Most DeFi “deposit” buttons hide a messy truth: you’re not really buying something, you’re stepping into a moving system that has to keep its books balanced while markets keep moving. Lorenzo’s On-Chain Traded Funds take that reality seriously. The clean part is the interface. The complicated part is the plumbing underneath how a subscription becomes a fund position, how that position earns, and why leaving doesn’t always mean instant liquidity.
A subscription into an OTF is closer to buying fund shares than it is to staking into a pool. You bring in a supported asset through the OTF page stablecoins like USD1, USDT, or USDC are used in the USD1+ flow and you sign the usual on-chain approvals and deposit transaction on BNB Chain. What you receive back is not “interest” and not more tokens over time. You receive a share token, commonly described as non-rebasing and value-accruing: sUSD1+ is the example @Lorenzo Protocol highlights, where your wallet balance stays flat while the unit value (the fund’s NAV per share) rises and falls with the strategy’s performance.
That design sounds cosmetic until you live with it for a while. Rebasing tokens are great for making yield feel visible, but they can be awkward for accounting, integrations, and anything that expects balances to behave like balances. A NAV-style token behaves more like a claim on a pool whose price changes, which is boring in the best way. The number of shares you hold becomes your identity inside the fund. The fund’s job is to make each share worth more over time, net of whatever costs are involved in running the machine. #lorenzoprotocol explicitly frames yield in USD1+ as showing up through NAV growth after fees, rather than drip rewards that you have to claim and track.
The part many people miss is what happens right after you subscribe. On-chain, it looks like a tidy swap: assets in, shares out. Off-chain, the system is preparing to deploy capital into strategies that don’t necessarily live entirely inside smart contracts. In Lorenzo’s own description of USD1+ OTF, deposits are held in custody and mirrored on a centralized exchange where a professional quantitative trading team executes the strategy, with activity occurring off-chain under operational controls. That line matters because it changes what “settlement” means. The chain is where you see your position, where shares are issued and burned, and where NAV updates are reflected. The work that produces the P&L can involve venues and operations that move at institutional cadence, not block cadence.
This is why the subscription experience feels immediate while redemption is deliberately paced. When you enter, the fund can accept new capital and issue new shares at the current unit value. When you exit, the fund has to reconcile real positions, ensure fair accounting across all investors, and coordinate unwinds that may be tied to the off-chain execution cycle. @Lorenzo Protocol describes redemptions as request-based, processed on a rolling cycle: you can submit a withdrawal request at any time, but the processing happens on scheduled reviews, with an expected window that can be as short as about seven days and as long as about fourteen, depending on when you submit relative to the cycle.
That window is not just a delay; it’s a rule that makes the fund legible. In a NAV-based product, fairness depends on everyone being priced off the same reference points. If redemptions were instantaneous while strategies were managed across venues, the most sophisticated users would treat the fund like a free option rushing in and out around performance updates, pushing hidden costs onto long-term holders. Cycle-based processing reduces that edge. It also makes the estimate you see at the time of request exactly that an estimate. Lorenzo is explicit that the final redemption amount is based on the unit NAV on the actual processing day, not the day you clicked withdraw, which means you’re exiting at the fund’s eventual mark, not at a snapshot you took mid-cycle.
The mechanics at the moment of exit are as important as the waiting period. In the USD1+ OTF example, when a redemption is executed, sUSD1+ is converted back into USD1, and the protocol describes consolidating the stablecoins used in the strategy into USD1 on payout. Practically, this is #lorenzoprotocol choosing a single settlement currency so the user’s “out” is predictable even if the “in” allowed multiple stablecoins. It’s a small design choice that removes a lot of friction. Without it, you’d have users redeeming into mixtures of assets, arguing about rates, and exporting risk back to the interface layer. Unification keeps the product feeling like a fund rather than a basket you have to rebalance yourself.
If you want a mental model that holds up, think of Lorenzo’s OTF interface as a share registry that happens to live on-chain. Subscriptions mint shares at the current unit value, tying you to the fund’s NAV. Yield shows up as a higher unit value over time, not as extra shares appearing in your wallet. Redemptions burn shares, but only after the system closes the loop between what is represented on-chain and what is being managed through its execution and custody setup.
None of this makes the product risk-free. It just makes the risks easier to name. You’re taking strategy risk because NAV can move. You’re taking timing risk because your exit price is determined on processing day, not request day. And you’re taking operational and counterparty considerations seriously because parts of the strategy may be executed off-chain even while the accounting and ownership are tokenized. The upside is that the enter-and-exit story stops being mystical. You subscribe into a share-based vehicle, you hold a token that behaves like a fund claim, and when you redeem, you’re stepping through a controlled settlement process designed to keep the fund’s math honest under real-world execution constraints.
