When @Lorenzo Protocol started appearing in lending protocols, I felt like I was witnessing a moment similar to when LSTs first stepped into DeFi a few years ago.
@Lorenzo Protocol #lorenzoprotocol $BANK
It's not an 'immediate game changer' type, but clearly a foundational change, quiet yet powerful, causing the way lending protocols operate to begin shifting.
Lorenzo – as the liquid restaking infrastructure layer – brings two important characteristics: higher yield performance compared to traditional LSTs, and the ability to create secondary assets that can be used as collateral.
And it is precisely these two points that are changing the risk structure, liquidity, and business models of lending protocols.
The first thing I noticed is that the integration of Lorenzo enhances the appeal of lending protocols in a very natural way.
In DeFi, users always want to optimize profits.
If they can stake ETH for basic yield, restake to receive additional security rewards from AVS, and use restaked assets for borrowing or providing liquidity, then clearly the actual profit margin increases significantly.
No lending protocol wants to stand outside that flow.
When an asset that allows users to 'stack profits' appears, it's only a matter of time before protocols compete to support it.
But the important thing is not in the profits.
The key lies in how Lorenzo changes the structure of collateral assets in lending.
Most assets that users brought into lending before had a fairly simple price model: ETH, wETH, LST,… meaning prices fluctuated with the market, without complex cash flows attached.
With Lorenzo, restaked assets have market value, additional yield, and risks related to AVS.
This is a type of 'multi-layer' asset, and bringing it into the collateral list forces lending protocols to rethink how to determine health factors and liquidation risks.
In fact, I see the clearest impact is the strong increase in TVL thanks to the appeal of yield.
Users have a strong incentive to collateralize restaked assets because they do not have to sacrifice the base yield.
With traditional assets brought into lending, you lose staking yield; but with Lorenzo, you retain yield and gain borrowing capacity.
This naturally increases the TVL of any lending protocol that supports Lorenzo.
And in DeFi, TVL is not just a number — it is a signal of trust.
As TVL increases, new users feel more secure, protocols have more leverage to expand products, algo stablecoins have more liquidity, and trading pools become deeper.
But every advantage has a downside.
Integrating Lorenzo also makes systemic risk more complex.
Restaked assets come with a type of risk that lending protocols haven't had to deal with before: AVS risk.
If an AVS encounters issues, is slashed, or significantly reduces rewards, the value of restaked assets can be affected in ways unrelated to the general ETH market.
Thus, the risk engine of the lending protocol must be smart enough to understand that restaked assets are no longer entirely correlated 1:1 with ETH.
When I reviewed the liquidation simulation models in some protocols, I realized they had to update their volatility assessment methods, adding stress-test scenarios linked to AVS.
Another thing I find quite interesting is that Lorenzo makes borrowing stablecoins based on restaked assets more appealing.
Not because the LTV ratio is increased, but because users can use the yield stream from restaking to offset borrowing costs.
This creates a type of 'internal carry trade' strategy: using yield to fund debt costs.
For those who like to optimize capital models, this is a golden opportunity.
But for the lending protocol, this could lead to a strong increase in borrowing demand, resulting in a greater need for stablecoin liquidity.
Many protocols may have to develop their own stablecoins or collaborate with algorithmic stablecoins to meet that demand.
Lorenzo also directly influences the liquidation market.
With traditional LST assets, price volatility is relatively stable compared to ETH.
But restaked assets can be affected by both ETH volatility and changes in yield from AVS.
This forces lending protocols to design more flexible liquidation mechanisms.
Some protocols are shifting to a multi-layer oracle model, combining market prices with performance data from AVS to determine collateral prices.
Personally, I evaluate this as a mandatory direction, as 'complex yield' assets like Lorenzo will become the new standard rather than the exception.
Another deeper influence is something many have not noticed: Lorenzo is driving convergence between restaking and lending protocols, making lending protocols no longer just a place to rely on traditional assets.
Lending is becoming a natural extension of restaking, as users who restake without borrowing miss out on an important layer of yield.
And this is precisely what is transforming lending protocols from the role of 'lending banks' into 'capital optimization machines'.
In the future, I think there will be lending protocols specifically built to serve restaked assets rather than the other way around.
An indirect but more strategic impact is that Lorenzo helps lending protocols increase their competitiveness.
In an increasingly saturated DeFi market, the protocol that integrates high-yield assets first will attract users first.
This creates a silent race among lending protocols: whoever integrates Lorenzo faster, optimizes risks better, and calculates liquidation smarter will have superior liquidity.
I have seen this shift clearly in how protocols update their roadmaps and add products.
Finally, the biggest impact of integrating Lorenzo lies in changing the mindset of the entire lending ecosystem.
Previously, 'lending - borrowing' was the core product.
But as restaked assets become increasingly complex, lending is no longer an independent product, but a piece in the multi-layer yield creation chain.
Users come not just to borrow; they come to optimize capital.
Protocols do not just provide liquidity; they provide architecture for users to accumulate multiple layers of profits while maintaining capital integrity.
And in my opinion, this is the biggest change: Lorenzo shifts the lending model from a simple financial product to a comprehensive capital governance platform.
