SY, PT and YT

SY, your deposit as a token

SY stands for Standardized Yield. When you deposit USDC, the protocol lends it out through the Blend v2 pool and gives you SY in return. Think of SY as a receipt for your deposit that quietly grows in value: as the pool earns interest, each SY becomes redeemable for a little more USDC. Your SY balance never changes on its own. What changes is the exchange rate, the amount of USDC one SY is worth, and it only moves up, because a deposit that only lends (and never borrows) earns interest and nothing else.

The word “standardized” is doing real work. Whatever the money is earning interest in (today a Blend lending pool, later perhaps other sources), SY always presents it the same way: a token count and an exchange rate. Everything built on top only ever sees that simple picture, never the details underneath.

Holding SY is exactly the same as holding the deposit itself. It carries both parts, principal and floating interest, still bundled together.

PT, the principal

PT stands for Principal Token. In a solvent market, one PT pays one underlying unit of principal at maturity, the market’s fixed end date. Under a shortfall, redemption applies the tokenizer’s pro-rata haircut. PT pays nothing before maturity.

Economically, a solvent PT should trade below one underlying unit before maturity: pay $0.99 today, receive $1 at the end, and the known gap is the fixed return. The deployed v1 AMM has a documented share-vs-asset unit deviation, so its raw curve quote is not a perfect underlying-denominated PT price once the SY exchange rate moves above 1. The factory-built AMM corrects that boundary before longer terms launch.

In the corrected curve, PT’s underlying-denominated price converges toward its solvent redemption value as maturity gets closer.

YT, the interest

YT stands for Yield Token. It collects all the interest that the matching principal earns from now until maturity. The interest builds up continuously, and you can collect it whenever you like along the way. At maturity the stream ends and YT becomes worthless, the same way a used-up coupon is worthless.

What is YT worth before then? Whatever the market guesses the remaining interest will add up to. That guess makes YT a leveraged bet on rates: for a fraction of the money a full deposit would take, YT gives you the interest of the whole deposit. If rates run higher than the market expected, YT earns more than its price. If rates sag, YT loses value, and there is no principal underneath to cushion it.

The identity that binds them

1 SY = 1 PT + 1 YT

Splitting SY mints equal amounts of PT and YT. Recombining equal amounts gives the SY back. The split is exact because the two tokens divide the deposit’s payouts with nothing left over: everything paid before maturity belongs to YT, everything paid at maturity belongs to PT.

Three consequences worth internalizing:

• Holding PT + YT is holding SY. Splitting on its own changes nothing about what you own. It only makes the two halves sellable separately.
• The prices police each other. If PT plus YT ever costs more or less than SY, anyone can split or recombine for an instant profit, and that very trade pulls the gap shut.
• Every trade has a plain-English reading. Selling your YT means trading floating interest for a fixed rate. Selling your PT means doubling down on floating. Buying YT with fresh money is a pure bet that rates beat expectations.