As an old investor who has gone through three rounds of bull and bear markets, I often review late at night: why were we able to make more money in the summer of 2020, the so-called 'DeFi Summer', than we could ever spend in our lifetime?
Is it because we are smart? No. Is it because we are diligent? Also no. It is because even when we buy with our eyes closed, we hit a huge track that is about to explode.
That year, the assets on Ethereum were awakened by 'smart contracts', and liquidity surged like a flood, creating myths like Uniswap, Aave, and Curve.
Four years have passed, and the current Ethereum ecosystem resembles a crowded red sea. Gas fees are expensive, projects are competing against each other, and VC valuations are absurdly high. If you still expect to find hundredfold opportunities on Ethereum Layer 2 now, it's like searching for a needle in a garbage heap.
So, where is the next 'DeFi Summer'?
Shift your gaze to that largest, oldest, yet most silent giant - Bitcoin.
Bitcoin, with a trillion-dollar market value, has only just reached its 'smart contract moment' (through technologies like Babylon) today. This previously unplowed virgin land is brewing a financial storm more violent than Ethereum's back in the day.
And at the center of this storm, I am optimistic about Lorenzo Protocol taking on the role of the 'liquidity engine'.
Today, let's discuss why Lorenzo might be one of the most important infrastructures in this bull market from the perspective of 'cyclical theory', and why its token BANK is a ticket that cannot be discarded.
Chapter One: The Choice Between the Red Sea and the Blue Sea
In trading, direction is more important than effort.
The current market landscape is very clear: on the Ethereum side, there are thousands of projects competing for that limited pool of funds, everyone is draining each other, which is also why the so-called 'value coins' have fallen harder than the meme coins recently.
On the Bitcoin side, there is a vast blue ocean with a volume of 1.5 trillion dollars, but the current level of development is less than 1%. This is a severely asymmetric market.
In the past, when we wanted to manage Bitcoin, we could only cross-chain it to Ethereum and turn it into WBTC. This was not only troublesome but also unsafe (due to BitGo custody risks). Now, Lorenzo Protocol provides a native solution. It does not require you to transfer Bitcoin away but instead uses Babylon's technology to directly secure rights, stake, and earn interest at the Bitcoin layer.
What does this mean? It means that the door to 'native DeFi' in the Bitcoin ecosystem has been opened. Those Bitcoin whales that were previously hesitant can now safely enter through Lorenzo. The volume of this capital is astonishing. Even if only 5% of Bitcoin enters the Lorenzo system, that would amount to hundreds of billions of dollars in TVL (Total Locked Value).
In the financial market, where there is a lot of water, there are big fish. Lorenzo occupies the largest water area.
Chapter Two: Lorenzo's Moat - Not only Staking but also Standards
Many newcomers will ask: There are several projects doing Bitcoin staking on the market, why are you specifically writing about Lorenzo?
Because in the infrastructure track, whoever sets the 'standard' is the king.
Lorenzo is not just a platform for retail investors to hold coins, it is more like a B-end 'liquidity wholesaler'.
Imagine this, there are dozens of Bitcoin Layer 2 public chains (like Merlin, B², etc.) competing for Bitcoin funding. If each of them establishes its own staking standards, the entire market will be extremely chaotic, and liquidity will also be fragmented.
Lorenzo's cleverness lies in making itself an 'intermediate layer'.
It uniformly receives users' Bitcoin at the front end.
It distributes funds to various Layer 2 networks through standardized interfaces at the back end.
It issued stBTC as a unified liquidity certificate.
It's like how the USB interface unified all computer peripherals. Lorenzo is attempting to unify the liquidity standards of the Bitcoin ecosystem.
Once this standard is established, all Layer 2s wanting to gain Bitcoin funding must connect to Lorenzo. All DeFi protocols wanting to support Bitcoin wealth management must be compatible with Lorenzo's tokens.
This is what I often refer to as 'positioning'. Lorenzo has choked off the financial flow.
Chapter Three: Principal and Interest Separation - A Bulletproof Vest Tailored for Large Capital
I have repeatedly mentioned Lorenzo's 'principal and interest separation' technology in my previous articles. Today, I want to discuss this from an 'institutional perspective'.
For retail investors, an annualized return of 10% or 20% may not make much difference, as long as it goes up. But for traditional institutions holding hundreds of millions of dollars, 'risk control' is the top priority.
Traditional staking tokens (like stETH) include not only the principal but also the yield, which can be highly volatile, and the tax treatment is extremely complicated. Lorenzo creatively split the assets into LPT (principal token) and YAT (yield token).
This is a perfect solution for institutions: Institution A (like pension funds) can only buy LPT, and it can be assured that its principal (Bitcoin) will not be affected by DeFi hacker attacks or market fluctuations, as it is isolated at the base layer. Institution B (like hedge funds) can only buy YAT, using high leverage to bet on yield fluctuations.
This refined risk layering is not something other competitors (like Solv, Lombard) currently possess. It is also the core reason why I believe Lorenzo deserves the three words 'institutional grade'.
There is technology, there are standards, and there is an understanding of human nature. This is the fundamental aspect of Lorenzo.
Chapter Four: BANK Token - The Capturer of Exponential Growth
Finally, let's talk about the most concerning subject - the native token BANK.
If you acknowledge the premise that 'the Bitcoin ecosystem is about to explode', you will find that selecting coins is a difficult task. The ecosystem will have lending, DEX, derivatives, and GameFi; which one will emerge? Unknown.
But in investing, there is a strategy called 'selling shovels'. No matter which application emerges below, they all need Bitcoin's liquidity, and Lorenzo is the one providing that liquidity.
The value logic of BANK tokens is very solid:
It represents the governance rights of the ecosystem: holding veBANK (locked BANK) can decide where future Bitcoin funds will flow. This is a resource that Layer 2 projects in urgent need of liquidity must compete for.
It is an amplifier of returns: ordinary users must hold BANK to obtain higher financial returns.
It is the index of the entire track: buying BANK essentially means going long on the prosperity of the entire Bitcoin DeFi ecosystem.
As long as the BTCFi track is still growing, as long as the TVL is still rising, the demand side for BANK is infinite, while the supply side is locked (due to the ve mechanism).
This supply-demand gap will ultimately reflect in the price.
Chapter Five: Conclusion - Lurking Before Dawn
Brothers, opportunities in the financial market always belong to the minority.
When everyone on the street is discussing the Bitcoin ecosystem, the opportunity might already be gone. Now is the quiet period before dawn. Many people are still questioning whether Bitcoin can do DeFi, while many others are struggling in Ethereum's red sea.
This is precisely the best timing for our layout.
Lorenzo Protocol has provided us with an excellent entry point. It is backed by top resources from Binance Labs, holding Babylon's core technology, and is reshaping the liquidity landscape of trillion-dollar Bitcoin assets with Wall Street-level product design.
Don't be the one who only realizes the next bull market peak too late. Understand Lorenzo, hold BANK, and let's calmly seize this tremendous wealth in Bitcoin's 'DeFi Summer 2.0'.
@Lorenzo Protocol #LorenzoProtocol $BANK
