Fundamentals

Pencils Protocol is a next-generation decentralized platform, formerly known as PenPad. The platform primarily provides auction services for blockchain-native assets and real-world assets (RWA), and offers unified and leveraged yield aggregation services to help users maximize asset utilization. Pencils Protocol also serves as Scroll’s native gateway for liquid staking and restaking of assets. Supported by Scroll, Pencils Protocol aims to redefine the L2 space using zero-knowledge technology.

Project Overview

Pencils Protocol is a comprehensive application platform within the Scroll ecosystem. Following a rebranding (formerly PenPad), it has expanded its functions in areas such as LaunchPad, yield aggregation, and real-world assets (RWA). Currently, the overall functional modules of the Pencils Protocol ecosystem include LaunchPad, Staking, Vault, and Shop, providing comprehensive trading services for users in the Scroll ecosystem. These modules can seamlessly integrate with each other and flexibly combine with other third-party applications like restaking and decentralized exchanges (DEX) to foster application innovation.

Funding Status

As a star project within the Scroll ecosystem, Pencils Protocol has received strong support from Scroll since its inception, including a series of resource allocations. Additionally, the project has attracted attention and investment from numerous renowned investors, including Scroll co-founder Sandy Peng, Gate Labs, and Animoca Brands. This has continuously increased its valuation, making users eager about the future of its ecosystem tokens.

Regarding its investor lineup, Pencils Protocol has received backing from top investors such as Scroll co-founder Sandy Peng, Animoca Brands, Gate Labs, Presto Labs, OKX Ventures, and Galxe. The participation of these investors also signifies their high recognition of Pencils Protocol’s development potential.

Source: rootdata

Roadmap

Q1 2024

• Platform Launch: Introduction of the platform with Ship Proof of Human login and zk-SDK for enhanced privacy.
• Launchpad Beta: Deployment of the launchpad beta featuring fair launch models and toolkits.
• $P Tokenomics: Announcement of $P tokenomics and the start of the Launch Seasons Event to establish the protocol as a leading launchpad brand, targeting over 120,000 verified users.
• Community Building: Global expansion of KOL (Key Opinion Leader) ecosystems to strengthen community engagement.

Q2 2024

• New Product Lines: Introduction of combinable launch product lines for new projects.
• Token Staking: Rollout of token staking with the pToken incentive model.
• Vault Product Beta: Release of the Vault product beta for yield aggregation.
• Staking Points System: Official launch of the Pencil (Pencils Protocol Staking Points) system, expanding ecological integrations and incentive utilities.
• Partnerships and Grants: Partnership with Scroll to establish grants for new projects, support for 50+ projects, and the launch of 5+ competitive projects valued at over $5 million. Development of 100+ partnerships to assist in project launches and growth.

Q3 2024

• Launch Products: Enhancements to launch products for diversified project launches.
• Pencils Protocol Shop: The shop feature will launch supporting multi-chain points transactions, pre-market trading, customized unlocking tools, Web3 equity cards, celebrity tickets, fan benefits, and various token standards like RWA, ERC721, and ERC404.
• User Growth: Registered verified users are expected to grow to 300,000, with the platform launch value exceeding $20 million.

Q4 2024

• Community-led IP: Establishment and incubation of community-led IP for new projects.
• Technical Support: Provision of technical support including market makers, smart contract auditors, and customized launch products.

Core Products

Staking

In the Pencils Protocol product suite, Staking is a crucial revenue entry point within the Scroll ecosystem. This segment offers a variety of staking options and flexible annual percentage rates (APRs). Through a series of combinable strategies, users can achieve substantial staking returns.

Initially, Pencils Protocol Farming will support five types of assets:

• ETH (including native ETH, WETH, LSDs, and LRTs)
• WBTC (EVM-compatible BTC collateral tokens)
• Stablecoins
• Scroll Tokens (when Scroll launches)
• Pencils Protocol Token

When users deposit tokens into a Pencils Protocol Vault, these funds enter a pool that borrowers can access to leverage their positions. As depositors, users earn yields generated from the interest these borrowers pay.

Pencils Protocol Vaults carefully evaluate each borrower’s principal and impose strict limits on their leverage to ensure the safety of deposited funds.

As depositors, users will enjoy the yields from dynamic interest rates and earn Pencils Protocol Points (Pencils) and Scroll Points, along with other rewards from partners. These rewards provide users with additional opportunities to benefit from the platform.

Deposit ARP

The APR earned by depositors in Pencils Protocol Vaults is determined by a floating interest rate model, similar to those used in mainstream lending protocols. This model adjusts the interest rate based on the availability of funds in the deposit pool, ensuring that depositors are rewarded fairly for their contributions.

When the utilization rate of the deposit pool is high, meaning that a larger portion of the funds is being borrowed, the interest rate (APR) will increase. This higher APR rewards depositors for providing liquidity when it is in high demand and encourages more users to deposit their tokens.

Conversely, when the utilization rate is low, indicating that available funds are abundant in the deposit pool, the interest rate will decrease accordingly. This dynamic adjustment helps maintain a balanced ecosystem and prevents overly high interest rates during periods of low borrowing activity.

By employing this floating interest rate model, Pencils Protocol Vaults ensures that depositors receive competitive token returns while promoting a stable and efficient lending environment.

Multiple Earning Opportunities

Pencils Protocol Farming provides users a secure and rewarding way to participate in the Scroll ecosystem. By supporting a variety of assets, including ETH, WBTC, stablecoins, and high-quality ERC20 tokens, Pencils Protocol ensures that users have ample opportunities to stake their tokens and earn competitive returns.

Users will receive various benefits, including farming yields, Pencils, and Scroll points. These rewards can unlock exclusive benefits, such as increased token allocations from projects that launch on Scroll, enhanced liquidity mining rewards, and access to limited edition merchandise.

As Pencils Protocol continues to expand its offerings and collaborate with top-tier partners, users can expect even more innovative features and valuable rewards. By participating in Pencils Protocol Farming, users not only support the growth of the Scroll ecosystem but also position themselves to maximize their returns and take advantage of the exciting developments within the Pencils Protocol platform.

Scroll Ecosystem Connector

Pencils Protocol has successfully established deep connections with the Ethereum and Bitcoin ecosystems regarding the supported asset types. The Staking segment is a crucial bridge linking Pencils Protocol with these ecosystems, offering a range of structured products and attractive APRs. These advantages are expected to attract high-quality assets from the Ethereum ecosystem into Pencils Protocol, thereby rapidly increasing the total value locked (TVL) within its ecosystem and providing positive support for the Pencils Protocol ecosystem.

Pencils Protocol Vaults

The Pencils Protocol Vaults 1.0 will first integrate with Scroll’s leading DEX, and the Vaults Pool will connect to the DEX liquidity pool. Users can participate by selecting their preferred LP tokens in the Pencils Protocol Vaults Pool, and flexibly set different leverage multiples. The Vaults contract will automatically allocate the required leverage funds from the Staking deposit pool, satisfying users’ pursuit of higher returns and providing a convenient and efficient fund appreciation experience.

Early active participants in Vaults will not only receive the base rewards from deposit staking and LP staking, but can also earn additional high multiples of Pencils Protocol, Pencil, DEX, and Scroll token rewards.

Vault 2.0 will collaborate with leading Liquid Restaking Protocols, allowing participants to enjoy restaking yields and earn token rewards, including EigenLayer, LRT, Pencils Protocol, DEX, and Scroll. The upgraded comprehensive reward matrix aims to attract more users and assets.

The launch of the Vault not only enhances user returns but also establishes a new liquidity solution, becoming an important liquidity hub. The expected returns from leveraged liquidity mining and various points significantly boost the enthusiasm of on-chain participants. These initiatives will attract more users and funds into the Pencils Protocol and Scroll ecosystems, while integrated third-party applications will gain better liquidity, indirectly drawing more funds and expanding the TVL scale. This will further enhance user trading experiences in DeFi facilities, promoting the prosperity of the Scroll DeFi system. In the future, Vaults will continue to integrate high-quality assets, offering on-chain delta-neutral strategies, on-chain synthetic yields, on-chain options, and other diverse, efficient, and secure asset appreciation channels, aiming to become users’ preferred fund yield management tool.

How to Participate in Staking?

1. Click “Deposit” on the Staking Pool page and enter the deposit amount.

2. View and claim deposit earnings in the Supply & Borrow info section.

3. Switch to “Withdraw” in the Manage section to withdraw the principal.

After completing these actions, users will receive additional incentives such as Pencil points and Scroll points based on the amount staked and other factors.

Economic Model

What is Pencil?

Pencil Points are an incentive system within the Pencils Protocol ecosystem. They serve as contribution points for users participating in Launch projects and act as a reward mechanism for the Pencils Protocol ecosystem. This system encourages users to actively engage in ecosystem development, helping them secure allocation quotas for Launch projects. Users can also use Pencil Points to purchase items in the Shop. The more a user contributes to the ecosystem, the more Pencil Points they earn and the greater the benefits they receive.

Utility of Pencil Points

Pencil Points offer multiple privileges to holders, enabling community members to:

1. Receive more favorable token allocations from projects that launch on Pencils Protocol in the future.
2. Obtain discounted quotas for the Launch project
3. Purchase various items, NFTs, and virtual or physical goods through the Pencils Protocol Shop.
4. Access to high-leverage positions in Pencils Protocol Vaults
5. Priority placements in Pencils Protocol airdrops

How to Earn Pencil Points?

According to Pencils Protocol rules, users can earn Pencil Points through various means, including Staking and Marketing activities.

Staking

Staking is the most direct way to earn Pencil Points. The more assets a user stakes and the longer the staking period, the more points they earn. Specifically, for every $1,000 worth of staked assets, users can earn 1 Pencil Point every 24 hours. Additionally, users can earn Staking yields and Scroll Points (with certain special assets having higher point weights).

Marketing

In addition to Staking, contributors to the Pencils Protocol ecosystem can earn Pencil Points by participating in designated marketing activities. The number of points earned depends on the specific content and contribution level.

Contributor Rewards

Influencers, volunteers, and partners who contribute significantly to the Pencils Protocol ecosystem will also earn points based on their contribution levels. To ensure fairness and protect user rights, Pencil Points are non-transferable and non-tradable and are closely tied to the user’s identity within the Pencils Protocol.

By providing users with incentive rights and rewards, Pencils Protocol strengthens user engagement with the ecosystem and catalyzes its growth. Pencil Points will play an important role in promoting the prosperity of the Scroll ecosystem by attracting numerous users to participate in staking and bringing more external assets into the Scroll ecosystem. This is crucial for the security and diverse development of the Scroll ecosystem and will provide strong momentum for the launch of projects on Scroll, thereby ensuring its long-term prosperity.

Conclusion

Overall, Pencils Protocol encompasses several popular areas such as LaunchPad, yield aggregators, LaaS, and Restaking, introducing innovations in each field. For instance, its yield aggregator features leveraged mining, which develops faster than traditional yield farming pools. As an integral part of the Scroll ecosystem, Pencils Protocol is expected to continually draw value from the Scroll ecosystem and achieve growth.