At the core of Lorenzo Protocol lies its Financial Abstraction Layer (FAL) — a system designed to make sophisticated financial strategies usable on-chain without exposing users to operational complexity.
What Problem FAL Solves
Traditional finance already offers structured strategies like covered calls, volatility harvesting, and risk-managed portfolios through ETFs. In contrast, Web3 still lacks scalable access to these instruments. Lorenzo’s FAL directly addresses this gap by abstracting complex execution into programmable modules (Lorenzo Docs – Financial Abstraction Layer) Lorenzo
How the Three-Step Execution Model Works
On-Chain Fundraising
Capital is raised through smart contracts, and users receive tokenized fund shares representing NAV exposure (Lorenzo Docs – FAL Architecture) Lorenzo
Off-Chain Strategy Execution
Funds are deployed into CeFi or hybrid strategies such as arbitrage, delta-neutral trading, or volatility strategies executed by whitelisted managers (Lorenzo Docs – Trading Execution Model) Lorenzo
On-Chain Settlement & Distribution
Profits, NAV updates, and yield distributions are settled transparently on-chain using rebasing or claimable reward mechanisms (Lorenzo Docs – Settlement Layer) Lorenzo
Why This Matters
FAL transforms DeFi from protocol-level tinkering into institutional-grade financial infrastructure, allowing both retail and professional users to access structured yield products without learning derivatives trading.
