Pendle Sparks Debate With veTokenomics Phase-Out Plan

Pendle’s plan to move away from vote-escrow (ve) tokenomics is sparking debate within the decentralized finance (DeFi) community, with some builders calling it a needed upgrade and others warning it could hurt long-term alignment.

Pendle, which boasts a total value locked (TVL) of over $3.5 billion, said it will replace vePENDLE with sPENDLE, a new token that removes multi-year locks and instead uses a 14-day withdrawal period. The protocol also said it will switch from manual voting to an algorithm-based emissions model, which aims to cut overall emissions by about 30%.

The change is a major shift for Pendle, and for DeFi more broadly, since vote-escrow models are widely used to manage governance and incentives. Pendle said the new setup is meant to be easier to use and more flexible for token holders.

Michael Egorov, founder of Curve, which pioneered the model, criticized the move in a post on X, saying ve-tokenomics is still one of the best ways to align incentives over time. “Undoing ve-tokenomics is a mistake,” Egorov wrote, calling it “a very bad move” for Pendle in the long run.

But some DeFi builders said Pendle’s move is a practical upgrade. “I think it reflects how DeFi is maturing,” Sid Powell, co-founder and CEO of Maple, told The Defiant. “Vote-escrow models were an important experiment, but they introduced real friction around liquidity, complexity, and participation.”

In its announcement, Pendle said vePENDLE had problems that limited participation. The team said only 20% of the token supply was locked in vePENDLE, and that the weekly vote system was too complex for many users.

Pendle added that the new system will use protocol revenue for PENDLE buybacks, distributed to eligible sPENDLE holders. Under the new model, sPENDLE holders are only considered “inactive” if they don’t vote during a period when a Pendle governance proposal is available.

Powell said Pendle’s decision aligns with how most DeFi users actually behave. “When governance becomes too rigid, it can discourage engagement rather than strengthen it,” he said, adding that Pendle’s update “prioritizes flexibility while still rewarding long-term holders.”

He added that if more protocols move away from long lockups, it could free up liquidity and make DeFi easier to use. “Long lockups often concentrate influence and trap liquidity,” he said. “The strongest protocols going forward will be the ones that reward commitment without forcing immobility, and that treat governance as a tool for coordination rather than a barrier to entry.”

PENDLE, the protocol’s native token, was trading around $2.11 on Wednesday, up about 11% over the past 24 hours, according to CoinGecko.