Ondo Finance: The Rising Star in the RWA Sector

In a bear market environment, high-yield projects are difficult to sustain, and the total locked value in the DeFi sector has significantly shrunk. Against this backdrop, the narrative of Real World Assets (RWA) centered around real-world assets is gradually emerging, and the market is turning its attention to low-risk, stable yield, and scalable asset classes such as U.S. Treasury bonds.

Ondo Finance has rapidly grown to become one of the leading projects in the RWA field against this backdrop. Recently, the Ondo Foundation announced that it will unlock the circulation of ONDO tokens on the 18th, followed by a well-known trading platform announcing that Ondo Finance (ONDO) will be included in the listing plan. This decision is expected to bring more incentives and liquidity to the Ondo Finance ecosystem.

Ondo Finance Overview

Ondo Finance is a protocol focused on the tokenization of RWA investments. In January 2023, it launched the v2 version of its tokenized U.S. Treasury Fund. The project aims to provide ordinary investors with institutional-level investment opportunities by introducing low-risk, stable-yield products such as U.S. Treasuries and money market funds into the blockchain world. This offers on-chain investors an alternative to stablecoins and allows holders, rather than issuers, to receive most of the returns from the underlying assets.

According to industry data, the total market value of RWA US Treasury bonds has surged from an early $110 million to $863 million, with Ondo's scale in this segment reaching $125 million, ranking third.

Core Products of Ondo Finance

Ondo has launched two products through tokenization: $OUSG ( tokenized US Treasuries ) and $OMMF ( tokenized money market funds ), allowing stablecoin holders to invest in bonds and US Treasuries. Investors receive tokens representing their rights to the fund, and Ondo charges an annual management fee of 0.15%.

In August 2023, Ondo launched the $USDY interest-bearing stablecoin, backed by short-term U.S. Treasury bonds and bank demand deposits. The innovation of USDY lies in providing a permissionless investment tool for global investors that allows them to store the value of the dollar while generating dollar returns.

Due to regulatory compliance requirements, Ondo's tokenized fund products are only available to clients who have passed KYC. To this end, Ondo has partnered with the DeFi protocol Flux Finance to provide stablecoin collateral lending services for tokens requiring permissioned investment, achieving permissionless participation on the protocol's backend.

stablecoin $USDY

$USDY is a dollar interest product aimed at non-U.S. residents and institutions, with underlying assets consisting of short-term U.S. Treasury bonds and bank demand deposits. Investors must participate after KYC to earn U.S. Treasury yields while maintaining a dollar peg. Currently, the total locked amount for this product is $65.37 million.

Tokenized US Treasury Fund $OUSG

$OUSG is a tokenized U.S. Treasury fund aimed at global institutional users, with the underlying asset being a short-term government bond ETF from a well-known asset management company. Investors must complete KYC before participating, and the total locked amount currently reaches $114 million.

Tokenized Currency Market Fund $OMMF

$OMMF is a currency market fund pegged to the US dollar, with relatively low risk. Although there is currently limited information available, it can be inferred that this is a tokenized SEC-compliant currency market fund based on a rebase model.

Flux Finance solves the permissionless investment problem.

Flux Finance is a decentralized lending platform developed by the Ondo team based on an open-source lending protocol. Due to the KYC access required for Ondo's front-end products, Ondo has partnered with Flux Finance to provide collateralized lending services in USDC, USDT, DAI, and FRAX for tokens like OUSG that require permissioned investment. This allows any DeFi user to participate on the other end of the protocol.

As of January 18, Ondo's total locked volume is $179 million, of which Flux Finance has a locked volume of $24.32 million and a loan amount of $14.11 million.

The Development History of Ondo Finance

Financing Situation

Ondo was founded in 2021 by two former employees of a large investment bank. The founders previously led the bank's blockchain research and development team, and the team members have extensive experience in both traditional finance and the cryptocurrency space.

In August 2021, Ondo completed a $4 million seed round of financing, led by a well-known venture capital firm, with participation from several prominent cryptocurrency investment firms. In April 2022, Ondo completed a $20 million Series A financing, co-led by two top investment firms. In May 2022, Ondo completed an ICO financing of over $10 million through a crowdfunding platform.

Token Economy

The total supply of ONDO tokens is 10 billion, with an initial circulation of approximately 14.3%. Over 85% of the tokens will be locked and gradually unlocked over the next 5 years. The token distribution plan is as follows: 2% for ICO investors, 52.1% for ecological incentives, 33% for protocol development, and 12.9% for private investors.

Summary and Outlook

The Ondo project team has an excellent background and has received support from top-tier capital, occupying an important position in the RWA US Treasury bond field. The project's compliance is high, having undergone multiple rounds of audits, and the product architecture is mature and reliable.

Ondo has precisely tapped into the RWA U.S. Treasury market, capturing the current market demand for low-risk, stable-return assets. However, the challenges cannot be ignored: on one hand, there is fierce competition from peers, with some latecomers achieving remarkable growth in a short period; on the other hand, there is the issue of product homogenization, and it is worth paying attention to how to expand more channels or launch more attractive products.

In the future, whether Ondo can utilize token incentives to create a growth flywheel and expand into new business areas beyond US Treasury RWA will be key factors determining its long-term development.