Pencil Finance Completes First On-Chain Student-Lending Cycle

Pencil Finance has achieved a milestone in on-chain lending by completing its first fully on-chain student-lending cycle. In July 2025, the protocol deployed $1 million in loans through ErudiFi on EDU Chain (built on Arbitrum Orbit) with funding from Animoca Brands, Open Campus, and NewCampus.

The bundle supported loans across Southeast Asia, servicing more than 6,600 students at 118 institutions with about 1,050 direct borrowers. The loan cycle was split into senior and junior tranches, with the senior tranche offering fixed returns and repayment priority, and the junior tranche offering variable returns while absorbing first losses from defaults.

Pencil Finance's protocol operates on EDU Chain, an Ethereum-based network built using Arbitrum Orbit, and is co-incubated by Animoca Brands and the developer community HackQuest. Every step of the cycle - deployment, servicing, and repayment - was recorded on-chain, according to Pencil Finance.

The success of this milestone extends a broader push to bring real-world lending into on-chain DeFi markets that already handle stablecoin borrowing. However, borrower costs, default rates, and investor returns were not disclosed, leaving auditability and risk assessment incomplete.