DeFi is about new ways to handle money and DeFi is trying to make things better. If DeFi had tickers for strategies people could see what is going on with DeFi. They could look at the tickers, for DeFi. Understand the strategies of DeFi. This would make it easier for people to use DeFi and understand what DeFi is doing. DeFi would be more open. People could make better choices with DeFi.
A Practical Look at Lorenzo OTFs (On-Chain Traded Funds) and Structured Yield
There is a frustration that almost every DeFi user will have to deal with at some point: you can see good opportunities, in DeFi but you cannot take advantage of these DeFi opportunities.
You can have Ethereum in your account. You can have Bitcoin in your account. You can also have stablecoins. You can even have governance tokens that tell a story.. When we talk about plans. The thing that people actually spend their time taking care of. DeFi usually makes you work all the time. You do not really own the plan you have to take care of it all the time. You have to do a lot of things like move money put money in a stake go through loops protect your money watch the rewards keep an eye on the liquidation thresholds check if the vault has changed its settings and hope that the money you make today will not be lost tomorrow.
That is why the idea, behind Lorenzos On-Chain Traded Funds hits a nerve in a specific way. Not because Lorenzos On-Chain Traded Funds are flashy. Because Lorenzos On-Chain Traded Funds are practical. Lorenzos On-Chain Traded Funds ask what happens if strategies become products and those products become tickers.
I do not think of tickers as a way to sell something. Tickering is like a way of doing things. It is a promise that you can give a name to a strategy figure out what it is compare it to things keep track of it and use it again. This is, like having a tool that you can use, not a list of things you need to do. Tickering is a discipline that helps you work with strategies, like tickers in a way.
The problem that OpenType Fonts are trying to solve is not about the yield. The problem that OpenType Fonts are trying to solve is actually, about the format of OpenType Fonts.
DeFi has always had yield. What it has really been missing is a simple way to put this yield together into something that acts like a part of a bigger investment portfolio. DeFi yield is available. It needs to be organized in a standard way so it can be a component of a portfolio.
In the way of doing finance you do not need to know all the details of every single trade to understand what you have bought. You might own a bond fund, a money market fund, a dividend fund or a managed futures fund. Each of these funds is, like a container that has rules. The rules say what the fund can invest in what kind of risk it can take, how it keeps everything balanced how it deals with money coming in or going out and how it tells you how it is doing. You are not actually running the investment strategy yourself. You are simply picking a plan a money management plan, a managed futures fund plan or any other type of fund plan that you like.
DeFi strategies are really confusing. They are like instructions that someone quickly wrote down on a napkin. The instructions say things, like "do these six things and do not stop". When the people who make these protocols try to make things easier by using vaults it is still really hard to understand what is going on. You have to think about what's happening at each step. You have to deposit money get a token watch the interest rate and hope that everything stays safe. DeFi strategies are just not simple.
On The Futures or OTFs are trying to change the way we think about things. They want to move the center of gravity one layer. So of thinking about vaults that do things we should think about products that represent exposures. This means that OTFs want us to focus on the products that show us what we are exposed to than just the vaults that hold things. OTFs are trying to make this change so we think about products that represent exposures, not vaults that do things.
That difference sounds small until you understand that it changes how people think about risk when it comes to a strategy. If you think of a strategy as a product you do not just ask what the Annual Percentage Yield is. You start asking what the shape of the strategy is. The shape of the strategy is what matters when you are looking at a strategy, as a product.
Structured yield is not about getting a yield. It is actually about having a shaped yield. The thing about yield is that it is really about the shape of the yield not just a higher yield. Structured yield is, about this shaped yield.
When people think of the word "structure" they usually imagine something that's really complicated.. The truth is, "structure" is just a way of being clear about what you want to do. You are making your intentions obvious that is what "structure" is, about.
A structured yield product is something that tries to define what you can get from an investment. A structured yield product does this by giving you a set amount of money so you know exactly what to expect from the structured yield product. The structured yield product is, like a plan that says how money you will get and when you will get it from the structured yield product.
How returns are. What the returns are dependent on. This is, about the returns and how the returns work. The returns are generated in a way and the returns depend on a few things.
What kinds of risks are people taking with the project. What risks are they trying to stay away, from. The thing is, some risks are being taken and at the time people are trying to avoid other risks. So it is interesting to think about what these risksre specifically and how they are being handled. What are the risks that people are taking with the project and what are the risks that they are avoiding. Why are they making these choices.
When people are under a lot of stress what actually happens in that stress situation.. The question is, who has to deal with the problems that come from that stress first who absorbs the losses, from the stress.
When things change, like the rules for rebalancing or the limits on leverage or the controls for dealing with losses how does the strategy work? What happens to the strategy as conditions change, like the rules for rebalancing or the limits on how much leverage's allowed or the controls for managing drawdowns. The strategy and its behavior are important when it comes to things like rebalance rules and the strategy must be able to handle changes, in leverage caps and the strategy must be able to deal with controls.
So when a lot of people want to sell something at the time it can be really hard to find someone who wants to buy it. This is what happens with liquidity. Liquidity is like a pool of money that people can use to buy and sell things quickly.. When everyone wants out at the same time the pool of money gets really small. It is like a lot of people trying to get out of a door at the time it gets crowded and it is hard to move. This is what happens with liquidity when everyone wants out at the time. Liquidity is very important because it helps people buy and sell things easily. Without liquidity it would be very hard to sell something when you need to. Liquidity is a problem when everyone wants out at the same time because it can cause big losses, for people who are trying to sell.
This is why structured products are important, to treasuries and funds and people who make investment decisions. It is not because they want things to be complicated. It is because they want to be able to predict what will happen. They want to know what the plan is and what it can and cannot do with their products. They want to understand their products.
Lorenzos way of framing things especially when people talk about his strategy as a series of steps is very organized. This approach is like the way people think about investments. It is an attempt to make money from investments something that can be managed like a business instead of something that people get excited, about, like a game. Lorenzos strategy is trying to make investments feel like a normal part of managing money not something that people do for fun.
The idea of a "ticker" really comes to life when the strategy can be taken anywhere.
Here is the sharpest version of the argument: a strategy cannot become an asset until the strategy can move through the system like an asset. The strategy has to be able to do this to really be an asset. This is what people mean when they talk about a strategy being an asset. The strategy has to be able to move through the system.
If an OTF token represents a defined mandate then the OTF token can be something that's really useful. The OTF token is like a ticket that people use to do certain things.
* The OTF token gives people permission to do something with the mandate that the OTF token represents.
The OTF token is important because it shows that the person has the right to do something with the mandate that the OTF token's for.
The main thing about the OTF token is that it is connected to a defined mandate so the OTF token is only good, for the things that the mandate says it can be used for.
Held in a wallet like a portfolio holding.
People use something as collateral if the risk engines are able to understand the collateral. This means the risk engines have to make sense of the collateral in order to use it as collateral.
Integrated into other DeFi products as a building block.
Tracked and reported as a distinct exposure (not a bundle of hidden steps).
When the market changes the investments are moved from one risk level to another. This happens when market regimes change. The investments are. Rotated between these risk bands.
That is where the idea of a "ticker for strategies" is not a nice phrase it is actually a part of the system. In finance many products are stuck inside their own account systems and they do not work well with other products.. With things that happen on a blockchain it is easy to combine different products and make them work together. So when you make a standard, for strategy tokens that people trust it can be used with all things.
This is also where the design work gets really tough. The more you can use a strategy in places the more you have to worry about hidden assumptions. Because the protocols that come later will really put them to the test in ways that the person who came up with the strategy did not think of. This is especially true for strategies, where hidden assumptions can cause big problems. The design burden is heavier, for strategies and that is something to think about.
So the On The Fly idea is not about how things are packaged. The On The Fly idea is actually a demand, for packaging that's of higher quality.
Lorenzos Bitcoin angle is really making people think that Over The Counter Funds are very necessary. The way Lorenzo looks at Bitcoin is making Over The Counter Funds feel especially needed. This is because Lorenzos view, on Bitcoin highlights the importance of Over The Counter Funds. Lorenzos Bitcoin angle is a reason why people are starting to think that Over The Counter Funds are crucial. The fact that Lorenzo is talking about Bitcoin in this way is making people realize that Over The Counter Funds are very important.
Within BTCFi people have been trying to figure out how to work with Bitcoin for a time. They wanted to know how to make Bitcoin easier to use and how to keep it safe. These are issues but they are not the biggest problems we have to deal with when it comes to Bitcoin anymore.
The big issue is figuring out how to use Bitcoin. How can Bitcoin become a resource that helps people without becoming too risky for them to use? The problem is that Bitcoin needs to be used in a way that makes it useful and strong not weak and easily broken. This is the part: making Bitcoin into something that people can rely on without it becoming fragile and losing its value. Bitcoin has to become capital, which means it has to be used to make more money or create something of value without becoming fragile capital that can easily be lost.
People who own Bitcoin usually think about the term, not just the short term. A lot of Bitcoin holders do not want to make changes all the time. They want to have Bitcoin investments that feel like:
“cash-like BTC” (liquid, redeemable, simple) versus
“yield-bearing BTC” (earning something, but with understood rules).
Lorenzo says that Bitcoin can be turned into a kind of asset management that is done on the chain. This idea of Lorenzo works with what are called OTFs. The reason is that OTFs let people show how risk they are willing to take in a clear way. This is really, about Bitcoin and how people can manage Bitcoin in a way like Lorenzo said.
In that universe one person who holds something might want to play it and get a steady yield. Another person who holds something might want to take a chance and get a return. Someone else might want to buy products that are like fixed-yield or protected designs.. Another person who holds something might be okay with taking a risk to get a higher return. Order To Fill systems are, like a collection of jobs not just one perfect solution.
Institutional product shelves work in a way: not every person is supposed to buy the same product. People are supposed to buy the product that matches their own objective. The institutional product they choose should be the one that fits what they want to achieve with the product.
What OTFs look like in practice: strategy products as “risk bands”
When you think about OpenType Fonts it is not one way of doing things. OpenType Fonts are really a type of file that can have different things inside it. OpenType Fonts can hold lots of shapes and styles so they are very useful. The best way to think about OpenType Fonts is that they are a format that can hold different strategy shapes like many different ways of making things look nice. OpenType Fonts are very good, at this.
So even if the people, in the group change products that are made in the OTF style usually fall into groups that're easy to recognize:
One family wants things to go smoothly they like the idea of having a steady income. This does not mean they want to avoid risk. It means they want to plan things to avoid big problems: they want fewer things that can go wrong they do not want to take big risks and they want to know what to expect when it comes to ups and downs, in the market.
Another family wants to make sure they have money set aside to stay safe. They do this by creating buffers, which're like safety nets. Some people call these principal- drawdown-managed structures.. Let us be real what they are actually doing is making things more complicated so they can avoid some big losses. The key thing to remember here is that they are only trying to avoid bad things from happening. No plan can completely get rid of every risk especially when it comes to crypto. However having a structure, in place can still make it less likely that things will go wrong in common ways.
There is a family of products that are all about trying to get better returns. These products can be really useful in a portfolio long as we know what we are getting into. The problem is not that they are trying to get returns it is that we do not always know what they are doing. If a product is going to behave like a risk then we should treat investment products like a big risk. The investment products should be clear, about what they're.
This is where the "ticker" concept is important again. The ticker is like a label. Labels are important because they make people accountable for what they do. When you give something a label you are making a commitment to what that label means. A label is like a promise to be a way and that is what a ticker is too it is a label that people use to identify something and that identification is a commitment to a certain profile the ticker concept is about being true, to that profile.
If Open Trading Floors succeed it will not be because they promise people will get a lot of money. It will be because Open Trading Floors teach people in the market to compare products by looking at what they have to do and how they behave, not by looking at pictures on a screen. Open Trading Floors will help people understand that comparing products is not, about looking at what they look like but about what Open Trading Floors can really do.
A good way to check if you really understand something is to ask yourself this question: Can I explain this on the fly without mentioning percentage yield? This is a mental test. If you can explain on the fly without mentioning percentage yield then you probably get it. Try this test with on the fly and annual percentage yield to see how well you can do.
Here is a simple way to tell whether a strategy has turned into a product:
If you take away the Annual Percentage Yield number can you still tell me what the investment is in terms? I want to know what I am dealing with in one to understand paragraph, about the investment.
A real strategy “ticker” should be explainable like this:
What the thing is supposed to do.
To do something you have to think about what it needs. What it must assume to do it is that everything is, in place. You have to consider what it must assume to do it and make sure that is the case. When something is going to happen what it must assume to do it is that all the parts are working together.
What could break the thing. I am thinking about what could break the thing. The thing is not very strong so lots of things could break the thing.
When things change how does it behave. It is interesting to see how something acts when the conditions are different. We want to know what happens to it when things are not the same. So we look at how it behaves when conditions change.
To get in and out you need to know how to enter and exit. The way you enter and exit is very important. When you enter you do something. When you exit you do something else. So it is good to understand how to enter and exit properly. This is, about the process of entering and exiting.
If the product cannot be described without talking about Annual Percentage Yield then it is not a portfolio instrument yet. The product is basically a bet on getting a yield, with some extra features added to it.
Operational Transfer Functions or OTFs, for short are trying to be things that people can understand. OTFs want to be instruments so that everyone knows what OTFs are doing.
The truth that is hard to accept is that having a plan does not make things completely safe. The plan just moves the danger to a place. Structure does not remove risk. It just relocates the risk.
Every single structured product whether it is, on a blockchain or not has to answer this one question: where does the downside risk actually go for these structured products?
The downside of something can be dealt with in a different ways. It can be managed with buffers. This means having money or assets like overcollateralization or being careful with how money is allocated. It can also be managed with hedging logic, which's like a plan to reduce risk or a waterfall-like design, which is a way of organizing things to reduce risk.
The downside can also be managed over time. This can be done with lockups, which means that people cannot get their money out away or with redemption friction, which makes it harder for people to get their money out.
Another way to manage the downside is through distribution. This can be done with fees which're like charges for something or with insurance modules, which are, like protection plans. It can also be done with reserve funds which're like extra money set aside for emergencies.
Sometimes the downside is not managed at all. Instead it is just. The price is adjusted. The downside of the investment is just. The price reflects that.
There is always a downside. The value of a structure does not lie in safety. The value of a structure lies in being transparent and having intentionality. The structure has to be transparent. It has to have intentionality.
So when we are looking at an OpenType Font, the adult way to evaluate an OpenType Font is not to ask if the OpenType Font is good. The question we should be asking about the OpenType Font is:
What risks are inside the box?
What risks are outside the box?
To make this mandate work what things do we have to assume are true, about the mandate? We need to think about what the mandate's what it requires. The mandate is the thing that has to be followed. So what are the assumptions that we have to make for the mandate to be valid and to hold up?
When things get tough what happens to liquidity? Liquidity is very important because it helps people buy and sell things easily. So when there is a lot of stress in the market liquidity can disappear fast. This means that people who want to sell something might not be able to find a buyer or they might have to sell it for a low price. This is a problem for liquidity. Liquidity is like the oil that keeps the market running and when it is gone everything can get stuck. So it is very important to understand how liquidity behaves under stress because it can help us make decisions, about our money and our investments. We need to think about what happens to liquidity when things get tough and how we can protect ourselves. Liquidity is a deal and we should pay attention to it.
The people in charge can change the rules. The rules can be changed very quickly by these people. The people in charge have the power to make these changes to the rules. They are the ones who decide what the new rules will be and when the rules will be changed. The rules can be changed by the people, in charge in an amount of time.
If Open Trading Funds become widely used these questions will stop being questions. They will become questions. That is not a loss of the DeFi culture. That is the DeFi system growing into the finance system. Open Trading Funds will be a part of the finance system.
The idea of strategy tickers is really interesting because it could actually change the way DeFi works.
DeFi is a system that's all about money and trading and strategy tickers could make a big difference in how people get rewards.
This is because strategy tickers are like tickets that people can buy and sell.
When people use strategy tickers they are basically betting on what will happen in the market.
If they are right then they get a reward. If they are wrong then they lose their ticket.
The cool thing about strategy tickers is that they could make DeFi more fair.
Now some people in DeFi get a lot of rewards just because they have a lot of money.
With strategy tickers it does not matter how much money you have.
What matters is how good you are at guessing what will happen in the market.
So strategy tickers could make DeFi a lot more fun and exciting for everyone.
This is why people are talking about how strategy tickers could change DeFis incentive structure.
DeFis incentive structure is like the rules of the game and strategy tickers could change those rules.
If strategy tickers become popular then DeFi will be a different place.
People will be able to make money in exciting ways and it will be a lot more fair.
That is why strategy tickers are such a deal and why people are so excited about them.
Strategy tickers could really change the way DeFi works and make it a lot better, for everyone.
The early days of DeFi were about trying new things moving fast and making different parts work together.. This also meant that people got really excited about things that seemed to be making a lot of money even if the people in charge were not being totally honest about how risky these things were. DeFi was like that. People were so focused, on making money with DeFi that they did not always think about the risks of DeFi.
Strategy tickers are something. They bring a kind of competition. This competition is, about strategy tickers. People use strategy tickers to compete with each other. The idea of strategy tickers is to make things more interesting. Strategy tickers are a way to compete.
Protocols are now competing to see which one can make its rules and requirements clearer, not just which one can produce the results. The protocols want to make sure people understand what they need to do. Protocols are trying to be better, at explaining what is expected of them. That is what they are competing about, not just about how much they can produce.
Designers are now competing to see whose product can handle stress the best, not which one has the best interest rate when everything is going well. The designers are trying to make sure their product can still work properly when it is under a lot of stress like when it's being used a lot. This is a change because before designers were only competing to see whose product had the best interest rate when it was not being used very much. Now designers are competing to see whose product is the best at handling stress performance and, at having a good interest rate.
People are starting to notice that markets are giving attention to products that behave consistently. Markets do this because they want products that always work well not products that have good marketing. The markets start to reward products that behave consistently. This is what matters to the markets not just how well the products are marketed. Markets want products that're reliable and that is what the markets will reward products that behave consistently.
People who handle Treasuries and the people who allocate things get tools that they can really hold onto without having to take care of them every day. This is a deal, for Treasuries and allocators because they get to use these instruments that are easy to manage.
People who buy and sell things in stores can benefit from this too. The biggest problem, for people is not that they do not get a lot back it is that things can go wrong. They do not understand what is happening. A product that works like a ticker tape can help reduce the need to always be paying attention to what's going on with retail. This retail product is really helpful because it reduces risk and misunderstanding for people who use it.
The practical promise is that we will have steps to take and more positions to fill. This means that the process will be simpler and there will be opportunities, for the positions. The positions will be readily available and we will not have to go through as many steps to get to them. This is the promise of having steps and more positions.
So what is Lorenzo really building with these OTFs? I mean what is Lorenzo actually doing with these OTFs? Is Lorenzo trying to make something with OTFs? Lorenzo is working on something, with OTFs. What is it that Lorenzo is really building with OTFs?
If you take away the talk the main idea of this thing is really simple:
Strategies should be ownable.
Ownable like an asset.
Comparable like a product.
Composable like a building block.
Auditable like a mandate.
Rotatable like an allocation.
That is what On-Chain Traded Funds are trying to do. They want to make a product shelf of strategy exposures. These exposures are. Labeled. They are designed to behave in ways that people can recognize. On-Chain Traded Funds make it easy to understand how these strategy exposures work.
In a system that is focused on Bitcoin this is really important. Bitcoin investors want their money to be safe. People who own Bitcoin usually want to keep their Bitcoin for a time have access, to their money when they need it and still make some money without having to sell their Bitcoin all the time. If these special funds can offer this in a way that's easy to understand they are not just a new way to make money from Bitcoin. They are a new way to own Bitcoin.
My last thought, on this is that DeFi does not need yield. What DeFi really needs is financial instruments. DeFi needs instruments to help people manage their money.
The future of DeFi will not be won by the DeFi protocol that promises the return. It will be won by the DeFi protocol that makes the returns easy to understand. This way people can hold the DeFi protocol returns in a way.
If "strategy tickers" actually become a thing that means DeFi will have created the missing link between building blocks and how people really manage their portfolios. The idea that Lorenzo has for OTF is right in the middle of this gap. It is trying to take strategies and turn them into things that people can actually use. This is, like taking a bunch of steps and turning them into a tool that people can work with. The "strategy tickers" and DeFi are really important here because they are what will make this happen.
Not a revolution. A formatting upgrade.
@Lorenzo Protocol #LorenzoProtocol $BANK
