 billion TVL. PTs are already used in major lending markets, such as Morpho, Aave, and now Euler; yet their growth has been constrained by pricing models that were never designed for assets whose value changes with every block.
Dynamic PT Oracle solves that problem. It tracks PT prices using real market data across Pendle’s venues, while also modeling the time-value component that pulls every PT toward its redemption price. The result is pricing that reacts to market movements but remains stable when liquidity is scarce. That means safer leverage, fairer liquidations, and a real path for PTs to scale as collateral.
The first deployment is live on Euler in collaboration with Objective Labs, and more integrations are coming next. With the right pricing foundation finally in place, PT-powered lending can grow from billions to tens of billions without adding unnecessary risk to the system.
Introducing Real-Time Pricing Infrastructure For Pendle’s PTs
Developed in collaboration with Objective Labs, the risk-intelligence and growth partner of Euler, RedStone Dynamic PT Oracle finally delivers the pricing infrastructure that Pendle’s PTs have been missing. It provides the most precise, manipulation-resistant, and time-aware valuation framework for PTs available today, ensuring pricing reflects actual market conditions.
“DeFi has been building the plumbing for yield markets for years, but Principal Tokens have never had a solid pricing system designed for the scale they’re reaching. RedStone’s Dynamic PT Oracle turns PTs into dependable, composable building blocks, giving markets the infrastructure they need to scale confidently and safely into the tens of billions.”
- Marcin Kaźmierczak, Co-Founder of RedStone.
The result is a foundational upgrade: PTs are now ready for deep liquidity, safer leverage, and broader adoption.
Time for Pendle’s $6B Yield Markets to Reach their Full Potential
Pendle’s Principal Tokens represent the fixed-value portion of yield-bearing assets, making them ideal collateral for lending, looping strategies, and a new generation of fixed-income products.
With predictable redemption value and yields that can reach around 22% APY on platforms like Morpho, PTs are rapidly becoming the backbone of DeFi’s yield economy.
The Challenge
Principal Tokens have become the dominant collateral in Pendle’s rapidly expanding markets, yet the fundamental pricing infrastructure behind them has not kept pace. PT pricing depends on multiple liquidity venues, each with different depths, trading behaviors, and volatility characteristics.
Existing oracles were built for simpler assets, not for tokens with a constantly shifting time-value component and fragmented market structure. As a result, protocols relying on PTs have been exposed to:
- Inaccurate pricing during volatility
- Liquidity-driven distortions between venues
- Increased manipulation risk
- Potential bad debt and unfair liquidations
Pendle has engineered the most advanced fixed yield markets in crypto. Still, PTs could not scale safely into lending, leveraged strategies, or institutional markets without more precise and time-aware data.
The Microstructure of Pendle Markets
To understand why pricing PTs is so challenging, it is helpful to examine them through a traditional finance lens and analyze the unique market mechanics that shape their value.
PTs Function as Zero-Coupon Bonds
At their core, PTs are the DeFi equivalent of zero-coupon bonds. Instead of paying periodic yield, they trade at a discount and are redeemed for a fixed amount of the underlying asset at maturity. The discount reflects the market’s view of the total yield that will accrue over the remaining term. A larger discount suggests higher expected APY, while a smaller discount implies lower yields. This structure creates predictable price convergence to the redemption value of 1 at maturity.
Price Dynamics: A Constant Pull Toward Redemption
Unlike most crypto assets, the price of a PT evolves along a known trajectory. It must converge to 1. This creates three defining behaviors:
Positive Drift
As time passes, a PT’s value increases simply because it is closer to maturity. The effect is similar to the pull-to-par in bonds or the predictable time-value behaviors seen in options markets. Price appreciation is mathematically embedded into the instrument.
Volatility Compression
Volatility declines as maturity approaches. This is driven by three main forces:
- Shorter time for the underlying yield to deviate from expectations
- Pendle AMM logic that increasingly concentrates liquidity around the expected redemption value
- Growing participation from conservative capital as risk declines
PTs transform from speculative yield positions into stable fixed-income products as they near maturity.
The Resulting Oracle Problem
These microstructural factors make PTs fundamentally different from spot assets. Pricing needs to reflect:
- Time decay effects
- Venue-specific liquidity distribution
- Changing volatility profiles
- Convergence mechanics enforced by AMMs
Traditional oracles simply cannot capture these dynamics. A static price feed or a single-source benchmark leads to structural mispricing. And when PTs are used as collateral, mispricing is not just inefficient. It creates material losses across lending and structured products.
To allow PT-backed markets to grow safely into the tens of billions, PTs require an oracle that understands time, liquidity, and market microstructure. That is the problem the Dynamic PT Oracle solves.
The Solution
The RedStone Dynamic PT Oracle introduces a new layer of pricing intelligence for PT markets. It combines real-time, multi-venue market data with Pendle’s valuation logic to produce pricing that continuously reflects both trading activity and the time value of money. The result is accurate, resilient, and capital-efficient pricing for PT-backed lending, looping, and structured yield strategies.
With this design, PTs finally gain the reliable valuation mechanism required to serve as primary collateral in DeFi’s largest and most complex yield systems.
Architectural Overview
The Dynamic PT Oracle is built as a hybrid pricing system consisting of two coordinated components:
- External TWAP Engine (off-chain)
- Aggregates trades across all PT liquidity venues
- Produces a long-window, manipulation-resistant price benchmark
- Handles data validation and anomaly detection before on-chain publication
- On-chain Exponential Pricing Module
- Continuously interpolates PT prices between updates
- Adjusts price based on block-by-block changes in time to maturity
- Enforces the natural convergence of PT prices toward their redemption value
RedStone sits in the execution environment at the data layer within the stack. It transforms diverse market trades and PT valuation mechanics into a single global settlement price for lending protocols, such as Euler.
This architecture supports high-frequency updates while keeping gas costs minimal and oracle logic transparent.
How Pricing is Generated
The pricing process follows a simple but powerful flow:
Step 1. Live Market Data Collection
The off-chain engine simultaneously monitors liquidity in the Pendle AMM and Pendle order book. This is essential when trades move outside the AMM tick range, where a single venue no longer represents the true price.
Step 2. External TWAP Calculation
A long-window time-weighted average price is computed, typically 1 to 4 hours, to ensure that short-term manipulation attempts become prohibitively costly and ineffective.
Step 3. On-chain Delivery of a Trusted Price Anchor
The latest E-TWAP is pushed on-chain at regular intervals. At the moment of update, the oracle solves for the implied discount rate baked into the anchor price.
Step 4. Smooth Exponential Price Interpolation
Between update events, the oracle does not freeze the price. Instead, it applies the formula:
PT Price = 1 / e^(discount_rate * time_to_maturity)
Time to maturity decreases with every block, so the price follows a mathematically correct upward trajectory, exactly matching the natural pull to par.
This creates a secure and market-aware pricing curve that is continuously in motion rather than reacting in abrupt steps.
Why a Dynamic Oracle Was Necessary
Static oracles cannot capture shifts in speculative yields such as points and incentive rewards. Fixed parameters lead to pricing that becomes stale and inaccurate as soon as yield expectations change.
TWAP-only oracles solve the adaptability issue but introduce a security trade-off:
- Short windows are vulnerable to manipulation
- Long windows result in a dangerous price lag
The Dynamic PT Oracle eliminates the trade-off by:
- Using the E-TWAP as a trusted anchor
- Applying time-value interpolation to maintain responsiveness
- Enforcing convergence to 1 at maturity, even during volatility conditions
The design respects financial reality and real market mechanics at all times.
Built for Scalability and High Stress Conditions
The system is engineered to power multiple PT markets simultaneously, regardless of their maturities, and to maintain reliable performance even when strategies require high-frequency adjustments to leverage. It is designed to remain accurate and secure during rapid re-pricing events driven by changes in speculative yields or shifting incentives. Most importantly, it achieves institutional-grade robustness while maintaining low gas overhead, as the pricing curve is calculated through lightweight mathematical logic with only periodic on-chain updates.
The Impact
RedStone’s Dynamic PT Oracle enables Pendle markets to operate faster, safer, and more scalably. Pricing now updates smoothly and consistently, which reduces the likelihood of liquidation shocks and improves the overall trading experience.
Multi-venue data sourcing and long-window pricing anchors protect against manipulation and prevent bad debt, enabling lenders and borrowers to operate with greater confidence.
The solution is also highly cost-efficient, since complex logic runs off-chain and only lightweight updates are pushed on-chain.
As a result, more PTs can be supported as collateral, more users can participate in leveraged yield strategies, and total market volume can grow without added risk.
The New Standard
Principal Tokens have already reshaped how DeFi prices and distributes yield. The missing piece has been an oracle that understands how these instruments behave as they mature and across fragmented liquidity venues.
With RedStone Dynamic PT Oracle, that foundation is finally in place.
