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Penpad, the native project on Scroll, recently upgraded its brand to Pencils Protocol. After the upgrade, the ecosystem has expanded into a comprehensive ecosystem integrating LaunchPad, Staking, Vault and Shop, and can deeply expand the narrative in directions such as DeFi and RWA.
In the newly launched Vault section of Pencils Protocol, the original liquidity mining gameplay has been completely upgraded, and a leveraged mining mode similar to the lending gameplay has been introduced, which supports users to borrow assets from the Vault pool and realize multiple returns. At the same time, participating in the leveraged mining of Vault is expected to realize point incentives in multiple ecosystems, which can be said to be killing two birds with one stone.
The first leveraged mining method
The Vault section is an important product launched by Pencils Protocol after achieving brand upgrade. It allows users to choose the LP targets of interest in the Pencils Protocol Vaults Pool to participate and obtain LP income from it. At the same time, users can set the mining leverage multiple. For example, if a user holds 1 ETH, he can borrow multiples from the Vault pool based on this and gain income by increasing mining positions. The Vaults contract will automatically allocate the required leverage funds from the Staking deposit pool to meet users' pursuit of higher returns and provide a convenient and efficient capital appreciation experience. When users conduct leveraged lending, they need to pay the corresponding interest to the Staking users and automatically return the funds to the contract after withdrawing the LP.
The advantage of Vault gameplay lies in the leveraged mining model. Judging from the existing LP mining gameplay, most of the current Farming gameplay cannot provide users with considerable income. According to defillama data, DeFi Farming APR is basically below 5%.
Therefore, at this stage, on-chain users generally lack interest in DeFi returns, which further makes it difficult for many emerging DeFi protocols and on-chain ecosystems to capture liquidity. The leveraged mining model of the Vault gameplay itself has lower risks, and users can increase the LP pool share at the lowest cost to maximize their returns. Compared with the revolving loan gameplay of the traditional lending sector, the Vault model has lower risks and higher income stability.
The Pencils Protocol Vaults 1.0 product will first integrate the Scroll head DEX and connect the Vaults Pool to the DEX liquidity pool. This composability will allow the Pencils Protocol Vault pool and users to have a very rich selection of high-quality pools. At the same time, the Pencils Protocol will also gain unlimited scalability based on composability.
For Vault users, the benefits they obtain are far more than just Farming benefits. In addition, they also include additional high-multiple Pencils Protocol, Pencil points, DEX and Scroll points rewards.
The combinatorial potential of Vault is not limited to DEX LP gameplay. In the future, in Vault 2.0, it will be deeply combined with LSD, Restaking, etc., which is expected to further make the Vault model more combinatorial and combine unprecedented rich gameplay for users.
Participating users can enjoy Native Restaking Yield and multiple point rewards (including EigenLayer, LRT, Pencils Protocol, DEX and Scroll) at the same time. The upgrade of this yield matrix is expected to attract more users and asset inflows.
How to perform leveraged mining?
In Vault 1.0, users can use Vaults to borrow funds and increase their returns.
Take the example of a user mining ETH-USDC LP:
1. The user holds a small amount of USDC and chooses to borrow more USDC (the borrowing ratio depends on factors such as the user's USDC holdings. Holding Pencil points can obtain a higher leverage multiple).
2. Vaults allocate assets to 50% ETH and 50% USDC
3. Assets are injected into the DEX liquidity pool, and LP tokens obtained through staking are used to obtain income
4. Follow similar steps when accessing LRT and other assets
The interest on borrowed funds will be automatically credited and paid to the Staking deposit pool to pay depositors' returns. By assessing the principal and limiting the leverage multiple, Vaults can ensure the safety of depositors' funds without taking on liquidation risks.
Steps
1. Click Detail on the Vaults pool page to enter the pool details and perform operations
2. Add assets to your wallet, select the assets you want to leverage and the leverage multiple
3. Switch to Withdraw in Manage to withdraw mining principal and income
Scroll Ecosystem’s New Liquidity Hub
The launch of the Vault section will not only improve users’ profitability, but will also build a new liquidity solution and become a new liquidity hub.
In fact, the expected returns from leveraged liquidity mining and various points are greatly increasing the enthusiasm of players on the chain, which will not only attract more users and funds to the Pencils Protocol and the Scroll ecosystem, but also enable third-party applications integrated with the Pencils Protocol to obtain better liquidity gains, and indirectly capture more funds and expand the TVL scale. This will further promote the transaction experience of users in these DeFi facilities, and ultimately feed back the prosperity of the Scroll DeFi system.
With Vault's support for LSD, Restaking and other sectors, it is expected to further accelerate the scale of the LSD track in the Scroll ecosystem, and more LST and LRT assets are expected to further capture liquidity, which is crucial to accelerating the scale of Scroll ecosystem funds and maintaining network security.
With the launch of Staking and Vault, the new value flywheel of the Pencils Protocol ecosystem will officially start operating and will become an important engine for the operation of the Scroll ecological value system.
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