that tries to bring the ideas of traditional finance into the blockchain world. The team behind Lorenzo believes that many people want to invest in real strategies like hedge funds managed futures volatility strategies and structured products but they do not want to deal with complex tools or private banks. They also believe that everything can be made transparent if the strategy is converted into code and if the investment product becomes a token that anyone can hold. Lorenzo uses this idea to create something called On Chain Traded Funds. These are similar to traditional fund structures but they live fully on chain. When a person puts money into Lorenzo they receive a token that represents their share of the strategy. The strategy itself can be simple like staking Bitcoin or mixed and complex like combining trading systems and yield sources from many markets.
To make all of this work Lorenzo uses a system called the Financial Abstraction Layer. This is the part that connects the user deposit to the actual strategies. When someone deposits Bitcoin or stablecoins the Financial Abstraction Layer splits the capital into different strategies based on the rules of the fund. It can send part of it to a strategy that earns yield from Bitcoin staking and another part to a strategy that uses futures to capture funding rates and another part to a real world asset credit platform. The user does not have to understand the technical parts. They only see that they hold a fund token and that the value of that token changes over time depending on the performance of the strategies.
In the early days Lorenzo became known for its work around Bitcoin. Many people hold Bitcoin but do not use it anywhere. It sits idle and does not earn anything. Lorenzo tried to solve this by creating a liquid staking system for Bitcoin using partners like Babylon to provide shared security. This system produced a token called stBTC which represents staked Bitcoin. The user keeps their Bitcoin exposure but the stBTC can move through different DeFi systems. They also created a simple representation called enzoBTC which is a one to one token backed by Bitcoin. It was designed like a cash style Bitcoin asset so that people can move it across networks and use it directly in DeFi or other strategies. With these tokens Lorenzo spread its system into many blockchains including major EVM networks and chains like Sui where stBTC became a yield bearing Bitcoin asset inside the local DeFi ecosystem.
As the project grew Lorenzo expanded beyond Bitcoin. It started to position itself as a full asset management platform that can hold many kinds of strategies. The goal was not only to farm DeFi yields but to merge real world assets centralized trading professional strategies and on chain tools into one model. The result is the On Chain Traded Fund. To build an OTF Lorenzo uses vaults. A vault is a structure that holds assets and follows a specific strategy. A simple vault is the most basic version. It can hold a single strategy. It could be a trading model a credit pool or a staking method. The simple vault is easy to understand and shows clearly what type of risk is inside. A composed vault uses many simple vaults at the same time. When someone deposits into a composed vault they are exposed to many strategies at once. The weights between these strategies can change over time based on performance or market conditions. Sometimes this is done by the protocol rules and sometimes it can be done by external managers who follow a certain investment style.
Because these vaults represent real economic value Lorenzo needs a way to calculate the value of every share. That calculation is called net asset value. Lorenzo uses price data and oracle systems to measure the current value of everything inside the vault. If someone wants to redeem their fund token the system uses the net asset value to decide how much they receive. This part is very important because if the calculation is wrong existing users can be diluted or someone could take more value than they should. The oracle layer and the accounting system are treated as core components.
Lorenzo also tries to bring automation into strategy management. The team uses the term CeDeFAI which means a mix of centralized finance decentralized finance and artificial intelligence. The idea is that an AI model can manage strategies and talk directly to the Financial Abstraction Layer. Instead of a person clicking through dashboards the AI can send capital into a vault tell the system to mint the fund token and then watch the performance. The same AI can move capital between yield sources or trading systems without human stress. In the future this could allow very advanced strategies to operate without becoming too complex for users.
Users see all of this through real products. One example is USD1 plus which acts like a stable token that earns yield. The underlying strategies include real world assets and trading so the token grows in value slowly while trying to protect capital. Another example is stBTC where the holder earns yield on Bitcoin. A user can hold the token in a wallet trade it or use it as collateral while the yield works in the background. There are also plans for products that use volatility strategies and multi asset portfolios. All of these products follow the same structure even if the strategies change.
Lorenzo uses partners for custody and security. Because Bitcoin is very valuable the protocol uses custody solutions like Cobo and other regulated services to secure holdings. It uses proof of reserve tools and price feeds to make sure that wrapped assets remain fully backed. It also connects to many chains so that the tokens can live where liquidity is strongest. This becomes important for adoption because users want their yield tokens to work in many ecosystems not only one network.
BANK is the token that connects the community to the protocol. BANK is used for governance and for incentives. People who hold BANK can vote on new vaults new strategies and changes to the platform. BANK also appears in the reward system. Someone who stakes or locks BANK into the vote escrow system receives veBANK. The idea is that a person who is committed to the protocol for a long time should have more influence over decisions. veBANK holders can choose how incentives are distributed between vaults and what direction the protocol should take. This creates alignment between users who are long term holders and the strategies that receive attention.
From a user point of view Lorenzo removes many painful steps. In normal DeFi if a person wants to earn yield they must learn how to use many tools. They must understand liquidity pools restaking credit platforms and futures funding. They must manage risk on their own. In Lorenzo this work is placed inside the vault system. The user sees one token and one interface. They can redeem at any time without thinking about closing individual positions. The transparency still exists because the contracts are visible and the vault structure can be inspected.
Lorenzo sits in a larger movement in crypto. Many people now talk about Bitcoin finance. Instead of only holding Bitcoin they want to use it in strategies while keeping exposure. Many people also talk about tokenizing real assets and building reliable yield from cash flow instead of inflation. There is also a growing belief that financial products should be programmable and borderless. Lorenzo is part of all these changes. It tries to combine the discipline of traditional fund management with the openness of DeFi. If this model works it can become a base layer for many wallets and applications. A payment app could offer yield through Lorenzo. A treasury manager could place stablecoins into an OTF. A user could keep Bitcoin in stBTC and earn automatically.
Like any system that deals with real money Lorenzo has risks. It depends on the safety of smart contracts and the quality of its partners. It depends on the health of the strategies and the behavior of markets. If the oracle layer fails the value calculation can break. If the underlying assets move violently the vault must handle redemptions without damaging the system. There are also regulatory questions around tokenized funds. The future path of Lorenzo will depend on how it manages these risks and how it proves its model in difficult market conditions.
When I look at Lorenzo I see an attempt to turn finance into code. It takes a model that normally needs lawyers traders fund managers and private banks and compresses it into a programmable layer called the Financial Abstraction Layer. It takes a long history of portfolio building and turns it into a simple vault system. It turns share certificates into tokens that live on chain. The user gets access to strategies that were once only available to wealthy clients. The protocol gets access to global liquidity. This is the core idea. It is the idea that financial intelligence can be open and that structured products can be for everyone not just institutions
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@Lorenzo Protocol #lorenzoprotocol $BANK
