What is Spectra?
Spectra is a permissionless yield tokenization protocol. It lets users split yield-bearing assets into Principal Tokens and Yield Tokens, enabling fixed-rate strategies, yield speculation, and sophisticated hedging.
How it works
When you deposit a yield-bearing asset into Spectra, you receive two tokens: a Principal Token (PT) and a Yield Token (YT). The PT represents your claim to the underlying principal at maturity. The YT represents your claim to all yield generated until maturity.
This separation creates new possibilities. Buying only PTs gives you a fixed-rate position — you know exactly what you'll receive at maturity. Buying only YTs lets you speculate on future yield without tying up full principal.
Anyone can create new Spectra markets for any yield-bearing asset. This permissionless design means new opportunities emerge without gatekeepers.
Fixed rates from variable yields
PTs trade at a discount to their maturity value. This discount determines the implied fixed rate. If a PT for 1 ETH trades at 0.95 ETH with one year to maturity, you're locking in roughly 5.3% APY.
This mechanism converts variable DeFi yields into fixed-rate positions. Useful for users who want predictable returns or need to match liabilities with known future payments.
Both protocols tokenize yield, but Spectra is fully permissionless — anyone can create markets for any yield-bearing asset. Pendle's market creation is more curated. Spectra also focuses on integration with other DeFi primitives.
Yield speculation
YTs are priced based on expected future yield. If you believe yields will rise above market expectations, buying YTs can be profitable. If yields fall below expectations, YT holders receive less than they paid.
YTs have leverage characteristics — small capital controls exposure to yield on larger notional amounts. This amplifies both gains and losses relative to yield movements.
Risks to understand
Smart contract risk exists with any DeFi protocol. Spectra involves multiple contracts interacting, increasing surface area for potential issues.
Liquidity risk can affect both PTs and YTs. Less liquid markets have wider spreads and more price impact, especially for larger positions.
Underlying yield risk means YTs can become worthless if the underlying asset stops generating yield. PT holders get their principal back, but YT holders have nothing to claim.