PENCIL FINANCE

Pencil Finance is a decentralized lending protocol that brings student loan financing on-chain, transforming student debt into a transparent and investable asset class. The company was founded in 2025 by Frank Li and is co-incubated by Animoca Brands and HackQuest. On April 30, 2025, it was announced that Open Campus and Animoca Brands deployed US$10 million in liquidity as loan collateral for the platform.

The protocol connects global investors with verified student loan originators through tokenized loan bundles. This is managed on the EDU Chain, a Layer 3 blockchain built on Arbitrum Orbit. The business model enables investors to provide liquidity to loan pools and earn returns from student loan repayments. The capital is allocated to educational financing providers, like ErudiFi, which then disburse the funds for student tuition fees. As students make their monthly repayments, the loan providers repay the principal and interest to the liquidity providers on the Pencil Finance platform.

Pencil Finance utilizes a dual-tranche capital structure to cater to different risk appetites. The Senior Tranche offers lower-risk, fixed returns, while the Junior Tranche provides a variable yield with higher risk and potentially higher returns. Investors can track their portfolios through a personalized dashboard. This model provides student loan companies with access to non-dilutive, flexible capital and reduces reliance on traditional financial intermediaries.

Keywords: decentralized lending, on-chain finance, student loans, real-world assets, RWA protocol, tokenization, blockchain, EduFi, asset-backed tokens, DeFi, impact investing, education finance, dual-tranche, liquidity pools, Animoca Brands, HackQuest, Frank Li, EDU Chain, Arbitrum Orbit, crypto lending