The blockchain landscape continues to evolve at a rapid pace, with Layer 2 (L2) scaling solutions emerging as pivotal infrastructure for the next generation of decentralized applications. Among these, Scroll has solidified its position as a leading ZK-Rollup network, and within its ecosystem, Pencil Protocol has risen as a foundational launchpad and yield innovation platform. As we step into 2025, Pencil Protocol is no longer just a promising project—it’s a core pillar of Scroll’s expanding multichain future.
This article dives deep into Pencil Protocol’s evolution, core features, economic model, and growing influence within the Scroll ecosystem. Whether you're an investor, developer, or DeFi enthusiast, understanding Pencil Protocol offers valuable insights into the future of compliant, privacy-preserving, and user-centric Web3 infrastructure.
The Rise of Pencil Protocol in the Scroll Ecosystem
In 2025, Pencil Protocol has firmly established itself as a cornerstone of the Scroll ecosystem. Total Value Locked (TVL) has surged past $15 million**, a dramatic leap from the earlier $3.21 million—signaling strong user adoption and confidence in its long-term viability. With over 25,000 active participants**, the platform has seen a 525% increase in user engagement since its Season 2 Launch, driven by strategic upgrades and expanded utility.
Originally launched as Penpad, Pencil Protocol underwent a comprehensive rebranding to reflect its broader vision: not just a launchpad, but a full-stack ecosystem enabling launch, staking, governance, and compliance—all powered by zero-knowledge (ZK) technology.
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Key Features Powering Innovation
Pencil Protocol differentiates itself through a suite of advanced features designed for security, scalability, and real-world integration.
Proof of Humanity & Identity Control
At the heart of Pencil Protocol is its “Proof of Humanity” login system, which leverages ZK technology to authenticate users without compromising privacy. By integrating with social media, email verification, and even biometric data via device-level security, the protocol ensures that accounts are human-operated—effectively reducing bot activity and sybil attacks.
This system allows dApps built on Pencil to maintain regulatory compliance with KYC/AML standards, while still preserving user anonymity—a rare balance in today’s Web3 landscape.
Compliance-Driven Architecture
Pencil Protocol embeds compliance at the protocol level. Its Deposit Manager and Filter tools actively monitor transactions to detect and block illicit fund flows. Through smart contract modules like Teller and Handler, assets can be separated from execution logic, simplifying audit trails and reporting for institutional use cases.
This makes Pencil an attractive gateway for traditional finance (TradFi) and real-world asset (RWA) projects looking to enter Web3 with confidence.
Account Abstraction & Developer Flexibility
By supporting account abstraction, Pencil enables developers to treat user wallets as smart contracts. This opens the door to advanced functionalities such as automated transactions, social recovery, multi-signature controls, and MPC-based security—all without requiring users to manage complex private keys.
When combined with ZK privacy layers, this creates a seamless, secure, and highly customizable user experience ideal for mass adoption.
The Pencils Points Economy
Central to Pencil Protocol’s ecosystem is its native points system: Pencils. More than just a reward mechanism, Pencils function as a versatile utility token within the platform.
How to Earn Pencils
- Stake supported assets: Users earn Pencils by staking ETH, BTC derivatives, stablecoins, or other ERC-20 tokens.
- Boost participation: Accumulated Pencils increase allocation quotas for upcoming project launches.
- Amplify yield: Users can leverage Pencils to boost returns in liquidity mining vaults.
- Unlock exclusive access: Spend Pencils on limited-edition NFTs, merchandise, or early access to new features.
As the ecosystem grows, so does the value of Pencils—creating a positive feedback loop that rewards early adopters and long-term contributors.
Liquid Staking & Yield Aggregation
Pencil Protocol has launched its own liquid staking ecosystem, introducing pTokens such as pETH and pWBTC. When users deposit assets into staking vaults, they receive pTokens—ERC-20 representations of their staked position—that continue to accrue yield.
These pTokens can be used across DeFi:
- Participate in liquidity pools
- Serve as collateral in lending protocols
- Generate additional yield through compounding strategies
To ensure deep liquidity, Pencil collaborates with partner DEXs to incentivize initial pToken pools. Early stakers also earn bonus rewards from Scroll and other ecosystem protocols.
Future upgrades will introduce LSD (Liquid Staking Derivatives) and reLSD (restaked LSD) models, further enhancing capital efficiency and cross-chain interoperability.
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Why Scroll Matters
Pencil Protocol’s success is closely tied to the growth of Scroll, one of the most technically robust ZK-EVM networks. Unlike other rollups that require code modifications, Scroll offers full EVM equivalence, allowing Ethereum dApps to migrate seamlessly.
With over 100 projects now live on its network and TVL exceeding **$218 million**, Scroll stands out due to its commitment to decentralization and open-source development. Backed by top-tier investors including **Polychain Capital, Sequoia China, OKX Ventures, and Qiming Venture Partners**, Scroll raised $80 million at a $4 billion valuation—proving strong institutional confidence.
Its ZK-powered architecture ensures high throughput, low fees, and Ethereum-level security—making it an ideal foundation for scalable Web3 applications.
Strategic Backing & Market Position
Founded in 2023 and strategically invested in by Gate Labs, OKX Ventures, Animoca Brands, Presto Labs, and Scroll co-founder Sandy Peng, Pencil Protocol holds an estimated off-market valuation of $250 million. As the first official launchpad within Scroll’s ecosystem, it enjoys close collaboration with core development teams and receives continuous technical and financial support.
This backing has enabled rapid iteration—from a simple launchpad to a full-fledged yield and compliance platform—positioning Pencil as a key player in the next wave of Web3 innovation.
Frequently Asked Questions (FAQ)
Q: What is Pencil Protocol?
A: Pencil Protocol is a launchpad and yield aggregation platform built on the Scroll network. It enables users to stake assets, participate in early-stage project launches, earn rewards via Pencils points, and access liquid staking products like pETH.
Q: How does Pencil Protocol ensure compliance?
A: Through ZK-powered tools like Deposit Manager and Filter, Pencil detects illicit transactions. It also supports KYC/AML integration via Proof of Humanity login while preserving user privacy.
Q: What are pTokens?
A: pTokens (e.g., pETH) are ERC-20 tokens representing staked assets. They allow users to maintain liquidity while earning staking rewards and participating in DeFi activities.
Q: Can I use pTokens outside Pencil Protocol?
A: Yes. As ERC-20 tokens, pTokens can be used across compatible DeFi platforms for lending, trading, or liquidity provision.
Q: How do I earn Pencils points?
A: You can earn Pencils by staking supported assets, participating in governance, or engaging with ecosystem partners. Points can be used to boost yields, increase launchpad allocations, or redeem exclusive perks.
Q: Is Pencil Protocol safe?
A: The protocol prioritizes security with audited smart contracts, ZK-based privacy layers, and collaboration with established partners. No major security incidents have been reported to date.
Pencil Protocol represents a new paradigm in Web3 infrastructure—where launchpads do more than launch projects; they empower ecosystems. By combining ZK technology, compliance tools, liquid staking, and a vibrant points economy, Pencil is setting the standard for what a modern L2-native platform should be.
As the Scroll ecosystem continues to grow, early participants in Pencil Protocol stand to benefit from both financial returns and governance influence. For those looking to get involved in high-potential Layer 2 innovations, now is the time to explore what Pencil has to offer.
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