Redemption
Redemption logic is embedded in Pencil’s smart contracts and is automatically triggered based on loan maturity dates and repayment flows, ensuring that investors are repaid in accordance with bundle terms and protocol prioritization logic.
Grow Token
Auto-redeemed at maturity without fees
Early redemption is possible if there is sufficient liquidity in the pool
Early exits incur a 1% protocol fee and are processed through a FIFO (First-In, First-Out) withdrawal queue
Liquidity for Grow Token redemptions comes from three primary sources:
10% Reserve Buffer – Lending partners can only withdraw 90% of the capital raised. The remaining 10% is held by the protocol as a liquidity reserve to support early redemptions.
Unwithdrawn Capital – Any funds in the pool that have not yet been drawn down by lending partners remain within the protocol and can be used to fulfill redemption requests. This unutilized capital increases available liquidity in the short term.
Ongoing Repayments – As borrowers repay their loans, capital flows back into the protocol, replenishing the pool and enabling queued redemptions to be processed.
When a Grow Token holder initiates an early withdrawal and the pool lacks sufficient liquid capital, their request is added to a FIFO queue. As new repayments arrive or new deposits are made into the pool, withdrawals are fulfilled in the order they were requested. This system ensures fairness while managing liquidity constraints and discourages premature redemptions through a penalty mechanism.
EDUFI NFT
Interest is distributed on a rolling basis according to the payout frequency defined in the bundle (monthly or quarterly)
Principal is returned only at maturity, following the repayment waterfall logic
No early redemption or transfer mechanism is currently available, but future updates may introduce secondary market options for NFT liquidity
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