Pencils Protocol is a one-stop comprehensive yield platform in the Scroll ecosystem, which continuously expands into fields such as LRT, LaunchPad, AI, FHE, and RWA based on DeFi functionalities like Farming, Vaults, and Auctions.
Recently, the Pencils Protocol ecosystem has seen significant progress, with the $DAPP token completing IDOs on platforms such as Tokensofe, Bounce, and Coresky, selling out in a short period. It will soon be listed on Gate and Bybit for market trading, alongside a series of Trade to Earn and Staking activities. Additionally, the launch of the Vaults product not only signifies the full activation of the Pencils Protocol ecosystem's yield system but also stretches the ecosystem narrative towards broader directions, providing deeper empowerment for the $DAPP token, which is a substantial positive development.
Vaults Product Fundamentals
The Vaults product is a crucial part of the Pencils Protocol ecosystem's yield system, supporting users to maximize returns through innovative product design that allows for leveraged yield aggregation and automated smart contracts with minimal entry barriers.
For example, in its leveraged mining feature, users can deposit certain assets (currently mainly LRT assets like pufETH) and choose 2x leverage to amplify their returns, converting a 10% annual return into a 30% return. The complexity of the smart contract management of the Vaults product allows funds to be placed into liquidity pools and downstream strategies while safely holding LP tokens.
Of course, the user-end product returns of Vaults do not stop there; it further expands in collaboration with Mind Protocol, capturing income for users in cutting-edge fields like AI and FHE. Mind Protocol itself aims to provide security for different networks (such as Zama, Fhenix, Singularity, and Bittensor) based on a re-staking scheme. Pencils Protocol will be an important partner for Mind Protocol, helping to validate the Mind Network ecosystem based on the current large LRT asset staking system, further enhancing the security of AI and PoS ecosystems while providing higher returns for Pencils Protocol participants.
Thus, when users participate in the Vaults product, they can achieve multiple returns and differentiate their competition. Users holding $DAPP tokens are expected to increase their income, which will provide essential demand for the $DAPP token.
Product Significance
Liquidity Hub: The Vaults product itself serves as a liquidity hub, providing stable and high returns through the Farming Pool and enhanced returns through Vaults, attracting significant liquidity. This liquidity can further act in different protocols and serve as a liquidity pool for various external DeFi protocols, which will not only drive Pencils Protocol to maintain a high TVL but also promote the further prosperity of the Scroll ecosystem.
Enhancing Capital Utilization: With Pencils Vaults, large whales can manage assets securely without manual involvement, which not only increases liquidity but also makes the ecosystem more vibrant and profitable for all participants.
Enhancing Ecosystem Activity and Node Revenue: Every operation within the Vaults system contributes to increasing the activity of nodes operating in the Scroll ecosystem. With the active transfer and deployment of liquidity, nodes will generate more revenue, and the entire Scroll infrastructure will become more integrated into a larger DeFi framework, creating a thriving, interconnected DeFi network that benefits all participants.
Who Will Use Vaults & Who Will Be More Inclined to Hold $DAPP Tokens
Therefore, for the Vaults product, many roles have essential needs.
Ordinary investment users hope to further enhance their returns through the Vaults product, and holding $DAPP tokens is evidently the best way.
AI and FHE projects within Mind Protocol wish to enhance voting rates in the network through Pencils Protocol products. These protocols are expected to provide $DAPP token incentives to users in the future, similar to Curve's "bribery" to enhance network security, which will create essential demand for the $DAPP token.
DeFi and LRT projects with liquidity needs expect to connect to the Vaults product and capture liquidity from Pencils Protocol's vast pool. Holding $DAPP tokens is expected to further enhance their weight in the Vaults product, attracting larger liquidity.
Whale players expect to use the Vaults product to manage assets and use $DAPP tokens as a catalyst to capture higher returns; the demand for $DAPP tokens among whale users remains substantial.
Overall, just from the Vaults segment, the market has a high demand for $DAPP tokens. Meanwhile, 30% of the revenue generated from the Vaults segment will be used to buy back and burn $DAPP tokens, further accelerating deflation. From this perspective, the launch of the Vaults product is undoubtedly a significant positive development.
As $DAPP gradually goes live on platforms such as Gate, Bybit, Kucoin, and Bitget, it may represent a new milestone, indicating that the Pencils Protocol ecosystem will enter a new phase and fully activate, with the $DAPP token poised for explosive growth.