#LorenzoProtocol #lorenzoprotocol $BANK @Lorenzo Protocol
Loan agreements and documents refer to the document protected by the Law as defined in the Contracts Act 1980.
Crypto has been an excellent market creator over the years.
Quite successful at facilitating speculation.
Quite excellent to allow people to trade anything, any time, any place.
However, it has been remarkably underperforming on one thing that conventional finance has mastered over decades.
Capital funds need to be managed to achieve results rather than for drama.
The majority of the users of the DeFi are compelled to be traders even when they do not intend to.
They are forced to keep track of charts.
React to volatility.
Jump between protocols.
Chase offers which vanish within no time.
Lorenzo Protocol begins at another point.
What will it be like when on-chain finance is no longer a casino, but asset management?
Asset management is not a cool term in crypto.
It doesn’t trend.
It doesn’t pump overnight.
It does not offer immediate satisfaction.
Yet it is the behaviour of real capital.
Memes are not pursued by large amounts of money.
They seek structure.
They seek repeatability.
They are looking at strategies that can be made in the long run, not in a single market regime.
Lorenzo Protocol is constructed according to that mentality.
Fundamentally, Lorenzo involves adopting financial strategies that already exist, strategies that have endured several cycles in the traditional markets and translating them onto-chain in a usable form, which is transparent and composable.
Not copying TradFi blindly.
Cryptocurrencies Not pretending is the reinvention of finance.
But to translate what works into a new set up.
That nuance matters.
This translation is based on the concept of On-Chain Traded Funds, or OTFs.
The majority of the people that hear tokenized fund believe that it is another wrapper.
It’s not.
An OTF is not a token that symbolizes exposure.
It is a living structure.
Capital flows into it.
There are strategies that perform in it.
The returns are piled up therein.
Risk is managed inside it.
The interface is merely the token.
The ease of use of traditional ETFs and funds is effective due to the fact that the complexity is abstracted out of the hands of the investor.
You do not have to know all the trades.
You do not have to rebalance manually.
You do not have to time exits and entrances.
You select a course of action, capitalize it and leave the machine to do its job.
Until recently, DeFi has been a failure in this regard.
Lorenzo fixes that gap.
Intentionality is what makes Lorenzo not just a simple vault platform.
Here, vaults are not just containers to yield.
They are containers of strategies.
There is a reason behind every vault.
Some are simple.
Some are composed.
And that difference counts.
Simple vaults are narrow-minded, judgmental and straightforward.
They reap capital and invest it on a particular strategy with minimal strata.
It is applicable in situations where lack of clarity is more important than optimization.
You are aware of what you are exposed to.
You know why you’re exposed.
You know what you are becoming a gambler.
Much to be said in that simplicity.
It is in composed vaults where Lorenzo begins to sense some more professional asset management.
In this case the routing of capital is dynamic.
Strategies interact.
Allocations shift.
Risk is balanced amongst various approaches.
This is not the pursuit of the best return at any given time.
It concerns the moderation of the actions under the circumstance of the market conditions.
A good example would be quantitative strategies.
The majority of the retail users hear the word quant and turn off.
But quantitative trading is just rule based decision making.
No emotions.
No panic.
No euphoria.
Just execution.
Quant strategies acquire something strong on-chain.
Transparency.
Every move is verifiable.
Every rule is inspectable.
Every outcome is traceable.
Lorenzo makes the users who would have never heard of those strategies to have that clarity.
There is an additional maturity added by managed futures strategies.
They are not worried about rising and falling markets.
They care about trends.
That neutrality is valuable.
Structurally long people are the majority in crypto.
They are also the beneficiaries of the increase in prices and the victims of the decline.
Managed futures bring in a new way of thinking.
Adaptation over prediction.
That’s rare in DeFi.
Volatility strategies can be misconstrued.
The society believes that volatility is danger.
As a matter of fact, opportunity is volatility when handled in the right way.
Options-like exposure.
Structured positioning.
Defined risk.
Lorenzo permits these strategies to be present and does not necessitate that users would have to engineer them manually.
That matters.
Vast majority of users are not supposed to construct volatility structures on their own.
Where Lorenzo however straddles TradFi and DeFi thinking is in structured yield products.
Yield is not discussed as whatever the protocol provides.
It is structured.
Designed.
Bounded.
It is based on defined mechanisms to yield returns rather than by the emissions roulette.
And this is the way capital would like to be handled.
The need to separate strategy logic and user interaction is one of the most significant design decisions made by Lorenzo.
The user does not need to know how all the moving parts work.
They don’t have to rebalance.
They do not need to respond immediately.
They do not need babysitting jobs.
They choose exposure.
That’s it.
This reduces cognitive load.
And that is not discussed in crypto enough.
DeFi is tiring to ordinary individuals.
Constant alerts.
Constant fear.
Constant decision making.
Lorenzo cuts a good deal of that noise.
One more aspect Lorenzo gets correct is composability.
OTFs are not isolated silos.
They are able to communicate with other protocols.
As collateral, they can be used.
They are capable of being incorporated into larger systems.
It implies that asset management does not necessarily need to be passive.
It may make a part of the building.
There is explicit risk management in Lorenzo.
Not hidden in complexity.
Not disguised by yields.
Every strategy has familiar patterns of behavior.
Upside potential.
Drawdown characteristics.
Volatility exposure.
This will enable users to make decisions of their choice rather than hyped decisions.
That’s a big shift.
To control this system, there is the native token, called BANK.
Governance, however, is not a tick box.
It’s structural.
Strategy parameters.
Incentive alignment.
Long-term direction.
These decisions matter.
And they should not be determined by the mercenary capital.
The vote-escrow model, veBANK, supports that notion.
Locking tokens are not concerned with limiting users.
It’s about commitment.
Long-term system care givers receive more voice.
That is how serious protocols are self-insured against short term manipulation.
In Lorenzo incentives are not tailored to drive short-term usage.
They are built to achieve participation in the long run.
That patience shows intent.
I like one aspect about Lorenzo in that it does not assume that everyone needs to handle their strategies.
Crypto is fond of the concept of sovereignty.
Sovereignty is not a state of isolation.
Delegation is not weakness.
It’s efficiency.
Lorenzo is not afraid of delegation and at the same time does not eliminate transparency.
Regarding a wider view, Lorenzo Protocol is one of the steps in the direction of on-chain financial maturity.
Not replacing traders.
Not replacing speculation.
But adding another layer.
A level on which capital can be deposited, organized and developed without being constantly touched.
That layer has been missing.
In the case that Falcon Finance is concerned with a way to maintain assets and have access to liquidity, and Kite is about allowing autonomous systems to transact in a responsible manner, Lorenzo is about making capital productive without compelling users to become experts.
The combination of them gives a clue of what on-chain finance might turn into.
Less reactive.
Less chaotic.
More intentional.
I am not sure that Lorenzo is the one that will be liked by everyone.
Individuals, who pursue the adrenaline, will find other sources.
Individuals who think in year not weeks will know its worth.
The number of that audience is increasing with each cycle.
Final thought.
Crypto does not require additional innovation as an end on its own.
It requires mechanisms that assist individuals to handle value casually.
Lorenzo Protocol is somewhat doing that.
And in a world where people are too preoccupied with noise, silence may count the most.
