Friends, recently I added a new toy to my crypto wallet—OTF (On-Chain Trading Fund). Don't be fooled by its three letters; what lies behind it could be the key to the next billion-dollar market. It all started with my first "on-chain financial management" experience in the Lorenzo Protocol.
1. The transition from "farmer" to "commander"
Do you remember the summer of DeFi? I was like a weary "farmer", rushing between countless liquidity pools to mine, afraid to miss any opportunity for profit. Now, with the emergence of OTF, I have upgraded from "farmer" to "commander"—I just need to choose a strategy, and let the code execute the rest. OTF is like having Goldman Sachs' trading desk stuffed into my wallet, and I don't need to understand complex financial derivatives, I only need to know: how much profit I want and how much risk I can bear.
In traditional finance, we need to go through banks or brokers to buy funds, whereas in the on-chain world, Lorenzo Protocol's OTF turns funds into freely tradable tokens. Imagine that what you are purchasing is not just a fund share, but an asset that can be freely combined in any DeFi protocol — it can be used for collateral lending, as trading margin, and even fragmented for transfer. This flexibility is something traditional financial products cannot achieve.
Two, The Eve of the Explosion of On-chain Asset Management
Data shows that the scale of tokenized money market funds has surged from about $770 million at the end of 2023 to nearly $9 billion. Goldman Sachs predicts that by 2030, tokenized funds will account for 1% of global asset management size, exceeding $600 billion.
But this is just the tip of the iceberg. In addition to money market funds, alternative assets such as private equity, real estate, and private credit are rapidly going on-chain. What Lorenzo Protocol is doing is building a universal issuance and trading layer for these assets — the Financial Abstraction Layer (FAL).
Three, Lorenzo's 'Financial Abstraction Layer': Ultimate Simplicity Behind Complexity
Lorenzo's Financial Abstraction Layer sounds profound but is actually quite clever. It functions like a super scheduling center, unifying the management of fund routing, strategy execution, and profit settlement. It is because of this infrastructure that Lorenzo can package and integrate off-chain quantitative teams, traditional financial assets (like treasury notes), and various on-chain yield sources into simple, tradable fund shares.
I love the design of their USD1+ product. Deposit stablecoins and receive sUSD1+ tokens. This type of token does not play tricks with quantity changes — you always have the same amount, but as the underlying fund's net value grows, the value of each token rises correspondingly. Returns are directly reflected in the price, making it clear to see and convenient for secondary market trading.
Four, Transparency: Risks Have Never Been So Clear
Unlike the black-box operations of hedge funds in traditional finance, Lorenzo clearly labels every risk factor of its strategies — what protocols it relies on, the historical maximum drawdown, and what factors may lead to losses.
As a player who has experienced multiple cycles in the cryptocurrency market, I deeply understand the value of this transparency. In the DeFi space, too many projects use complex economic models to obscure real risks. The on-chain verifiability of Lorenzo allows the ancient maxim of 'trust but verify' to be truly realized.
Five, Future Imagination
When I hold Lorenzo's BANK tokens and stake them into veBANK, I am not just speculating; I am participating in the governance of this on-chain investment bank. I can vote on which strategies receive more resources, how fees are distributed, and even the direction of new products.
Institutional-grade asset management strategies are being tokenized and democratized. As regulation, liquidity, and financial infrastructure push more value onto the chain, protocols like Lorenzo are positioning themselves as a full-stack asset management and liquidity layer.
So, next time you open your crypto wallet, consider this — you are no longer just holding assets; you are operating a micro investment bank that belongs to you. The OTF is the gateway to this new world.
