Pencil Finance Completes First On-Chain Student Loan Cycle with $1M Deployment

Pencil Finance marked a significant milestone in decentralized finance by completing its first fully on-chain student loan cycle, deploying $1 million in loans to students through EDU Chain. This achievement demonstrates the potential of blockchain technology in making financial transactions more transparent and efficient.

The loan bundle was split into two tranches: senior tranche investors received $750,000 at a fixed 15% annual percentage yield, while junior tranche investors took the remaining $250,000 with variable returns and first-loss risk if borrowers default. The loans were administered on the ground by ErudiFi, a Southeast Asian edtech lender.

Pencil Finance chose to build its infrastructure on EDU Chain, a layer-3 blockchain built on Arbitrum, which inherits Ethereum's security at a distance while keeping transaction costs low. This decision has architectural implications for the protocol and demonstrates its commitment to providing transparent and efficient financial services.