You know how Bitcoin is usually just… lazy? It sits in your cold wallet, doing absolutely nothing. Maybe it goes up, maybe it goes down, but it’s mostly just collecting digital dust. I have always found that annoying. Ethereum guys get to play with yield and staking, while Bitcoiners are stuck HODLing.
Well, that’s basically the problem Lorenzo Protocol (Bank) is trying to fix. But they aren't just doing the usual "wrap it and stake it" thing. They’re doing something weirdly specific they are slicing Bitcoin into two separate pieces.
Here is the breakdown of how these derivative tokens actually work, without the fancy banking jargon.
The big idea here is what they call "Principal-Yield Separation." It sounds complex, but it’s actually dead simple. Imagine you own an apple tree. That tree is your Principal (your capital). The apples it grows every year? That’s your Yield.
In the old world (and most of DeFi), if you sold the tree, you lost the future apples. If you kept the tree, you had to wait for the apples.
Lorenzo essentially lets you rip the future apples off the timeline and trade them separately from the tree itself. You deposit your Bitcoin, and the protocol hands you two different tokens in return.
One represents the money you put in, and the other represents the profit that money is supposed to make. It’s a neat trick.The first token you get is the Liquid Principal Token, or LPT. In Lorenzo ecosystem, the main one is called stBTC.
Think of stBTC as your claim ticket. It says, "I own 1 Bitcoin sitting in the vault." It doesn't grow. It doesn't shrink. It just mirrors the price of Bitcoin. If you put in 1 BTC, you get roughly 1 stBTC back.
It’s boring, but boring is good when you want to make sure you still own your underlying asset. You can take this stBTC and go use it elsewhere in DeFi lend it out, use it as collateral knowing that it represents the "body" of your Bitcoin without the yield attached. It’s like keeping the apple tree in your backyard while selling the rights to the next harvest.
Then you have the wild card: the YAT, or Yield Accruing Token. This is the "ghost" of the future profits.
When you deposit that Bitcoin, the protocol calculates the staking rewards you should get over a certain period and mints them into this separate token. This is where things get interesting.
Since the YAT is separate, you can sell it immediately. It’s like selling your future apples today because you want cash now. Or, if you’re a gambler (let’s be honest, many of us are), you can buy someone else's YATs.
If you think staking rewards are going to go up, you buy up these yield tokens cheap and hope they pay out more later. It isolates the risk. You aren't betting on Bitcoin's price here; you're betting on Bitcoin's interest rate.
But before you can even touch the LPT or the YAT, there’s usually a wrapper involved, often called enzoBTC.
Bitcoin doesn't speak the same language as these smart contracts (which are usually on EVM-compatible chains). So, you have to wrap your native BTC into enzoBTC first. It’s the gateway drug. Once you have enzoBTC, you can stake it to mint the other two.
I have seen a dozen wrapped Bitcoin versions come and go, but this one is necessary plumbing to make the split happen. It’s basically the fuel that powers the machine. Without this wrapper, the fancy financial engineering of splitting principal and yield just stays a whiteboard theory.
So, why does any of this matter?
Honest truth? It’s about flexibility. In a traditional setup, you are locked in. With Lorenzo, you can mix and match. You could hold stBTC (safety) but sell your YATs to buy a coffee today. Or you could sell your stBTC to buy more YATs if you want to go full "degen" mode on yield speculation.
It turns Bitcoin from a rock into a set of Lego bricks. It’s not perfect smart contract risk is always a real thing, and you should never ignore that but it’s one of the few times I’ve seen a project actually try to make Bitcoin behave like a sophisticated financial instrument rather than just digital gold bars
@Lorenzo Protocol #LorenzoProtocol $BANK
