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How Simplicity and Combination Enhance Capital Efficiency
An important design of the Lorenzo Protocol is the 'Vault' system. Unlike the common single liquidity pool in DeFi, Lorenzo's vaults are divided according to different strategies, and each vault has clear risk parameters, return objectives, and operating logic. The vault system not only represents a way of storing funds but also serves as an 'asset strategy mapping mechanism', allowing users with different risk preferences and return expectations to carry out more professional investment activities on-chain.
Why choose a vault instead of a single pool? This is because a single pool cannot achieve strategy isolation, nor can it express the risk factors behind different investment logic. In a single pool, all participants' funds are mixed in a large pool, and strategy execution tends to be relatively coarse. Once a certain strategy fails, it will damage the performance of the entire fund pool. Lorenzo's vault system divides funds into different logical units according to strategies, making funds correspond one-to-one with strategies, and achieving more complex asset allocation through the combination of strategies.
Why choose a vault instead of a single pool? This is because a single pool cannot achieve strategy isolation, nor can it express the risk factors behind different investment logic. In a single pool, all participants' funds are mixed in a large pool, and strategy execution tends to be relatively coarse. Once a certain strategy fails, it will damage the performance of the entire fund pool. Lorenzo's vault system divides funds into different logical units according to strategies, making funds correspond one-to-one with strategies, and achieving more complex asset allocation through the combination of strategies.
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