Asset Tokenization: The Next Revolution in Financial Markets

Asset tokenization is becoming an important development trend in the financial markets. Some industry leaders believe that this represents the future of finance and the next stage of market evolution. Real World Assets(RWA) have become a highly regarded asset class in the cryptocurrency industry. As of May 2024, the RWA market size has exceeded $6.6 billion, reflecting the growing interest of investors in this innovative financial product. Tokenizing RWA and introducing it to the blockchain can provide new yield opportunities for decentralized finance(DeFi). Predictions suggest that by 2030, the asset tokenization market size will reach $10 trillion.

The advantages of asset tokenization lie not only in creating yield opportunities for DeFi. By digitizing assets into tokens, it achieves asset fragmentation—dividing assets such as government bonds, stocks, and real estate into smaller shares. This process enhances liquidity and opens the door to investment opportunities for investors with different levels of capital.

The main advantages of asset tokenization include: improving liquidity and accessibility through interoperable tokenized assets, enabling small investors to invest in high-yield assets with lower capital; increasing transparency due to the public nature of many blockchains; and enhancing composability by connecting the value of physical assets to the DeFi ecosystem.

The market value of tokenized government bonds in the United States grew from $114 million in 2023 to $845 million, with a certain asset management company being the largest issuer in this asset class, holding about 38% of the market share.

A recent study shows that 64% of high-net-worth investors and 33% of institutional investors plan to increase their investments in tokenized government bonds before the end of 2024.

Although still in its early stages, asset tokenization represents one of the most promising and potential applications of blockchain technology. A financial company is in a favorable position in this trend with its government bond tokenization services, and investor interest continues to grow.

Technological Innovations of a Financial Company

The company is transforming finance through its decentralized protocol, leveraging blockchain to provide institutional-grade products. By tokenizing stable assets from traditional finance, the company combines reliability with the efficiency of blockchain.

The company has two main departments: asset management and technology. The asset management department creates and oversees tokenized financial products, while the technology department develops the protocols that support these products.

Currently, the company offers two different investment options:

1. USDY( Dollar Yield Token )

   • Tokenized notes backed by short-term US Treasury bonds and bank deposits.
   • Provides an annualized yield of 5.30%(APY), with a total locked amount(TVL) of 315.35 million USD.
   • Safer and more transparent than traditional stablecoins.
   • Managed by a trust company to ensure compliance and investor protection.

2. OUSG( Short-term US Treasury )

   • Provide low-risk tokenized short-term U.S. Treasury bonds for passive investors.
   • Provides an annualized yield of 4.81% ( APY ), with a total locked-up amount ( TVL ) of 221.32 million USD.
   • Transfer investment from a certain ETF to another fund in March 2024.
   • The new version of OUSG has been launched, named rOUSG, which provides returns to investors through additional rOUSG Tokens.

Flux Finance: Innovation in Decentralized Lending

Flux Finance, created by the company's team, is an important advancement in decentralized lending. It is based on a certain protocol but adds new features. It supports open tokens like USDC and restricted tokens like OUSG. This means users can freely lend USDC, but using OUSG as collateral for loans requires meeting specific licensing requirements to ensure compliance and security.

Flux uses the p2pool ( model, allowing users to lend and borrow with over-collateralization. Lenders can earn interest on the stablecoins they provide, while borrowers can use their collateral to borrow stablecoins, following the asset's permission requirements. Flux Finance is governed by the company's DAO.

Market Competition Landscape

Given that the company has established partnerships with large asset management firms, it seems to be emerging in the traditional finance sector in the field of crypto RWA, complementing other traditional financial companies.

In the decentralized finance space, competition is intensifying. Some protocols focus on tokenization of structured credit and use NFTs to issue debt. Other protocols provide exposure to synthetic assets, allowing users to trade without holding the assets. There are also protocols that offer low collateral loans to institutions, emphasizing credit assessment and lending. Certain protocols handle tokenization of yield trading, enabling users to separate and trade the yield portion of assets.

There are several reasons why the company stands out. It targets the massive U.S. Treasury market by integrating traditional finance with blockchain, offering extensive market coverage. Its complementary approach involves collaborating with traditional financial giants, thus avoiding direct competition. In addition, the company offers innovative products such as USDY and OUSG, providing safer and more transparent alternatives to traditional stablecoins.

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Token Economics

ONDO Token Economics Summary

Current Price:$1.87

Market Cap Rank: #54

Fully Diluted Valuation ) FDV (: $131.5B, Rank #16

Circulating Supply: 1.44 billion ONDO, 14.27% of the total supply )

Total Supply: 10 billion ONDO

Max Supply: 10 billion ONDO

Next unlock: 1.67 million ONDO ( approximately $2.19 million ), in 5 days

Upcoming Unlock Event

June 18, 2024: 1.67 million ONDO ( approximately $2.19 million )

July 18, 2024: 1.67 million ONDO ( approximately $2.19 million )

August 18, 2024: 1.67 million ONDO ( approximately $2.19 million )

September 18, 2024: 1.67 million ONDO ( approximately $2.19 million )

October 18, 2024: 1.67 million ONDO ( approximately $2.19 million )

November 18, 2024: 1.67 million ONDO ( approximately $2.19 million )

December 18, 2024: 1.67 million ONDO ( approximately $2.19 million )

January 18, 2025: 1.94 billion ONDO( approximately $25.5B)

January 18, 2026: 1.94 billion ONDO( approximately $25.5B)

January 18, 2027: 1.94 billion ONDO( approximately $25.5B)

January 18, 2028: 1.94 billion ONDO ( approximately $25.5B )

Token Use Cases

The ONDO Token is the governance token of the company and its Flux Finance protocol. Holders have the right to vote on various proposals within the company's DAO, ensuring that all decisions are made transparently on-chain.

To initiate a proposal, an individual must hold or be delegated at least 100 million ONDO voting rights.

It is still unclear whether other uses will be introduced for ONDO holders in the future.

Team, Fundraising and Ecosystem

The company's team has a diverse mix of personnel from traditional finance and the Web3 space. The founder and CEO, as well as the president and COO, both come from a large investment bank. Another key member comes from a major asset management firm. Additionally, the team includes developers from several well-known Web3 projects. This combination of expertise aligns closely with the company's unique vision and goals.

Fundraising Summary

Seed Round: In December 2021, raised $4 million at a price of $0.013 per Token, achieving a 99.87x return on investment ( ROI ). A total of 300 million Tokens ( were sold, accounting for 3% ) of the total supply, led by a well-known investment institution, with a 1-year initial lock-up period, followed by a 24-month release period.

Public Round: On May 12, 2022, raised $10 million at a price of $0.03 per Token, achieving an investment return of 43.28 times ( ROI ). A total of 100 million Tokens ( were sold, which is 1% ) of the total supply, conducted on a certain platform, with a 1-year lock-up period, followed by an 18-month release period.

Series A Financing: In April 2022, raised $20 million at a price of $0.02 per Token, achieving a 64.92 times return on investment (ROI). A total of 1 billion Tokens ( were sold, accounting for 10% of the total supply ), led by a well-known investment fund, with a 1-year initial lock-up period followed by a 24-month release period.

Partnership

The company has formed several key partnerships to enhance its blockchain and financial services:

• A certain blockchain foundation: This collaboration will showcase the integration of physical assets with blockchain technology, starting with the tokenization of US Treasury product USDY.
• A certain laboratory: Collaborated to launch USDY for use in its AMM pool, and will use it as collateral for the collateral debt position (CDP), enhancing liquidity and DeFi solutions.
• Market Maker: Collaborate to enhance the liquidity of the US Dollar stablecoin USDY, providing round-the-clock liquidity across multiple blockchain platforms.
• A large asset management company: Demonstrated its commitment to expanding tokenization efforts and integrating with the company's products by investing $95 million in its funds.

Adoption and Roadmap

The company aims to connect traditional finance and decentralized finance through public blockchain technology. Their focus is on creating secure, transparent, and compliant financial products.

Main Products:

• OUSG: Tokenization of Short-Term U.S. Treasury Bond ETF.
• OMMF: Tokenized Money Market Fund.
• USDY: An alternative to yield stablecoins.
• Flux Finance: A protocol that supports tokenized securities as collateral.

These products have driven significant growth, with the company's TVL increasing from $40 million to $534 million. Looking ahead, the company plans to expand the use of its tokenized cash equivalents by increasing the adoption and liquidity of USDY, OUSG, and OMMF. This will involve establishing partnerships and developing cross-chain tools to facilitate these processes.

In the next phase, they aim to tokenize publicly traded securities, addressing challenges related to liquidity and infrastructure. Ultimately, the company hopes to innovate in traditional finance by extending the advantages of blockchain to a broader range of financial services, using a combination of centralized and decentralized mechanisms. This approach will help bring the benefits of blockchain technology to a wider array of financial operations.

Bullish Fundamental Factors

• The tokenization industry is set to experience significant growth, with the company's collaboration with large asset management firms strategically positioning it to bring trillions of dollars into Web3.
• The company's TVL has seen significant growth since the beginning of 2024. Real-world assets represent a fresh and promising narrative in the crypto space, with strong early adoption potential.
• The company is committed to developing its products to meet customer needs.
• Most OUSG investments were initially in a certain ETF. In March 2024, they shifted to another fund, aligning with the company's focus on asset tokenization.
• The company is a leader in the crypto RWA space and has become the preferred choice.
• The company holds approximately 38% of the current supply of a certain fund.

Bearish Fundamental Factors

• The use of ONDO Token shows significant centralization risks.
• Although all holders can participate in governance, the largest holders have the greatest influence.
• Approximately 85% of the total ONDO supply is held by the company group.