Pencils Protocol is a comprehensive yield platform within the Scroll ecosystem, which has already surpassed $350 million in TVL on the Scroll single chain alone. In just a few months since its launch, it has accumulated over 500,000 active community users. At this stage, Pencils Protocol has completed the TGE of its DAPP token, having conducted IDOs on platforms such as Tokensoft, Bounce, and Coresky, and subsequently launched on leading platforms like Gate and Bybit. With a series of significant advancements in the ecosystem, it also signifies the full launch of the Pencils Protocol ecosystem.
The DAPP token is the ecological token of Pencils Protocol, serving not only as a governance asset but also as an important functional and equity asset within the ecosystem. As the DAPP token enters the secondary market, investors and community users have high expectations for this asset. So why can we be optimistic about DAPP?
Pencils Protocol spans multiple narrative tracks, with high valuations bringing expectations for DAPP.
Pencils Protocol is expanding its connections across multiple tracks, including Farming, Vaults, and Auction, playing the role of a liquidity center and PoS security layer. The Vaults product, through innovative design, allows users to achieve maximized returns with minimal thresholds via leveraged yield aggregation and automated smart contracts. Additionally, it collaborates with Mind Protocol to capture revenue in cutting-edge fields such as AI and FHE. Mind Protocol aims to provide security for AI and FHE networks (like Zama, Fhenix, Singularity, and Bittensor) through re-staking solutions. As an important partner, Pencils Protocol utilizes a vast LRT asset staking system to assist the Mind Network ecosystem in validation, enhancing the security of AI and PoS ecosystems while providing higher returns for participants.
In the previous two market cycles, Yearn Finance and Alpaca Finance, as yield aggregation platforms, saw the former reach a market cap of $3-5 billion and the latter peak at around $1 billion. Before the launch of Pencils Protocol's Vaults product, there had been no similar pioneering yield aggregation platform. Vaults deeply integrates with the LRT market, pre-market incentive market, and PoS market, offering users a variety of yield tools.
In the long term, Vaults will focus on user asset management, integrating more quality assets and launching various on-chain yield strategies to further broaden yield channels. The valuation of the Vaults product alone is highly promising.
Considering the fundamentals and business aspects of Pencils Protocol, its ecosystem has a potential valuation of over $10 billion, and the conservative market cap estimate for the $DAPP token is expected to exceed $5 billion. Currently, with an initial market cap of only $86 million, the valuation of the Pencils Protocol ecosystem is severely underestimated, with potential increases reaching a hundredfold.
There is a strong demand both inside and outside the ecosystem.
The $DAPP token itself has many functions; beyond governance, it can directly relate to users' rights and earnings. For example, in the Vaults section, users wishing to gain more points incentives, higher leverage, priority access to exclusive features, and richer strategy products need to stake $DAPP tokens.
Pencils Protocol is also planning to integrate the $DAPP token into various DeFi products, including liquidity protocols and lending services, allowing users to optimize asset allocation through providing liquidity, lending, or participating in staking, and to gain additional rewards from these activities. Furthermore, holding $DAPP tokens will accelerate the equity attributes of Pencils Points holders, enabling better income distribution based on different Farming methods, thus promoting deeper community participation and loyalty.
Therefore, from the perspective of application scenarios, the $DAPP token itself has a very broad demand; users can convert staking, holding, and using $DAPP tokens into earnings and rights. The broader the business scope of Pencils Protocol, the stronger the demand for $DAPP tokens.
Pencils Protocol has strong profit expectations, and continuous buybacks will accelerate the value growth of the DAPP token.
Pencils Protocol itself has strong profitability; for instance, the already launched Farming and Vaults products have robust revenue-generating scenarios, such as fees from user staking and using Vaults products, and lending income, especially with the collaboration between Vaults and Mind Network, which can capture revenue from AI, FHE, and other networks.
Upcoming features like Auctions and Shops will further help Pencils Protocol establish deep links with more projects, ecosystems, and tracks, and will also serve as engines for capturing the ecological value of Pencils Protocol.
Pencils Protocol has clearly stated that 30% of its Vaults revenue will be used for the buyback and destruction of DAPP tokens, and other yet-to-be-launched segments will also establish a series of buyback policies upon their launch. Additionally, some essential scenarios are key to the continuous deflation of the DAPP token, with expectations that each buyback could lead to a deflation of around 1%.
Community rounds accumulate consensus before heading to the market.
In previous market cycles, many projects with community rounds performed exceptionally well because they could accumulate consensus in advance and build strong communities. For example, Polygon and Avalanche performed remarkably in the last market cycle, with Matic (through Coinlist IDO) reaching a peak price of $2.68, over 1000 times higher than its TGE price, while AVAX (through Tokensoft IDO) peaked at $146.22, around 300 times its TGE price.
Thus, these projects that closely embrace the community can unleash astonishing energy in subsequent markets, demonstrating that early community engagement is key. In fact, many projects in this market cycle have overlooked the importance of community consensus, such as LayerZero and zkSync mentioned earlier. This also indirectly confirms that methods like ICOs and IDOs are deeply ingrained in the DNA of Crypto.
Pencils Protocol has gained high recognition in the market and continues to secure financing under current market conditions, partly due to its product innovations and profit expectations. On the other hand, it has community rounds through TokenSoft, Bounce, and Coresky, while its LaunchPad section offers higher openness, granting the community greater voice.
By further decentralizing power to the community, it brings more choices and initiative to community users. Users can not only participate in the early-stage project discovery through a DAO approach but are also granted bargaining power, allowing them to continuously lower the costs of participating in new projects, enabling the community to recognize good and quality projects earlier and join these ecosystems.
Therefore, we have every reason to believe that the DAPP token, as a project firmly in control of the community in this market cycle, is also expected to bring significant price increases.
Limited early circulation, staking and destruction further reduce the circulating supply.
The DAPP token itself has a low circulating supply; for instance, in both the IDO and airdrop rounds, not all tokens are released at once, but rather a small portion is released initially, with the remainder being released linearly over several months to a year. Meanwhile, both on the platform and in CEX or with some DeFi partners, a series of staking scenarios have been built for the DAPP token, such as the upcoming DAPP token Farming on the platform and Staking launched on Gate and Bybit, which will further restrict the circulation of DAPP tokens. With the launch of Vaults and the auction feature next month, the DAPP token will further possess essential demand and will be continuously destroyed, indicating that the DAPP token will always maintain a low circulating volume.
There are expectations for listings on major exchanges.
Currently, well-known exchanges that have already listed include Bitget, Gate, Kucoin, and Bybit. Additionally, Pencils Protocol maintains good cooperative relationships with OKX Wallet, so there are expectations for DAPP to be listed on major exchanges in the future, which is a potential positive for the DAPP token.