In December, the current wave of 'TradFi on-chain' enthusiasm is not about how much a new coin has risen, but rather that J.P. Morgan has directly tokenized money market funds and placed them on the public chain Ethereum—named MONY, with the bank itself initially investing $100 million as seed funding.
The significance of such products for institutions is very straightforward: you are not here to experience DeFi; you are here to obtain an 'on-chain fund share' that is auditable, deliverable, and accountable. And when this demand becomes mainstream, the true watershed moment will shift from 'who can create strategies' to 'who can turn strategies into assets usable by institutions.'
I think the value of Lorenzo precisely falls on this watershed—it is more like a system that engineers the asset management backend rather than a single-point yield pool. Lorenzo refers to its core infrastructure as the Financial Abstraction Layer (FAL) in the white paper: it abstracts capital routing, NAV calculation, settlements, and profit distribution into standard interfaces using modular components, allowing complex strategies to be delivered in a form that is 'holdable/integrable' such as OTF (On-chain Traded Funds).
Lorenzo: The three essential components of the 'fund backend' that whales truly care about.
The first thing: net worth is not a caliber; it is discipline.
The 'transparency' of many on-chain products remains at the level of contract visibility; however, what whales want is the transparency of 'fund caliber': how net assets (NAV) are defined, how each net value (UnitNAV) is updated, and how redemptions are settled. Lorenzo provides very specific formulas for net worth and shares at the contract level: UnitNAV = NAV/LP, and clarifies the calculation method for deposited shares, settlement updates, and the next period's NAV after redemption.
More crucial is the redemption process: first, requestWithdraw() to lock shares, wait for the settlement period to finalize the UnitNAV, then withdraw() to retrieve the underlying assets—the white paper even states that the waiting period is set at 5-8 days, a 'delivery rhythm acceptable to institutions.'
This design may sound 'unsexy,' but it is closer to institutional habits: better to be a bit slower, but to solidify the caliber.
The second thing: strategies are not black boxes; they are accessible production lines.
You will find that Lorenzo writes very technically about 'introducing strategy teams': due diligence, configuring trading pairs and server IPs, mirroring funds to sub-accounts, issuing API Keys, settling profits and losses periodically, communicating about liquidation size in advance, and then returning the principal and profits to the contract address.
This actually answers an institutional-level question: when a strategy goes wrong, where is the chain of responsibility? When you need to change managers, how high are the migration costs? When you need to set risk control red lines, how are permissions cut? The existence of FAL is precisely here—it turns 'people and processes' into 'interfaces and permissions,' compressing uncontrollable subjective execution into auditable operational tracks.
The third thing: compliance is not a slogan; it is 'can be frozen/blacklisted/queryable.'
What institutions fear most is not yield fluctuations, but rather that 'dirty money risks' could implicate the entire fund pool. Lorenzo writes this very clearly in the security section: assets are managed through custodial/exchange main wallets with multi-signature management; once a CEX flags a suspicious transaction, you can use freezeShares() to freeze the corresponding LP shares, addBlacklist() for the blacklist, and query the blacklist and freeze list through the partner API.
The significance of this mechanism lies in its acknowledgment of compliance friction in the real world and its 'productization.' You might not like it being more CeDeFi oriented, but whales will see it as an explicable risk: rules are written in the contracts and APIs, and there are clear stop-loss switches in case something goes wrong.
BANK: Turning the 'adoption rate of asset management systems' into quantifiable governance rights.
At this point, the role of BANK is more like the 'equity certificate of asset management infrastructure' rather than just a simple emotional currency. The white paper clearly defines the uses of BANK: staking for rights, participating in governance, and participating in incentives; governance allocates influence and incentive weight through veBANK (locking, non-transferable, time-weighted).
If you view Lorenzo as the 'on-chain fund backend,' then the logic of BANK/veBANK is more like: those who help the system access more funds, more strategies, and more distribution channels (wallet/PayFi/DeFi) have more authority to decide how the system evolves—research reports also describe FAL as a modular API that can be integrated as backend services for wallets, payment applications, and other DeFi protocols.
This type of 'distribution capability' is becoming increasingly valuable in the hotspots of 2025: on one side, banks are moving money market funds on-chain (MONY), while on the other side, the on-chain money market fund assets of major institutions continue to expand (for example, the report mentions that BlackRock's BUIDL had reached nearly $1.8 billion by mid-December).
When TradFi begins to seriously engage in 'on-chain shares,' the on-chain world actually needs an 'asset management operating system' that can standardize strategies, settlements, risk control, and data disclosure. This is the position Lorenzo aims to occupy.
My view is simple: if you are looking from the perspective of a whale/institution, when studying Lorenzo, do not first ask 'what is this week’s APY,' but first ask three things—Is the UnitNAV/NAV caliber solid enough? Can the permissions and processes of FAL save you due diligence costs? Can the compliance switches (freeze/blacklist/API searchable) extract tail risks? If these three conditions are met, the strategy qualifies as an 'asset'; otherwise, no matter how high the return, it is just luck.
Disclaimer: The above content is personal research and views of 'carving a boat to seek a sword', intended for information sharing only and does not constitute any investment or trading advice.
