Do you think the shadow of FTX's collapse has dissipated? Don't be naive. Go ask the fund managers on Wall Street who control hundreds of billions of dollars why, until the end of 2025, they still prefer to keep 90% of their cash sitting in JPMorgan accounts earning meager interest rather than touching those enticing 20% returns in the DeFi world? The answer is simple: they are not afraid of market volatility; they are afraid of waking up in the morning to find the exchange's cold wallet empty or the smart contract drained by hackers. In this ruins of extreme trust deficit, Lorenzo Protocol chose not to shout the slogan 'Not your keys, not your coins' like fundamentalists, but instead took a more pragmatic and challenging path—CeDeFi (a blend of centralized and decentralized finance). Lorenzo, strategically incubated by YZi Labs (formerly Binance Labs), has built a hybrid engine that integrates Fireblocks' MPC (Multi-Party Computation) technology, establishing a system where 'funds are secured on-chain, and strategies are executed off-chain.' This is not just a technical architecture adjustment but a delicate balancing act of 'control' and 'efficiency.'
The so-called CeDeFi architecture essentially builds a bridge with a 'safety cushion' between decentralized transparency and centralized liquidity. In Lorenzo's system, the Financial Abstraction Layer (FAL) acts as the commander. It no longer sends user funds directly to the exchange's hot wallet to 'run naked,' but collaborates with institutional custodians such as Fireblocks and Ceffu, using off-exchange mirroring technology. This means that the funds are always locked in a regulated MPC multi-signature vault, and the exchange only receives a mapped amount of the funds for executing delta-neutral quantitative strategies. This design completely severs the hands of exchanges from misappropriating user funds while retaining the seemingly bottomless liquidity depth of CEX. The BANK token, as the settlement medium in this architecture, triggers the burning of protocol revenue with each on-chain and off-chain fund transfer settlement.
To understand the value of this system, we must confront the two major deadlocks in the current market. Pure DeFi protocols, while transparent, are constrained by on-chain performance and slippage, making it difficult to execute high-frequency quantitative strategies, which leads to a cliff-like drop in yield after large capital inflows (typically maintaining only 3-5%). On the other hand, purely CeFi asset management can capture Alpha yields of over 15% through high-frequency trading, but its 'black box' nature keeps investors in constant anxiety— you never know if your money is being arbitraged or used to fill the boss's hole. Lorenzo's CeDeFi architecture precisely penetrates this pain point: it uses MPC technology to put a 'shackle' (restricting misappropriation) on the funds, while allowing trading strategies to dance the freest waltz (efficient execution) in the CEX ballroom.
This process was perfectly validated during an extreme market condition on December 18, 2025. At that time, the market fluctuated violently within an hour, leading to a backlog of liquidations in many on-chain lending protocols. Lorenzo's FAL system completed the adjustment of hedge positions in milliseconds through Ceffu's OES (Off-exchange Settlement) channel, and all operations were carried out in the off-chain matching engine, unaffected by the soaring on-chain gas fees. In the subsequent settlement phase, the smart contract automatically verified the balance changes in the escrow account at block height 928,550, updating the earnings in real-time to the on-chain sUSD1+ net value. The entire process enjoyed the silky experience of CEX while maintaining the trustless verification of DeFi.
Data does not lie. According to the latest tracking by DeFiLlama, the USD1+ OTF using the CeDeFi architecture has achieved a robust APY of 12.8% over the past three months, maintaining a record of zero asset loss during multiple exchange outages. This 'safe high yield' has attracted a large influx of traditional hedge funds, with the proportion of institutional funds in the Lorenzo protocol rising from an initial 15% to 48%. Meanwhile, due to the substantial profits brought by high-frequency off-chain execution, the number of $BANK repurchased and burned by the protocol reached a monthly record high, accounting for 0.65% of the circulating supply.
@Lorenzo Protocol #LorenzoProtocol $BANK
Looking ahead, YZi Labs is defining a new financial species through Lorenzo. In 2026, we may no longer deliberately distinguish between what is DeFi and what is CeFi. True financial sovereignty is not a black-and-white ideological struggle, but rather a code in which control always remains in the hands of users, regardless of where the funds flow. Lorenzo is not just building a trading architecture; it is a submarine tunnel leading from the Web3 world to the deep waters of traditional finance. And the BANK in your hand is the most primitive pass to this tunnel. I am KeZhouQiuJian, an analyst who focuses on essence and does not chase noise.
