Recently, Pencils Prtocol, which has completed its brand upgrade, ended Season 2 and seamlessly launched Season 3. In Season 3, users can obtain considerable returns by staking a series of assets including $ETH, $USDT, $USDC, $STONE, $wrsETH, $pufETH, etc., and obtain a series of point rewards including Scroll Marks, Pencils points, EigenLayer points, StakeStone W1 Points, Kelp Miles, Puffer Points, as well as ecological alliance airdrop rewards.
Pencils Protocol's Season 3 is one of the most profitable series of activities in the LRT sector and the Scroll ecosystem, and continues to attract high attention from the industry. In Season 3, the Scroll Ecosystem Treasure Hunt, jointly launched with Trust Wallet and Scroll, saw its TVL quickly climb to $25 million in just 36 hours after its launch. Currently, the total pledged amount of $Stone assets alone has reached $17 million, and its growth rate ranks first among all assets. At the same time, Pencils Protocol TVL has ranked first among Scroll native projects.
Of course, focusing on the Pencils Protocol ecosystem itself, it is also the most undervalued project in the Scroll ecosystem.
Why is Pencils Protocol severely undervalued?
From the perspective of the Pencils Protocol project itself, its current overall valuation is not high. In the Season 2 stage, judging from the staking situation of its first Launch event (staking more than 1,500 ETH tokens) and other market fundamentals, the overall valuation of the project is about 20 million US dollars. Not long ago, Pencils Protocol received investments from a series of well-known capitals, which also brought its valuation to 25 million US dollars. But even so, from the perspective of the overall development prospects of Pencils Protocol, its valuation is still seriously underestimated.
From the basic perspective of the project
Pencils Protocol was originally a LaunchPad platform. As its brand is upgraded and further expanded into the Staking and Vault sectors, its narrative direction is also undergoing further changes.
On the one hand, Pencils Protocol is not only an important entry point for launching projects in the Scroll ecosystem, but also an important channel for users and investors to realize profits on Scroll and participate in potential projects in the Scroll ecosystem.
On the other hand, the newly upgraded Pencils Protocol will become the largest liquidity service provider in the Scroll ecosystem through its innovative leveraged mining Vault gameplay. It can provide long-term liquidity for projects connected to the Vault section based on its Staking pool, and is expected to become an important liquidity engine for the Scroll ecosystem.
In addition, Pencils Protocol is also collaborating with a series of LSD and LRT protocols to further expand in the direction of ReStaking. Through incentives including Pencils points, Scroll points and ultra-high APR, it is expected to further promote more assets to participate in the Restaking field. This is not only conducive to the expansion of the Scroll ecosystem in the direction of LSD and Restaking, but also conducive to maintaining the underlying security of the Scroll ecosystem.
Therefore, in terms of narrative, Pencils Protocol spans potential sectors such as LaaS, Restaking, and LaunchPad, and each sector has an extremely high ceiling.
In fact, the fact that Pencils Protocol is backed by the Scroll system is also an advantage. Scroll itself has a solid technical foundation, and it is also one of the most highly valued ecosystems in the Zk Layer2 camp (valued at approximately US$4 billion). This will be a factor in why Pencils Protocol has an extremely high ceiling.
From the valuation of projects in the same track
From the perspective of valuation, similar projects that have a certain overlap in narrative with Pencils Protocol include YFI, which performed well in the last bull market, as well as several leading protocols in this round, such as Kelp DAO, Puffer Finance, and Renzo.
We can see that Pencils Protocol is not at all behind these projects in terms of narrative fundamentals, investment camps, product features, and revenue, and it even has very obvious advantages in some aspects. Therefore, compared with YFI, Kelp DAO, Puffer Finance, Renzo, etc., which are valued at over 100 million yuan, Pencils Protocol's valuation of 25 million US dollars is obviously seriously underestimated.
From the perspective of investment lineup
On the one hand, Pencils Protocol was born with a golden key. When it was first launched on Scroll, it received strong support from the Scroll ecosystem, and Scroll provided market resources in Season 2 and Season 3 to help Pencils Protocol achieve better development. In particular, Sandy Peng, co-founder of Scroll, participated in the early investment of Pencils Protocol, which shows the attitude of the Scroll ecosystem towards the project.
From the perspective of the investor camp, Pencils Protocol has successively received investments from Scroll Co-founder Sandy, Animoca, Gate Labs, Presto Labs, OKX Ventures, Galxe, etc., which also represents the optimism of these top investors for the long-term development potential of Pencils Protocol. Similarly, the current valuation of only US$25 million is seriously underestimated.
Respond to community misunderstandings in the most structured way
Another thing worth noting is that the Pencils Protocol community recently caused a small disturbance because a small number of investors did not fully understand the rules of Season 2.
In Pencils Protocol Season 2, the project team mentioned many times on Medium and official Twitter that S2 staking is an important way to obtain token shares. After the staking is completed, the shares will be allocated according to different points, rather than airdrop activities. However, many users still do not fully understand the rules (perhaps because the rules are a bit complicated), or do not study them carefully, thinking that they will get airdrops after staking, so they questioned that they could not withdraw the full amount of ETH after the staking was completed (the ETH for the subscription part must be paid).
In fact, as a project that has received long-term support from the Scroll ecosystem and obtained a series of top capital financing, Pencils Protocol aims at long-term operation. There is really no need for Pencils Protocol to unreasonably deduct users' ETH outside the rules. This is not in line with normal thinking logic.
From the perspective of the Pencils Protocol project, all the rules are very clear and clearly reminded to all investors. Deductions are made according to normal rules without violating any contractual spirit. Even so, in order to further take care of these users, Pencils Protocol has also made some "compensations" for them, which is worthy of praise.
First of all, the project apologized to these users and provided a flexible solution from the perspective of protecting user interests and optimizing user experience. Users can now choose the following three methods on the ETH withdrawal page: First, choose to transfer it to S3 with one click, at which time users will be able to obtain:
All S2 points will be converted to the new community points system Pencils at a ratio of 5:1, and this conversion will take effect at the end of S3. Pencils will provide users with the opportunity to receive higher returns and exclusive airdrops from projects launched using Pencils.
l Have the opportunity to receive a series of points rewards including Stone W1 points, Puffer points, Kelp Miles points, Scroll Marks, etc.
l Get airdrops in the Scroll ecosystem
The second is to directly withdraw the remaining ETH after deducting the subscription amount (the user will lose access to all Pencils, Community Points, Scroll Marks and exclusive airdrops);
Third, if you have any doubts about the subscription, you can choose a full refund (lose all rights), but based on current user feedback and project potential assessment, it is expected that only a very small number of users will exercise the refund right. The refund channel has been opened at 07:00 UTC on May 23 and will be open until 07:00 UTC on May 30.
In addition, in order to thank and motivate every community user who participates in S2 and supports the project for a long time, the project will issue an S2 participation certificate to each participant (the S2 participation certificate will be automatically issued to each participant before 07:00 UTC on May 30). After the Sessions event, these users will be airdropped. S2 not only represents that the user has locked 100% of the rights to obtain the $PDD airdrop, but also a strong certificate of deep interaction with the Scroll ecosystem during the S2 period. As the project's popularity continues to rise, I believe that $PDD's TGE plan is just around the corner, and you can continue to pay attention to the details of the next airdrop.
Furthermore, if users choose to transfer the remaining tokens in S2 to S3 and continue until the end of the S3 event, Pencils Protocol will provide these users with additional privileges when participating in S3. The points accumulated by users in S2 will be converted into Pencils at a fixed ratio and settled uniformly for users after the event ends. This means that S2 users will have many first-mover advantages and rights when S3 is launched, helping them win more opportunities in S3.
The introduction of new rules not only represents that the Pencils Protocol project takes community as its first core principle, but also represents the pattern of the Pencils Protocol project itself.
So overall, the fundamentals of Pencils Protocol and its series of market performance and progress show that the project's valuation of $25 million is significantly underestimated. The pattern shown by Pencils Protocol is an inherent driving force for the long-term development of the ecosystem, which will also drive the ecosystem to a larger and broader market.
