@Lorenzo Protocol #LorenzoProtocol $BANK
This article will delve into the concept of 'fractional finance', explaining why the share structure of traditional funds can traverse decades of market cycles, while OTF is bringing this structure on-chain, allowing financial products to exist for the first time in the form of 'holdable shares' rather than fragmented strategy collections.
Many people, when they first see OTF, instinctively understand it as 'strategy tokenization', as if it simply packages a certain yield strategy into a token that users can buy to participate. However, this understanding actually misses the essence of OTF's ability: it is not strategy tokenization, but rather the on-chain realization of 'fractional finance'.
This is a very critical distinction.
Tokenizing strategies is equivalent to turning a set of logic into a token;
Share-based finance is equivalent to turning the entire product into a 'holdable equity unit'.
The difference between the two is like tokenizing a musical note vs. shareing a complete music score.
One is a fragment; the other is a structure.
The past DeFi world has never truly seen 'structured shares'.
Most products simply put users' funds in a certain pool and then give you an LP Token that 'represents your position'; this type of LP is not a share, it is merely a receipt proving your past participation in liquidity. It lacks structure, composability, income layering, and cycle management capabilities.
And the share mechanism of OTF is designed according to real financial engineering.
It is essentially a type of on-chain fund share.
What you hold is the 'structural equity' of the product, not a pool position;
What you enjoy are the earnings generated by the structure, not rewards from specific operations;
You bear the portfolio risk, not isolated risk;
What you gain is a 'financial object that can change over time', not a static receipt.
This design is very close to fund shares in traditional finance, but the challenge lies in how to put it on-chain so that it is composable, auditable, and disassemblable, while also allowing ordinary users to hold it directly. This is precisely the breakthrough achieved by Lorenzo's OTF.
When you deposit funds into USD1+ OTF, what you receive is not 'an LP Token representing a position', but a value-increasing share sUSD1+ that automatically accumulates with earnings. This is not just 'income growth', but 'structured growth'. The system itself generates income through multiple strategy combinations, and the value of sUSD1+ automatically rises with structural actions. This means what you hold is not an operational result, but a 'financial object that evolves over time'.
In this sense, OTF's shares are much closer to real financial products than any 'income certificates'.
The reason share-based finance can traverse cycles is simple: it absorbs volatility within the structure rather than leaving it to users.
The fact that traditional funds have not disappeared for decades is because share structures are naturally suitable for long-term holding. They do not require users to constantly migrate or adjust, but allow users to participate in long-term portfolio changes by holding shares.
And OTF is making this logic work on-chain for the first time.
More interestingly, the share mechanism gives the structure future scalability.
Traditional DeFi products are almost all 'one-time designs', with a lifecycle like a single event, not a system. In contrast, share-based structures are 'sustainably evolving'. Strategies can be updated, portfolios can be adjusted, risk control can be iterated, while shares as 'equity carriers' do not need to change. It is the continuous identity of the product.
In the future, if OTF supports more types of strategies, the shares will still be the original shares;
If iterations occur within the structure, the shares can still accommodate changes;
Even if a certain enterprise wants to combine its own cash flow with OTF, the shares remain an appropriate abstraction.
The deeper you look, the more you will realize: OTF is not meant to adapt to a certain strategy, but to adapt to time. It is not about chasing a certain market, but about allowing financial structures to continue to exist on-chain.
At the same time, shares enable OTF to have 'composability'.
Wallets can recognize shares, applications can embed shares, and enterprises can hold shares, making these actions more structurally significant than holding 'tokens representing LP positions'.
Shares are the language of the financial world; they make products into objects, rather than just a string of numbers.
OTF brings this language on-chain, moving DeFi from a 'pool' logic to a 'product' logic.
This is also why the combination of OTF and FAL is so important.
Shares are responsible for 'financial expression',
FAL is responsible for 'financial invocation'.
One expresses structure, the other executes structure,
This is exactly how modern financial systems are composed.
Behind all these changes, my deepest feeling is:
OTF is allowing on-chain finance to finally have a 'product layer'.
Previously, DeFi only had protocols, tools, and mechanisms but lacked 'products'.
A product is a combination, a structure, an action, an experience accumulated over time.
OTF is the beginning of this experience.
In the future, when more wallets, applications, and enterprises start using OTF shares as asset management units, people may realize: what on-chain finance really lacks is not strategies, but a structure that can carry strategies.
And share-based structures are the cornerstone of all this.
