Pencils Protocol is a comprehensive yield platform within the Scroll ecosystem, which has already surpassed $350 million in TVL on the Scroll single chain. 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 the ecosystem experiencing a series of significant advancements, it also signifies the full launch of the Pencils Protocol ecosystem.
The DAPP token is the ecosystem 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, acting as a liquidity center and PoS security layer. The Vaults product, through innovative design, allows users to achieve maximum returns with minimal thresholds via leveraged yield aggregation and automated smart contracts. Additionally, it collaborates with Mind Protocol to capture income in cutting-edge fields like AI and FHE. Mind Protocol aims to provide security for AI and FHE networks (such as Zama, Fhenix, Singularity, and Bittensor) through re-staking solutions. As an important partner, Pencils Protocol leverages a vast LRT asset staking system to help validate the Mind Network ecosystem, enhancing the security of AI and PoS ecosystems while providing higher returns for participants.
In the previous two market cycles, yield aggregation platforms like Yearn Finance and Alpaca Finance performed exceptionally well, with the former reaching a market cap of $3-5 billion and the latter peaking at around $1 billion. Before the launch of Pencils Protocol's Vaults product, there were no similar pioneering yield aggregation platforms. Vaults deeply integrates with the LRT market, pre-market incentive market, and PoS market, providing users with diversified 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 very promising.
Considering the fundamentals and business aspects of Pencils Protocol, its ecosystem's potential valuation exceeds $10 billion, with a conservative market cap estimate for the $DAPP token expected to reach over $5 billion. Currently, the initial market cap is only $86 million, indicating that the valuation of the Pencils Protocol ecosystem is severely underestimated, with potential gains possibly reaching a hundredfold.
There is a strong demand both inside and outside the ecosystem.
The $DAPP token itself has multiple functions. Beyond governance, it can directly relate to user 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 earn additional rewards from these activities. Furthermore, holding $DAPP tokens will further accelerate the equity attributes of Pencils Points holders, enabling better income distribution based on different farming methods, thus promoting deeper community engagement and loyalty.
From the perspective of application scenarios, the $DAPP token has a very broad demand. Users can convert their staking, holding, and using of $DAPP tokens into earnings and rights. The broader Pencils Protocol's business scope, the stronger the demand for $DAPP tokens.
Pencils Protocol has strong profit expectations, and continuous buybacks and burns accelerate the value growth of the DAPP token.
Pencils Protocol itself possesses strong profitability. For instance, the already launched Farming and Vaults products have robust revenue-generating scenarios, such as user participation in staking, transaction fees from using Vaults products, and lending income. Especially, the collaboration between the Vaults product and Mind Network can capture income from AI, FHE, and other networks.
Upcoming features like Auctions and Shop will further help Pencils Protocol establish deep links with more projects, ecosystems, and tracks, serving as engines for capturing ecosystem value.
Pencils Protocol has clearly stated that 30% of its Vaults revenue will be used for the buyback and burn of DAPP tokens, and other yet-to-be-launched sections will also implement a series of buyback policies once launched. Additionally, some essential scenarios are key to the continuous deflation of the DAPP token, with each buyback expected to 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, increasing over 1000 times from its TGE price, while AVAX (through Tokensoft IDO) peaked at $146.22, increasing around 300 times from its TGE price.
Thus, these projects that closely embrace the community can unleash tremendous 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. This also indirectly confirms that methods like ICOs and IDOs are deeply ingrained in the DNA of Crypto.
Pencils Protocol has gained high market recognition and continues to secure financing in the current market environment, partly due to its product innovation and profit expectations. On the other hand, it has community rounds through platforms like 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 participate in the early discovery of projects in a DAO manner and are also granted bargaining power to continuously lower the costs of participating in new projects, allowing 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 grasping the community in this market cycle, is also expected to bring significant gains.
Limited early circulation, staking and burning further reduce circulation.
The DAPP token itself has a low circulation. For instance, in both the IDO and airdrop rounds, not all tokens are released at once; only a small portion is released initially, with the remainder being released linearly over several months to a year. Meanwhile, whether on platforms, CEX, or some DeFi partners, a series of staking scenarios have been established for the DAPP token. For example, the upcoming DAPP token Farming on the platform and Staking on Gate and Bybit 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 burned, meaning that the DAPP token will always maintain a low circulation.
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.