In this market cycle, the DeFi market has long been on the fringes, with established blue-chip DeFi tokens still able to maintain high market values but with limited price growth. Many new-generation DeFi projects lack innovation, making it difficult to drive narrative development, and they struggle to stand out in the market, making it hard to find Alpha investment opportunities in the DeFi space.
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 soared to $350 million, making it the project with the highest TVL 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 based on this, the DAPP token 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 using staking to pledge assets and provide users with multiple different incentive points. This sector is downstream of the LRT track and is deeply bound to various LRT projects. By supporting the staking incentives of 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 into the existing LP model, allowing users to obtain LP yields multiple times through borrowing and leveraging. 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 into 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 votes to contribute to the ecological 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 will be.
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 launch pad for quality projects in the Scroll ecosystem but also expected to become a significant launch pad for the LRT market and the DeFi track. The Shop is 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 will not only expand the business pipeline for the platform and capture Web2 users but also serve 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-tier 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, amounting to $2.5 million at a valuation of $25 million.
In September, Pencils Protocol secured 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 the long-term development potential of a company; the higher the long-term development potential, the higher the market capitalization. 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 rather building a comprehensive platform that integrates multiple track functions while playing important roles. From a functional perspective, it serves as a liquidity hub, a crucial resource pool for retaining users in the LRT market, an important launch pad for quality projects entering the market, and a key for users to capture yields in a one-stop manner, essentially 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 global liquidity expansion, a frenzied 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 post-IDO, the circulating market value of the DAPP token was only $84 million. The circulating DAPP tokens will continue to decrease as they are staked and burned, causing the value per individual token to rise. 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 has significant potential to become an important 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 the cost of holding DAPP tokens will be the lowest outside of the IDO.