Pencils Protocol was initially a comprehensive DeFi platform on the Scroll ecosystem, based on a series of product sections including Farming, Vaults, and Auction. It has not only become an important liquidity and yield hub on Scroll but also a significant LaunchPad market and traffic pool, continuously driving the development of the Scroll ecosystem. It is reported that the protocol's peak TVL surpassed $400 million and is backed by 700,000 users, representing market recognition of Pencils Protocol.
In the new stage of ecological development, Pencils Protocol is expanding the narrative of the ecosystem. By launching a yield-oriented DEX Pencils Swap, this DEX can link with multiple chains and build an ecosystem that integrates yields and liquidity for all chain traders and crypto projects. As a foundational facility for the new era of crypto, Pencils Protocol is gearing up for the next stage of DeFi development.
Pencils Swap: The Liquidity and Yield Hub of the On-chain World
Multichain development has always been a main theme in the evolution of the crypto market. As more chain ecosystems enter the market, this not only intensifies liquidity dispersion but also leads to liquidity imbalance between different chain ecosystems.
From the user's perspective, the liquidity imbalance in different chain ecosystems presents a potential yield opportunity. Some liquidity-scarce ecosystems typically offer more attractive DeFi yield opportunities to capture liquidity better. On the flip side, traders seeking these yields usually need to switch back and forth among different chain ecosystems, leading to a fragmented experience. Meanwhile, although potential yield opportunities are evident, for relatively illiquid niche ecosystems, DeFi applications themselves face a series of issues such as poor trading experiences and high yield risks (high slippage, high impermanent loss, etc.), making yields unstable. Overall, aside from a few professional investors, the vast majority of investors are not very proactive in liquidity arbitrage.
For some on-chain projects, especially less mainstream native on-chain projects, capturing liquidity (especially multichain liquidity) is becoming increasingly difficult. Although these projects may offer relatively attractive yields, as mentioned above, their efficiency in attracting liquidity remains low. In this market cycle, discussions surrounding DeFi narratives have significantly decreased, and the entire industry is facing severe internal competition, with generally low yields leading users to gradually lose interest in uninspired DeFi concepts. Furthermore, established DeFi 2.0 projects like OlympusDAO and Tokemak have also proven to be ineffective long-term liquidity solutions.
In fact, the barriers between chains are a major obstacle. The fragmented user experience and high costs of multichain exploration are suppressing users' enthusiasm for multichain yields. At the same time, crypto projects can typically only capture liquidity on their local chains and face high costs and thresholds when expanding to multichain liquidity. Therefore, from this perspective, simplifying the complexities brought by chain natives can lower the costs, risks, and thresholds for users exploring yields while providing more quality options. Crypto projects can also obtain multichain liquidity through more optimized paths, continuously attracting active users.
The Pencils Swap launched by Pencils Protocol, aimed at yield, is the final push to achieve this goal.
The Narrative of Pencils Swap
Pencils Protocol is launching Pencils Swap, primarily aimed at yield aggregation and liquidity aggregation. By establishing a series of native cross-chain facilities, this layer can establish interoperability with chains of different technical characteristics.
1. Investor Yield Side
Pencils Swap can 'aggregate' multichain ecosystems and find arbitrage opportunities in the DeFi protocols of different chain ecosystems, such as potential arbitrage differences arising from different prices of the same token between different DEXs on different chains, or differences in contract prices of the same asset on different derivatives DEXs, etc. Currently, the Vaults section integrates a series of advanced LP yield strategies, allowing users to maximize earnings from each transaction. Users can directly use Pencils Protocol's Vaults tool on Pencils Swap for some LP strategy arbitrage and directly claim earnings on Pencils Swap. Meanwhile, users can also access key details such as routing, fees, and price impacts through the dashboard and stay updated on historical transactions and liquidity conditions.
Compared to users manually LP arbitraging across different DEXs, Pencils Swap can significantly reduce slippage and improve efficiency through automatic routing, creating extensive profit opportunities for LPs, making users not only more predictable about their potential yields but also possessing better and more stable profitability.
Similarly, for different traders, Pencils Swap has designed three different trading fee tiers, ensuring that users have good flexibility and better profitability whether trading stable assets or high-volatility assets.
l 0.05%: Applicable to high-frequency trading and assets with relatively low price volatility.
l 0.30%: Applicable to the general fee rate for most trading pairs.
l 1.00%: Applicable to assets with high price volatility.
Thus, Pencils Swap not only provides good profitability for users but also offers a series of yield functionalities to become the best tool for users to capture LP arbitrage profits from the multichain market.
2. Liquidity Demand Side
Pencils Swap itself is not only a DEX with multichain strategy yield capabilities but also a liquidity aggregation hub that provides liquidity for multichain projects.
As a multichain yield aggregation hub, one end of Pencils Swap connects investors holding assets, i.e., liquidity sources, and the other end connects liquidity pools of different DeFi protocols. As long as there are arbitrage opportunities, there will be liquidity flow.
Pencils Protocol has built Pencils Swap into the ultimate platform for liquidity guidance. For dApps with liquidity needs, simply connecting to Pencils Swap will allow it to link with liquidity sources and other liquidity pools. With this liquidity-rich environment, on-chain projects can efficiently capture liquidity at minimal cost, achieving a smoother launch with the support of community-driven initiatives.
Overall, Pencils Protocol is folding the barriers posed by chain natives. By establishing interoperability with multiple chains, it empowers different demanders to seamlessly access multichain ecosystems, overcoming a series of obstacles brought about by chain natives. Pencils Swap not only acts as a resolver for users' intent to capture LP arbitrage profits across multiple chains but also provides a seamless experience for users seeking yields across various chains.
For liquidity demanders, their goal of capturing liquidity is no longer limited to local chains. Through Pencils Swap's connection to multiple chains, it provides crypto projects with broader liquidity capture capabilities, significantly enhancing overall chain liquidity efficiency while injecting more vitality into the DeFi market and bringing new growth points.
A new example of composability: Pencils Swap + Auction, envisioning a brand new LaunchPad ecosystem
Pencils Protocol recently launched the Auction function, with a community-centric LaunchPad platform as the main function of the Auction section. With the launch of Pencils Swap and its deep integration with the Auction section, Pencils Protocol is expected to further create a new paradigm for a multichain LaunchPad ecosystem.
With the support of Pencils Swap, a brand new LaunchPad ecosystem enables projects to capture funding across multiple chains in a single launch. Based on Pencils Swap, users from different chain ecosystems can participate in launches through Pencils Swap as an aggregation entry point, eliminating the need for projects to launch on multiple LaunchPad platforms, which is expected to save costs and significantly enhance user coverage and fundraising efficiency.
After the project launches, Pencils Swap can also better support the market value management of tokens for the Launch project. In fact, different chain ecosystems have disparities in liquidity and trading volume, which will bring arbitrage opportunities for users. For Pencils Swap, as long as there are arbitrage opportunities, it means it can attract a large number of arbitrage groups from the multichain ecosystem to contribute liquidity to the token, significantly reducing the subsequent market-making pressure on the token.
Similarly, through a new collaboration with the Vaults section, based on a series of arbitrage strategies, it can not only bring considerable LP arbitrage profits to users holding tokens participating in the Launch, enhancing user token holding stickiness and loyalty, but also provide significant profit effects for Launch projects. Even the project party itself can act as an arbitrageur, artificially creating arbitrage opportunities and price differences to attract external arbitrageurs and traders, significantly increasing the project's on-chain activity, trading volume, and token holder data, laying the foundation for the project to reach a broader market.
Therefore, the new combination of Pencils Swap and Auction not only provides a foundation for projects to launch synchronously across multiple chains but also empowers token market value management, token holder profits, project revenue, and even supports long-term development after the token is launched in the market. The new paradigm combination is laying the groundwork for the transformation of the LaunchPad market.
In the long run, Pencils Swap will not only be a DEX but will also further develop into an important infrastructure in DeFi, fueling the next explosion of DeFi.
Pencils Liquidity Incentive Program
To further promote the comprehensive development of the ecosystem, Pencils launched the liquidity incentive program after successfully launching the Swap function. This program aims to provide generous rewards for liquidity providers while offering additional incentives for Farming participants, ensuring users enjoy the highest APR and quality experience across chains.
Event Time:
Start time: December 19, 2024, 08:00 AM (UTC)
End time: January 1, 2025, 07:59 AM (UTC)
Liquidity Pool:
To participate in this event, liquidity providers must add liquidity for the following designated pairs:
l ETH/USDC
l ETH/USDT
l ETH/STONE
l USDT/USDC
l ETH/wrsETH
Users only need to complete the 'Add Liquidity' operation for the designated currency pair on the Pencils liquidity page to officially join this event.
1. Reward Mechanism
Basic Reward:
By providing liquidity for designated trading pairs, participants will share from the platform's DAPP income reward pool, with total rewards reaching up to 20,000 DAPP!
2. Additional Staking Rewards
During the event, users who continuously stake in any Pencils Farming pool for more than 10 days and participate in this liquidity incentive event will enjoy an additional 20% liquidity reward boost in DAPP earnings.