Background

External Incentive Campaigns (EICs) let protocols add extra rewards to their Pendle markets directly through Pendle's portal.

Campaigns can use a protocol's preferred incentive token and can target LP, YT, or SY positions.

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EICs now also feed into Pendle's co-incentive system. Co-incentives are matching PENDLE rewards from Pendle, added on top of the protocol-funded campaign and will be used to incentivise limit orders on pools.

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How Pendle Incentives Work Now

Pendle uses an Algorithmic Incentive Model: an automated reward model that allocates PENDLE emissions based on market performance instead of manual voting.

The model has four reward streams:

1. Performance incentives: PENDLE emissions based on liquidity and swap fees.
2. Limit Order incentives: PENDLE emissions that support notional orderbook depth and recent volume.
3. Co-incentives: PENDLE matching rewards for protocol-funded EICs.
4. Discretionary incentives: strategic allocations for high-potential pools.

Pendle's public update highlighted the capital efficiency of Limit Order incentives: around 6.5k PENDLE/week supports roughly $400M notional orderbook depth, or about $1 annualized incentive driving ~$800 of liquidity.

Co-Incentive Matching

When a protocol creates an EIC, Pendle may match that campaign with additional PENDLE rewards, up to the weekly co-incentive budget.

How matching is calculated:

• Protocols submit incentives weekly through EICs.
• Co-incentives are updated weekly on Wednesdays.
• Token values are calculated using 7-day moving average prices for both the contributed token and PENDLE.
• The weekly co-incentive budget is capped at 9,000 PENDLE/week.