Pencil Finance, a decentralized lending protocol incubated by Animoca Brands, says it has completed a $1 million student-loan cycle entirely on-chain, from raising investor capital to recording repayments and returning the funds with yield.

Education-financing company ErudiFi issued the loans, while Pencil Finance packaged them as an on-chain private-credit investment, allowing funders to supply capital and monitor repayments through blockchain records. Pencil Finance called it the first fully on-chain student-lending cycle, a claim that could not be independently verified.

The project belongs to a broader movement to bring private credit onto public blockchains, an approach pioneered by protocols such as Centrifuge, Maple Finance, and Goldfinch, which tokenize real-world debt so that investors can hold and track loans as on-chain assets. Applying that model to student lending, however, remains rare, and this cycle is a small test case: at $1 million, the bundle is modest even by the standards of the on-chain private-credit sector, where outstanding loan figures reported by tracking platforms run into the billions of dollars.

Animoca Brands, Open Campus, and NewCampus funded the bundle in July 2025. "The protocol deployed loans in the aggregate amount of US$1 million to borrowers, serviced through repayments, and returned the capital to the bundle's funders with yield, with every step recorded transparently on blockchain," Animoca Brands wrote on X.

The protocol operates on EDU Chain, an education-focused Ethereum-based network built using Arbitrum Orbit. Animoca Brands and the developer community HackQuest co-incubated Pencil Finance.

ErudiFi deployed most of the bundle through student loans and tuition financing across Southeast Asia, including Indonesia and the Philippines, a region where access to formal student financing is limited and many households lack credit histories. According to the company, the capital supported loans for more than 6,600 students at 118 schools and universities over 12 months, with about 1,050 receiving funding directly attributable to Pencil Finance.

Investors were divided into a senior tranche offering fixed returns and repayment priority, and a junior tranche offering variable returns while absorbing the first losses from defaults. That tranched structure mirrors conventional securitization, where risk is layered so that senior investors are shielded from initial defaults.

Across ErudiFi's portfolio, half of borrowers are women, 93% come from lower-income households, and 52% are using formal credit for the first time, the company says.

"Education lenders in emerging markets are creditworthy but invisible. Global capital can't verify their performance, so it never reaches them," Frank Li, co-founder of Pencil Finance, said in a statement. "Putting the lending cycle on-chain changes that: every repayment is recorded and auditable by anyone, in real time. This bundle built a public track record that makes the next bundle easier to fund."

Whether the model attracts larger follow-on bundles will depend in part on disclosures the company has so far withheld: it did not disclose interest rates, investor yields, defaults, or blockchain transaction records, limiting outside verification of the performance data underpinning the claimed track record.