In this market cycle, the DeFi market has long been in a marginal position. Established blue-chip DeFi tokens can still maintain high market values but struggle with price growth, while many new DeFi projects lack innovation and find it difficult to drive narrative development, making it hard to find Alpha investment opportunities in the DeFi market.
However, with Pencils Protocol entering the market and launching a series of innovative products linked to potential sectors like LRT and RWA, it is becoming a key factor in revitalizing the DeFi market.
It is reported that just two months after its launch, the single-chain TVL on Scroll has surged to $350 million, making it the highest TVL project on Scroll, while attracting over 500,000 users to participate in the protocol.
As the latest barometer in the DeFi space, Pencils Protocol represents a new trend, and the DAPP token based on it is expected to become an Alpha asset worth paying attention to in this market cycle. As the DAPP token gradually goes live on platforms like Gate and Bybit and opens for trading, it will also become a new opportunity readily available to investors.
Pencils Protocol Project Fundamentals
Pencils Protocol is a comprehensive DeFi platform within the Scroll ecosystem, encompassing a series of sectors such as Farming, Vaults, Auction, and Shop. These sectors can deeply link with different tracks and expand the narrative direction for Pencils Protocol.
Farming is a pre-market incentive yield market with leveraged characteristics, primarily allowing users to stake assets and providing multiple different points of incentives. This sector is downstream of the LRT track and is deeply bound to various LRT projects. By supporting staking incentives for various LRT assets, it can quickly attract potential holders of these projects and assets, further converting them into users of Pencils Protocol.
The Vaults sector is a native yield market centered around a liquidity mining model, but it further incorporates leverage factors into the existing LP model, allowing users to obtain LP yields multiple times through borrowing and leverage. Meanwhile, the Vaults product is also connected to Mind Network, a platform based on blockchain and artificial intelligence technology, focusing on data privacy protection and the development of decentralized applications (DApps).
When users participate in the Vaults product, their assets will be further staked in Mind Network, enhancing the security effects of these projects by increasing the scale of PoS staking for AI, FHE, and other projects. Users can also participate in voting to contribute to the ecosystem's development, and both stakers and Pencils Protocol will receive contribution rewards. This not only represents multiple earnings for users participating in the Vaults product but also allows Pencils Protocol to gain multiple platform revenues. In other words, the more users Pencils Protocol's Vaults have, the higher the platform's income.
In addition to the aforementioned sectors, the Auction sector includes auctions for rare assets and also features a Launchpad sector, which is not only an important launchpad for quality projects in the Scroll ecosystem but is also expected to become a significant launchpad for the LRT market and DeFi track. The Shop serves as an important channel for Pencils Protocol to establish links with markets like RWA, where the platform will launch a series of virtual or physical products, including some RWA assets. This not only expands the business pipeline for the platform and captures Web2 users but also serves as one of the important sources of income for the ecosystem.
Recently, Pencils Protocol secured two rounds of financing due to its broad narrative, including investments from top capital such as OKX Ventures, Animoca Brands, Galxe, Gate.io Labs, Aquarius, Presto, and Agarwood Capital, as well as individual contributions from several notable figures including Scroll co-founder Sandy Peng, V Fund partner Ashely Xiong, Inception Capital co-founder David Gan, Cyberconnect founder Ryan Li, and Arcanum Capital co-founder Lucia Zhang, totaling $2.5 million at a valuation of $25 million.
In September, Pencils Protocol received a new round of strategic financing from well-known investment institutions such as DePIN X, Taisu Ventures, Black GM Capital, and Bing Ventures at a valuation of $80 million. Currently, Pencils Protocol's valuation has surpassed $200 million.
Imagination of the DAPP Token
Market capitalization reflects a company's long-term development potential; the higher the potential for long-term development, the higher the market capitalization reflected. This is also true from the perspective of the crypto market.
Pencils Protocol represents a new trend, no longer limited to a single DeFi functional paradigm but building a comprehensive platform that integrates multiple track functions while playing important roles. From a functional perspective, it serves as a liquidity hub, a resource pool that promotes user retention and growth in the LRT market, an important launchpad for quality projects entering the market, and a key for users to capture yields in a one-stop manner, representing a value oasis.
Thus, the long-term valuation of Pencils Protocol will be equivalent to the sum of the valuations of leading projects in these tracks. Especially in the context of the Federal Reserve's interest rate cuts leading to a global liquidity surge, a massive bull market may be on the horizon, placing Pencils Protocol on the brink of an explosion.
Therefore, from a valuation perspective, the imagination and potential of the DAPP token far exceed that of all DeFi concept coins currently on the market.
From the initial valuation, during the listing phase after the IDO, the circulating market value of the DAPP token was only $84 million. The circulating DAPP tokens will continue to decrease due to ongoing staking and burning, leading to an increasing value per individual token. On the other hand, compared to most DeFi tokens currently valued in the billions, the DAPP token still has more than a hundred times growth potential. The DAPP token itself possesses significant potential to become an Alpha asset in this market cycle.
It is worth mentioning that the DAPP token will be listed on Gate and Bybit platforms on September 27, which means that those who purchase early will be able to profit sooner, as this is the lowest cost for holding DAPP tokens aside from the IDO.