Pencils Protocol is a comprehensive revenue platform for the Scroll ecosystem. Its TVL on a single chain in the Scroll ecosystem has exceeded 350 million US dollars, and it has accumulated more than 500,000 active community users in just a few months of its launch. At this stage, Pencils Protocol has completed the TGE of the DAPP token, and after completing IDO on Tokensoft, Bounce, and Coresky, it has successively launched on leading platforms such as Gate and Bybit. As the ecosystem ushered in a series of major progress, it also indicates that the Pencils Protocol ecosystem has been fully launched.
DAPP token is the ecological token of Pencils Protocol. It is not only the governance asset of the ecosystem, but also an important functional asset and equity asset in the ecosystem. With the launch of DAPP on 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, and its high valuation brings expectations for DAPP
Pencils Protocol is expanding its connections to multiple tracks including LRT, LaaS, AI, FHE, RWA, etc. by launching functional modules including Farming, Vaults, and Auction, playing the role of liquidity center and PoS security layer, spanning multiple narratives.
The Vaults product is innovatively designed to support users to maximize returns with minimal barriers through leveraged yield aggregation and automated smart contracts. At the same time, it works 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 such as Zama, Fhenix, Singularity, and Bittensor through re-staking schemes. As its important partner, Pencils Protocol uses the huge LRT asset staking system to help the Mind Network ecosystem verify, enhance the security of the AI and PoS ecosystems, and provide higher returns to participants.
In the first two market cycles, Yearn Finance and Alpaca Finance served as yield aggregation platforms, with the former having a market value of $3-5 billion and the latter having a peak market value of about $1 billion. Before the launch of Pencils Protocol's Vaults product, there was no similar groundbreaking aggregation yield platform. Vaults is deeply bound to the LRT market, pre-market incentive market, and PoS market, providing users with diversified yield tools.
In the long run, Vaults will focus on user asset management, integrate more high-quality assets, and launch a variety of on-chain revenue strategies to further expand revenue channels. The valuation of Vaults products alone is very promising.
Considering the fundamentals and business of Pencils Protocol, its ecosystem potential valuation is over 10 billion USD, and the conservative valuation of $DAPP token is expected to reach over 5 billion USD. The current initial market value is only 86 million USD, and the valuation of Pencils Protocol ecosystem is seriously underestimated, and the potential increase may reach 100 times.
There are rigid demands both inside and outside the ecosystem
The $DAPP token itself has many functions. In addition to governance, it can directly have a deep connection with the rights and interests of users. For example, in the Vaults section, if users want to get more points incentives, higher leverage multiples, priority use of exclusive functions, and more abundant strategic products, they need to pledge $DAPP tokens.
Pencils Protocol is also planning to integrate $DAPP tokens into various DeFi products, including liquidity protocols and lending services, allowing users to optimize asset allocation by providing liquidity, lending or participating in staking, and gain additional bonus utility from these activities. At the same time, holding $DAPP tokens will further accelerate the equity attributes of Pencils Points holders, and obtain better income distribution based on different farming methods, thereby promoting deeper community participation and loyalty.
Therefore, from the perspective of application scenarios, the $DAPP token itself has extremely broad rigid demand. Users can convert $DAPP tokens into income and rights by staking, holding, and using them. The broader the business scope of Pencils Protocol, the stronger the rigid demand for $DAPP tokens.
Pencils Protocol has strong profit expectations, and continuous destruction and repurchase accelerate the growth of DAPP token value
Pencils Protocol itself has strong profitability. For example, the Farming and Vaults products that have been launched now have strong hematopoietic scenarios. For example, the fees and loan income when users participate in staking and use Vaults products can all be profitable. In particular, the cooperation between Vaults products and Mind Network can capture income from AI, FHE and other series of networks.
Features that have not yet been launched, such as auctions and shops, will further help Pencils Protocol establish in-depth links with more projects, ecosystems, and tracks, and will also be the engine for capturing the value of the Pencils Protocol ecosystem.
Pencils Protocol has currently stated that 30% of its Vaults revenue will be used to repurchase and destroy DAPP tokens, and other sectors that have not yet been launched will still formulate a series of repurchase policies after they are launched. In addition, some rigid demand scenarios are the key to the continued deflation of DAPP tokens. It is expected that each repurchase in the future will cause DAPP to deflate by about 1%.
There is a community round, first accumulate consensus and then go to the market
In previous market cycles, many projects with community rounds performed extremely well because they were able to accumulate consensus in advance and build a strong community. For example, Polygon and Avalanche performed very well in the last market cycle, with Matic (through Coinlist IDO) reaching a peak price of more than 1,000 times higher than the price at TGE ($2.68) and AVAX (through Tokensoft IDO) reaching a peak price of about 300 times higher than the price at TGE ($146.22).
Therefore, these projects that embrace the community closely can always burst out amazing energy in the subsequent market, which shows that embracing the community in the early stage is the best way. In fact, in this round of market cycle, many projects have ignored the importance of community consensus, such as LayerZero and zkSync mentioned above. This also indirectly confirms that the startup methods such as IC0 and IDO have long been deeply imprinted in the genes of Crypto.
The reason why Pencils Protocol has been highly recognized by the market and can continue to obtain financing in the current market situation is, on the one hand, its product innovation and profit expectations. On the other hand, it has community rounds such as TokenSoft, Bounce and Coresky, and its LaunchPad section has a higher degree of openness, which can give the community a higher voice.
By further delegating power to the community, more choices and initiative are brought to community users. Users can not only participate in the exploration of early online projects in the form of DAO, but are also given bargaining power, that is, the cost of participating in new listings is continuously reduced through various means, so that the community can recognize good projects and high-quality projects earlier and join these ecosystems.
Therefore, we have every reason to believe that DAPP token, as a project that firmly grasps the community in this round of market cycle, is also expected to bring extremely high growth.
There was little circulation in the early stage, and pledge and destruction further reduced the circulation
The DAPP token itself has a low circulation. For example, whether it is the IDO round or the airdrop round, it is not fully released, but a small part is released in the early stage and released linearly in the following months to a year. At the same time, whether in the platform, CEX or some DeFi partners, the DAPP token has built a series of staking scenarios, such as the Farming of the DAPP token that will be launched on the platform, and the Staking launched on Gate, Bybit and other platforms, which will further restrict the circulation of the DAPP token. With the launch of Vaults and the auction function next month, the DAPP token will have further rigid demand and will be continuously destroyed, which means that the DAPP token itself always maintains a low circulation.
There is a large online expectation
Well-known exchanges that have been launched include Bitget, Gate, Kucoin, and Bybit. In addition, Pencils Protocol has always maintained a good cooperative relationship with OKX Wallet, so there may be an expectation that DAPP will be listed on a major exchange in the future, which is a potential benefit for the DAPP token.