Pencils Protocol’s Upcoming Vaults Product: A Major Boost for the Ecosystem!

To make the ecosystem more rewarding, Pencils Protocol is launching the Vaults Product, a new feature that allows users to maximize their earnings potential through asset leverage and participation in liquidity mining. This launch is set to be a major catalyst for the growth of the platform’s ecosystem, particularly with the introduction of the deflationary mechanism that involves sending 30% of vault revenue to a void address as $DAPP. This approach will enhance the long-term value of the $DAPP token and support the ecosystem’s sustainable development.

Currently, Pencils Protocol is the leading DeFi platform in the Scroll ecosystem, boasting the highest Total Value Locked (TVL). Despite a relatively bearish market, the platform maintains a locked value of around $300 million and has experienced significant growth, with over 247,000 active users.

The imminent launch of the Vaults Product is one of the most exciting developments for the platform. Vaults will serve as a crucial revenue stream for both the platform and its users. Notably, 30% of the revenue generated from Vaults will be sent to a void address as $DAPP, creating a deflationary effect and enhancing the protocol’s long-term value. The remaining 70% of the revenue will be allocated to the ecosystem and community development fund, providing incentives for growth and supporting the sustainable development of the ecosystem.

How Does the Vaults Product Works?

Vaults is essentially a liquidity mining yield pool featuring leveraged mining functionality. On one hand, it connects to the Staking pool, allowing users to borrow and lend assets. On the other hand, Vaults 1.0 will integrate with various liquidity pools in the Scroll ecosystem’s DEXs, enabling users to participate in liquidity mining as LPs and earn amplified rewards through leverage.

Here are the key details:

Early participants not only receive staking and LP rewards but also benefit from high multiplier bonuses in points and token incentives, driving user engagement and increasing capital efficiency on the staking side. The process is straightforward, with a low barrier to entry, attracting a wide range of farming participants.

Moreover, Vaults serve as a liquidity hub. By participating, users inject substantial liquidity into DEXs, an essential function in the current market landscape. With its integration into the LRT sector, including BTC and ETH ecosystems, the narrative surrounding Vaults continues to strengthen.

Looking ahead, Vaults will evolve into a comprehensive asset management platform, integrating top-quality assets and offering on-chain delta-neutral strategies, synthetic yields, and exotic options to broaden revenue streams.

Historically, each market cycle sees the rise of an innovative aggregate yield product that meets users’ demand for steady returns. During bear markets, users seek stable income, and aggregate yield products that offer consistent, reliable returns are highly favored. In bull markets, these products become investor favorites due to their diverse features and above-average returns. Yearn Finance, for instance, reached a valuation of $3–5 billion during its peak, while Alpaca Finance had a market cap of about $1 billion. Vaults fill a gap in the current cycle, providing a much-needed liquidity hub and aligning with the LRT sector narrative, which could significantly boost the valuation of both Vaults and Pencils Protocol.

From the Vaults Product alone, we can begin to estimate Pencils Protocol’s future valuation. As more strategy-based passive income features, LaunchPad, and Shop products roll out, the platform’s $80 million pre-money valuation is clearly undervalued.

Comparison to Other DeFi Protocols:

Pencils Protocol’s Vaults stand out from other DeFi protocols due to their innovative approach to leveraged lending and their focus on user-friendliness. Here’s a comparison:

Deflationary Mechanism: A Growth Engine for $DAPP Token Value

One of the most exciting features of our Vaults Product is the allocation of 30% of vault revenue to be sent to a void address as $DAPP. This deflationary mechanism will contribute to the long-term appreciation of the $DAPP token. Additionally, the remaining 70% of the revenue will flow into the ecosystem and community development fund, which will provide incentives for different stages of growth, supporting the ecosystem’s sustainable development and future user engagement.

How it Works:

• Revenue Generation: The Vaults generate revenue, 30% of which is allocated to be sent to a void address as $DAPP, effectively removing these tokens from circulation.

• Token Reduction: By sending $DAPP tokens to a void address, the circulating supply is permanently reduced.

• Value Appreciation: The reduction in the circulating supply creates deflationary pressure, potentially increasing the value of $DAPP tokens over time.

Limited Token Circulation:

• Initial Lock-Up: The majority of $DAPP tokens will be locked up following the token sale, ensuring limited token availability in the early stages.

• Balanced Emission: The deflationary mechanism of sending tokens to a void address helps counterbalance any potential increase in supply from future token unlocks, maintaining a healthy balance between token distribution and reduction.

$DAPP tokens serve a vital role within the Pencils Protocol ecosystem, offering both practical utility and significant earning potential. Users can stake $DAPP to earn governance tokens ($pDAPP) at a 1:1 ratio. $pDAPP holders can stake to receive rewards or provide liquidity on DEXs. Within the Vaults Product, $DAPP stakers enjoy additional benefits, including bonus points, enhanced leverage rewards, exclusive access to advanced features, and a wider range of strategy products.

With the launch of Vaults, the demand for $DAPP is expected to gain traction as users look to optimize their returns. The strategic integration of $DAPP within the Pencils Protocol ecosystem not only incentivizes participation but also strengthens the overall value proposition of the platform, driving sustained growth and engagement.

In conclusion, Vaults will create a positive value cycle for the platform: increased transaction volume generates revenue, with 30% of this revenue being sent to a void address as $DAPP, reducing token circulation and enhancing its value. The rising demand for $DAPP within the Vaults and its growing utility will further accelerate value growth. This deflationary mechanism not only initiates this value loop but also sustains it, serving as the driving force behind the platform’s continuous growth.