@Lorenzo Protocol $BANK #LorenzoProtocol
If you look at the stablecoin sector from 2019 to now, you will find an increasingly obvious pattern:
Scale is not the difficulty of stablecoins; the value cycle is.
Expansion is not the difficulty; self-sustainability is.
Why do many stablecoins grow rapidly at first, but ultimately their value systems collapse?
The reason is not that users have left, nor that competition is too fierce, but that:
Their value capture link has not been clean from the very beginning.
Either rely on incentives to sustain, or rely on interest rate reflexivity to surge, or rely on structural arbitrage to overlap, or rely on short-cycle revenue models.
These models shine during bull markets, but expose all issues in bear markets.
Lorenzo's fee system is an almost 'counter-cyclical' approach:
It is not designed to attract users, not to pull TVL, but to build a long-term monetary cycle's blood generation mechanism.
In this article, I will dissect Lorenzo's value capture link, explaining why it is so clean, why it is risk-resistant, and why it is sustainable.
Part One: The vast majority of stablecoins' value capture is 'unstable'
This statement sounds harsh, but almost every stablecoin in the industry cannot escape a few issues:
Question 1: Value capture depends on short-term interest differentials
When interest spreads are high, it looks very profitable,
But when the interest spread is low, the entire system has no income.
Question 2: Value capture depends on expectations rather than real income
You will see many protocols stating 'what the future will hold',
But today's actual income is zero.
Question 3: Value capture depends on complex structures, rather than simple models
Once the structure breaks, the link is severed,
Yields disappear like smoke.
Question 4: Value capture depends on growth, not on use
When user growth slows, the entire economic model will deteriorate in reverse.
Question 5: Value capture depends on inflation models, governance tokens, and emotional accumulation
Such tokens are not 'value assets',
But rather 'story assets'.
These issues have led to a strange phenomenon in the stablecoin space:
The faster a stablecoin grows, the more it exposes value capture issues.
Because growth is often based on 'future income' rather than built on 'real income'.
And Lorenzo is exactly the opposite:
Its value capture comes from —
Income that has occurred, is auditable, and measurable.
Part Two: Why is Lorenzo's fee system a 'clean value cycle'?
The so-called 'clean' refers to:
Not relying on inflation
Not relying on emotions
Not relying on external subsidies
Not relying on complex structures
Not relying on market risk premiums
Not relying on unpredictable interest rate spreads
Not relying on the assumption that 'the future will always be better'
And Lorenzo's value cycle link is very simple and direct:
Stablecoin demand → Minting activity → Liquidation mechanism → Protocol fixed costs → BANK value return
Every step in this chain is reproducible, audit-able, and sustainable.
You can think of it as a 'small on-chain bank model', but it does not rely on loan interest spreads, but on two types of the most stable on-chain income:
Minting & redemption mechanism fees
The yield from the collateral assets themselves
This mechanism is the true value closed loop that can traverse cycles.
Part Three: Why do 'simpler fee models tend to last longer'?
Many protocols like to make their rates extremely complex:
Dynamic rates
Risk-adjusted rates
Variable liquidation rates
Parametric yield
Negative interest rate mechanism
Layer 2 minting discounts
These structures can bring 'appear to be more scientific' designs in the short term,
But in extreme market conditions, it can lead to a fatal problem:
Complex structures = Structures that are unexecutable during liquidation.
During liquidation, no one will study the parameters,
The market only cares about:
'Can it be liquidated?'
'Can it be taken over?'
'Is it transparent?'
'Is there a discount?'
'Are there potential loopholes?'
And Lorenzo's fee structure is clean to the extreme:
Parameters public
Behavior determined
Not relying on complex functions
Not relying on external arbitrageurs
Not relying on speculators
Not relying on demand driven by high APY
Not relying on emotional chains
It is a real cash flow structure, not a narrative model.
Part Four: Why is Lorenzo's value cycle more 'sustainable' than Maker, FRAX, and USDe?
I compared from several dimensions:
Compared to Maker (DAI)
The problem with DAI is:
The larger the scale, the higher the governance complexity;
The yield structure is becoming more diversified and institutionalized;
At the same time, the collateral system is becoming increasingly centralized.
Its value capture comes from a multi-layer income combination, which is not pure enough.
Compared to FRAX
FRAX is innovative but has a complex yield structure,
Some of its income depends on market structure and lacks complete predictability.
Compared to USDe
USDe's value capture comes from market interest spreads, short selling income, and risk premiums,
This system performs strongly in high-yield cycles,
But in bear markets, it exposes extreme pressure points.
And Lorenzo's value model is a 'static steady-state model':
Stable collateral yields → Stable protocol rates → Stable BANK value.
It does not rely on external conditions, does not rely on market conditions, and does not rely on high volatility.
The biggest characteristic of this type of value capture is:
Will not collapse due to changes in market sentiment.
Part Five: Lorenzo's monetary cycle is not a 'speculative cycle', but a 'usage cycle'
The essence of stablecoins is debt.
The question that all stablecoins ultimately need to answer is:
Who is willing to borrow this money long-term?
Who is willing to use this debt long-term?
Who is willing to pay the usage costs long-term?
This is the monetary cycle.
The vast majority of stablecoins fall into 'speculative cycles':
High APY → High minting → High reflexivity → System vulnerability
This cycle is driven by emotion and expectation, and cannot exist long-term.
And Lorenzo's cycle model is a 'usage cycle':
Real use → Stable minting → Stable income → Protocol self-sufficiency
This is the only correct lifecycle of stablecoins.
Part Six: Why does BANK have 'real value' in this structure?
Because BANK is not:
Governance token
Narrative tokens
Emotion tokens
Incentive tokens
Its value comes from:
Minting fee
Liquidation income
Collateral asset yield
Protocol net income
Growth in borrowing demand
Stablecoin usage depth
In other words,
BANK does not rely on 'user numbers', does not rely on 'community sentiment', does not rely on 'future roadmap',
But relies on 'how much money the protocol generates each day'.
Such tokens are very rare in the crypto industry.
Because the vast majority of projects do not dare to use 'real income' as a value anchor.
Lorenzo dares, and its model logic allows it to do so.
Part Seven: My judgment — Lorenzo's fee system is the most 'cycle-resistant' structure in the industry
In conclusion, my judgment is very clear:
The future of the stablecoin space will increasingly resemble traditional monetary systems.
It's not about TVL, not about growth speed, not about multi-chain, not about packaging ability,
But rather:
Whose blood generation mechanism is the cleanest?
Whose value capture is the least dependent?
Whose monetary cycle is the most robust?
Whose reflexivity is the lowest?
Who is the least dependent on market sentiment?
Lorenzo's value cycle exactly meets these requirements.
Its fee structure has no gimmicks, no stories, no pseudoscience.
Only a true financial structure.
This is also why I believe:
Lorenzo is one of the few stablecoin systems that can exist long-term based on its own structure.
And BANK is one of the few protocol tokens that can maintain value through real income.
They are not designed for short-term markets,
But is designed for the next phase of the entire industry — the era of monetary infrastructure.
