When I first followed how Lorenzo Protocol moves from vaults to OTFs, I hit a moment of real confusion. I kept asking myself where the trading actually happens. Is it on chain or off chain. The answer turns out to be both, working together in a loop. Capital comes in on chain, the risk taking and execution can happen off chain under strict rules, and then everything flows back on chain for settlement and distribution. I started picturing it like a conveyor belt. It leaves the clean factory floor, handles the messy work elsewhere, and then returns with a clear label anyone can verify. That full cycle is what Lorenzo calls the Financial Abstraction Layer. The name sounds heavy, but the idea is simple. Raise funds on chain, do the trading work off chain, then settle everything back on chain with NAV updates along the way.
OTFs were the next thing that made me pause. An On chain Traded Fund is basically Lorenzo wrapping one or more strategies into a single token I can hold. It feels similar to an ETF concept, but everything from issuance to burning to NAV tracking lives in smart contracts. When the NAV changes, my claim changes with it. When I redeem, I exit according to the fund rules, not guesswork or promises. That structure makes the whole thing feel more mechanical and less emotional.
Most users really meet the system through vaults, so that is where I spent the most time thinking. Vaults feel like jars. I deposit assets, the jar gives me a receipt, and then it follows a defined plan. NAV is simply what the jar is worth at any moment, divided across all the receipts. If the strategy performs well, NAV goes up. If it loses, NAV reflects that too. From my perspective, there is no illusion here. It is just transparent accounting enforced by code.
On the BTC side, Lorenzo has focused heavily on liquid staking. The clearest example is stBTC. I stake BTC through Lorenzo using a flow tied to Babylon, and I receive stBTC that represents my staked position. Liquid here just means I still hold a token I can move or use, instead of my BTC sitting locked and idle. The Babylon connection matters because stBTC is positioned as BTC staked through that specific setup, not some abstract derivative.
There is another layer that took me a minute to appreciate. Yield does not always show up as more of the same token. Lorenzo introduces Yield Accruing Tokens or YATs. The way I think about it is this. One token represents my principal, while another token represents the yield that accumulates over time. That split is clever. It lets me hold or trade yield separately without selling the base asset. This structure shows up clearly in how Lorenzo frames its BTC staking products.
Because no one likes being stuck on one chain, Lorenzo has also pushed cross chain movement for its BTC tokens. Using Wormhole, enzoBTC and stBTC can move across ecosystems like Ethereum, BNB, and Sui. To me, that just means the same BTC backed token can travel where I need it, instead of being trapped in one place.
Then Lorenzo made a move that really caught my attention. It applied similar thinking to stablecoins. That is where USD1 plus OTF and sUSD1 plus come in. The message is not about farming a dozen protocols. It is about holding one token that tracks a blended yield strategy. That strategy pulls from three buckets. Real world assets like tokenized US Treasury exposure, delta neutral trading on major exchanges which means strategies that try not to care about price direction, and on chain lending or other DeFi yield sources.
sUSD1 plus is the part that confuses people at first. It does not rebase. My token balance does not automatically increase every day. Instead, the token price is designed to rise slowly as yield is earned. I imagine it like a jar that gets heavier over time even though the number of jars stays the same. Redemptions can follow a set schedule rather than being instant, because the underlying strategies may need time to unwind and settle back into the base asset.
That brings me to BANK. BANK is the steering wheel. It is the governance layer and the gateway into veBANK, which is voting power earned by locking tokens. By holding veBANK, I can vote on fees, incentives, and protocol changes. It is not flashy, but it is the kind of boring control that decides whether a system stays balanced as it grows.
When I step back, I see Lorenzo as two worlds sharing one backbone. Vaults mint claim tokens. OTFs package strategies into single assets I can hold. The Financial Abstraction Layer pulls off chain execution back into on chain proof and settlement. BANK sits above it all like a rulebook that the community can actually vote on. And if the acronyms feel overwhelming at first, that feels normal to me. It means I am actually trying to understand the system instead of just skimming headlines.
