Ondo Finance: The Rising Star in the RWA Space

Recently, as high-yield projects struggle to survive in the bear market and the total locked value in the DeFi space has significantly shrunk, the narrative of real-world assets (RWA) led by MakerDAO has gradually emerged. The market is beginning to shift its focus toward tangible assets, especially low-risk, stable-yield assets like U.S. Treasury bonds that can be widely applied.

Against this background, Ondo Finance has emerged as a leading project in the RWA field. Recently, the Ondo Foundation announced that it will unlock the circulation of ONDO tokens on the 18th, followed by a well-known trading platform listing Ondo Finance(ONDO) in its coin listing plan. This decision is expected to bring more incentives and liquidity to the Ondo Finance ecosystem.

Overview of Ondo Finance

Ondo Finance is a protocol focused on RWA tokenized investments, which launched the Ondo v2 tokenized US Treasury Fund in January 2023. The project is dedicated to providing institutional-grade investment opportunities to a wide range of investors, bringing low-risk, stable yield, and scalable fund products (such as US Treasuries, money market funds, etc.) into the blockchain space. This offers on-chain investors another option besides stablecoins, while allowing 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 the current $863 million. Among them, Ondo has reached a scale of $125 million in the RWA US Treasury bond market, ranking third in the market, only behind two other major projects.

Tokenized Products of Ondo Finance

Ondo has launched the $OUSG tokenized U.S. Treasury bonds and $OMMF tokenized money market fund products through fund tokenization, allowing stablecoin holders to invest in bonds and U.S. Treasury bonds. Investors will receive a certificate of entitlement for the tokenized fund, and Ondo charges a management fee of 0.15% per year.

In August 2023, Ondo launched a tokenized note project backed by short-term U.S. Treasury bills and bank demand deposits — the $USDY interest-bearing stablecoin. The innovation of USDY lies in providing global investors with a permissionless investment tool that can store dollar-denominated value and generate dollar returns.

Due to regulatory compliance requirements, tokenized fund products are only available to clients who have completed KYC. To address this limitation, Ondo has partnered with the decentralized finance protocol Flux Finance to provide stablecoin collateral lending services for tokens requiring licensed investment, such as $OUSG, enabling permissionless participation in the protocol's backend.

Stable Yield Coin $USDY

$USDY is a dollar-yielding 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 undergo KYC to participate, allowing them to earn U.S. Treasury yields while maintaining a dollar peg. Currently, its total locked amount has reached 65.37 million dollars.

Tokenized US Treasury Fund $OUSG

$OUSG is a tokenized U.S. bond 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 to participate, with a current total locked amount of $114 million.

Tokenized Currency Market Fund $OMMF

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

Flux Finance addresses the issue of permissionless investment.

Flux Finance is a decentralized lending platform developed by the Ondo team based on a well-known lending protocol. As Ondo's front-end products require KYC access, Ondo collaborates with Flux Finance to provide collateralized lending services in USDC, USDT, DAI, and FRAX for tokens like OUSG that require permissioned investment. On the other end of the lending protocol, there are no permissions required, allowing any DeFi user to participate.

As of January 18, the total locked amount of Ondo is $179 million, with the locked amount of Flux Finance reaching $24.32 million and the loan amount being $14.11 million.

The Development History of Ondo Finance

Financing Status

Ondo was founded in 2021 by two former employees of a well-known investment bank. The founders previously led the bank's blockchain research and development team, and the team members have extensive experience in various financial institutions and blockchain projects.

In August 2021, Ondo completed a $4 million seed round financing, led by several well-known investment institutions. In April 2022, it completed a $20 million Series A financing. In May 2022, it raised over $10 million through an ICO on a certain platform, with the token amount accounting for 2% of the total.

Token Economics

According to the Ondo Foundation proposal, the total supply of ONDO is 10 billion tokens, with an initial circulation of approximately 14.3%. More than 85% of ONDO tokens will be locked and will be unlocked in batches after the initial unlock at 12, 24, 36, 48, and 60 months.

The tokens of private investors (excluding the ICO round) and core contributors will be locked for at least 12 months and will be gradually released over the next four years. The tokens of ICO round participants (accounting for 2% of the total supply) will be fully unlocked, constituting a major part of the initial circulating supply.

The token distribution is as follows: ICO round investors (2%), ecological incentives (52.1%), protocol development (33%), private placement investors (12.9%).

Outlook

The elite background of the Ondo project team and top-tier capital support have established its position in the RWA U.S. Treasury field. The project's compliance is relatively high, having undergone multiple rounds of audits, and the trading structure of $USDY draws on mature models. Compared to some projects that only have simple product descriptions, Ondo appears more solid.

Ondo's early entry into the RWA US Treasury market demonstrates unique strategic insight. As a low-risk, stable yield, and scalable asset, US Treasuries are the biggest beneficiaries in the current RWA track, with broad future development potential.

However, Ondo also faces homogeneous competition from its peers. For example, a certain yield-bearing stablecoin project launched in September 2023 has exceeded Ondo's total locked value in just four months. In addition, other projects have also partnered with multiple well-known protocols through tokenized US Treasury funds.

On the other hand, Ondo's product line is relatively simple, and the existing US Treasury RWA products and yield-bearing stablecoin products have low thresholds. It is worth looking forward to how to expand more channels or launch more attractive products.

Finally, whether teams and investors with a longer unlocking period can create a growth flywheel through token incentives is also a key point. In addition to US Treasury RWA, Ondo also needs to explore more possibilities to maintain its competitive advantage.