Holding a few PPTs and backtesting data to raise tens of millions of dollars? Those good days of 2021 are long gone. On a certain day in December 2025, when the 23rd quantitative team officially connects to the Lorenzo protocol, they will face not investors in a café, but a cold and ruthless 'digital security check' system. On this day, Lorenzo's on-chain managed assets (AUM) will exceed $600 million, but what deserves more attention is the selection rate behind it — only 4.2%. In this seemingly decentralized world, Multichain Event Protocol Limited has built an extremely centralized trust funnel by controlling the distribution of API keys. For trading teams, this is a contract to exchange their souls (IP whitelisting and KYB data) for liquidity; for Lorenzo, this is a cold-start game using a low management fee of 0.5% to attract 20+ top wallet providers (Source 171).
The core of this onboarding mechanism is called 'Fund Mirroring'. In terms of technical implementation, it is not a simple transfer but a precise state mapping. The trading team must first pass the due diligence of the business team, submitting core privacy data including the server IP address. Subsequently, Lorenzo mirrors the raised funds into the CEX sub-account opened for that team and issues a permission-sanitized API key. Economically, this design is extremely cunning: it deprives the trading team of the 'withdrawal right', retaining only the 'trading right', thus reducing the probability of moral risk (Rug Pull) from non-zero to mathematically infinitesimal. In exchange, Lorenzo only charges a 0.5% protocol management fee (far lower than the traditional hedge fund's 2%), and this income ultimately flows to the $BANK ecological incentive pool, forming an economic moat of 'low fee savings and high standard access'.
However, this process hits the most painful nerve of current crypto asset management: the monetization of trust costs. On a societal level, traditional Crypto fund due diligence (KYB) averages three weeks and costs up to 15,000 euros, often relying on unreliable paper reports. Lorenzo's 'digital security check' solves this data dilemma through enforced technical binding. The trading team must provide trading pairs and strategy logic during the configuration phase, and if actual trading behavior deviates from the preset (for example, if an account that should be delta neutral suddenly goes long), API permissions will be instantly cut off by the smart contract. This technical 'tyranny' may make some radical teams uncomfortable, but it is precisely the only reason institutional funds dare to enter the market – under Binance API's hard limit of 100 orders every 10 seconds, only the most disciplined code can survive.
The details of the execution process are filled with game theory flavor. When a new team passes the review, Lorenzo will call addPortfolios(address[]) on-chain to whitelist its hosted wallet. It then enters the 'Fund Mirroring' phase, where funds flow from the Vault contract to CEX sub-accounts. The most critical constraint occurs in the seven-day settlement cycle: the trading team must confirm the closing volume three days in advance (T-3) and return the principal plus profits to the Vault contract. If funds do not arrive on day T, what triggers on-chain is not a collection notice, but an automated freezeShares() penalty mechanism. This practice of solidifying commercial contract logic into Solidity code infinitely amplifies the economic cost of default, forcing trading teams to perform as precisely as machines.
The market's feedback on such strict rules is honest. As of December 2025, Lorenzo has successfully connected over 20 public chains and more than 30 DeFi protocols, with the yield strategy generated by stBTC attracting over $600 million in Bitcoin assets. Compared to the greedy model of traditional hedge funds, which often charges '2% management fee + 20% performance commission', Lorenzo's OTF model forces trading teams to survive solely on pure Alpha returns by only charging a 0.5% channel fee. This survival of the fittest leads to the intensification of the 'Matthew effect': the top five strategy teams manage 80% of the funds, while mediocre performers are ruthlessly eliminated during the seven-day settlement cycle.
The emergence of this model marks that the asset management industry is undergoing an 'Uberization' transformation. Traditional fund managers are like chefs with independent storefronts, while trading teams on Lorenzo are more like ride-hailing drivers – they do not need to own vehicles (funds), nor do they need to handle customer complaints (fundraising); they just need to provide driving skills (strategies). In this comparison, the legal framework of traditional Crypto funds appears cumbersome and inefficient. Lorenzo replaces LP protocols with API keys, uses on-chain settlement instead of fund administrators, and reduces the marginal cost of asset management services to nearly zero.
I observe that this is not just a rate war, but a reconstruction of production relations. When trading teams no longer hold the custody rights of funds, they degenerate from 'asset managers' to 'strategy nodes'. In this giant financial abstraction layer built by Lorenzo, each API key is an access port. By 2026, you may see Goldman Sachs or Bridgewater applying for an API Key to become a node in the Lorenzo network. This is not a downgrade, but an evolution – because in the depths of Web3, only codes that can pass the 'digital security check' deserve liquidity. For you, who hold BANK, every API call adds value to your governance asset.
I am a sword seeker, an analyst who focuses only on essence and does not chase noise.
