Pendle becomes second-largest protocol on XLayer by TVL in under a month

Pendle needed less than 30 days to become the second-largest DeFi protocol on XLayer, OKX’s EVM-compatible Layer 2 network. The yield tokenization platform has amassed $37.5 million in TVL on the chain, a figure that represents a remarkable chunk of XLayer’s total DeFi TVL of roughly $150 million.

What makes this even more striking: nearly all of that capital flowed through a single market built around USDG, the Paxos-issued stablecoin backed by USD reserves and Treasuries.

How Pendle carved out a quarter of XLayer’s DeFi

Pendle launched natively on XLayer around August 11, 2026. Within weeks, the protocol’s TVL surged by 268% over a seven-day stretch, according to DefiLlama data.

The catalyst was a carefully orchestrated combination of liquidity incentives and cross-protocol integration. On the incentive side, Pendle rolled out LP rewards designed to attract capital into its USDG yield market. On the integration side, the real accelerant was Aave V3.

Around August 31 to September 1, Aave V3 on XLayer began accepting Pendle’s PT-USDG, the principal token representing fixed-yield positions on USDG, as collateral. The loan-to-value ratio came in at 93.59%, which means depositors can borrow up to roughly 94 cents for every dollar of PT-USDG posted. Aave also attached a $150,000 incentive pool to sweeten the deal.

The result was a classic DeFi composability loop. Users could deposit into Pendle’s yield market, receive PT-USDG, post it as collateral on Aave, borrow against it, and potentially reinvest. Each step in the chain created additional demand for the underlying asset, pulling more capital into both protocols simultaneously.

USDG’s quiet dominance on XLayer

The Paxos-issued stablecoin accounts for over 92% of XLayer’s approximately $1.7 billion stablecoin market cap. That concentration means any protocol that builds compelling yield products around USDG gets a direct pipeline to most of the ecosystem’s stable capital.

The multi-chain playbook

Pendle now operates across 14 different blockchain networks, with a cumulative TVL exceeding $1.2 billion. On XLayer specifically, the strategy has been focused on stablecoins and Real World Asset-linked yield markets. The protocol works by splitting yield-bearing assets into Principal Tokens (PTs), which offer fixed returns at maturity, and Yield Tokens (YTs), which allow holders to capture variable yield.

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