Ondo Finance: The Rising Star in the RWA Sector

As the bear market continues and high-yield projects become unsustainable, the total locked value in the DeFi sector has dramatically shrunk. Against this backdrop, the concept of real-world assets represented by MakerDAO, (RWA), is gradually gaining traction, and the market is starting to pay attention to real assets, especially low-risk, stable income, and scalable assets like U.S. Treasury bonds.

Ondo Finance has grown into a leading project in the RWA field against this backdrop. Recently, the Ondo Foundation announced that it will unlock the circulation of ONDO tokens on the 18th, and shortly after, Coinbase announced that it will include Ondo Finance ( ONDO ) in its 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 RWA tokenization investment protocol that launched the Ondo v2 tokenized US Treasury Fund in January 2023, aimed at providing institutional-grade investment opportunities for a wide range of investors. Ondo brings low-risk, stable yield, and scalable fund products like US Treasury bonds and money market funds ( into the blockchain, offering on-chain investors options beyond stablecoins and allowing holders, rather than issuers, to capture most of the underlying asset returns.

According to the data, the total market value of the RWA U.S. Treasury sector has surged from the previous $110 million to the current $863 million. Ondo has a market size of $125 million in the RWA U.S. Treasury field, ranking third, only behind the Franklin OnChain U.S. Government Money Fund and Mountain Protocol.

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Ondo Finance's Tokenized Products

Ondo has launched the $OUSG tokenized US Treasury Bonds and $OMMF tokenized Money Market Fund products through fund tokenization, allowing stablecoin holders to invest in bonds and US Treasury securities. Investors will receive a tokenized fund equity certificate, and Ondo charges an annual management fee of 0.15%.

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

To address regulatory compliance issues, tokenized fund products are only available to clients who have completed KYC. Ondo collaborates with the backend DeFi protocol Flux Finance to provide stablecoin collateralized lending services for tokens requiring permissioned investment, such as $OUSG, enabling permissionless participation at the backend of the protocol.

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) 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 complete KYC to participate and can earn U.S. Treasury bond yields based on a U standard. The current TVL is $65.37 million.

$USDY is independently issued by Ondo USDY LLC, which is a bankruptcy-remote independent SPV that issues $USDY collateralized by its assets/equity, designating $USDY holders as the ultimate beneficiaries through a trust.

Tokenized US Treasury Fund $OUSG

$OUSG is a tokenized U.S. Treasury bond fund aimed at global institutional users, with underlying assets being the BlackRock iShares Short Treasury Bond ETF. Investors must complete KYC to participate, and the current TVL is $114 million.

$OUSG is issued by the Ondo tokenized fund. Investors contribute USDC as LP, and the Ondo tokenized fund manages fiat currency by withdrawing to Clear Street, which acts as a broker to purchase ETFs. New earnings will be reinvested, automatically generating a higher compound interest rate.

Tokenized Currency Market Fund $OMMF

$OMMF is a money market fund pegged to the US dollar, with relatively low risk. This could be a SEC-compliant money market fund that is tokenized based on a rebase model.

Flux Finance solves the problem of permissionless investment

Flux Finance is a decentralized lending protocol developed by the Ondo team based on Compound V2. As Ondo's front-end products require KYC access, Ondo collaborates with Flux Finance on the back end to provide collateralized lending services for tokens requiring permission, such as OUSG, with USDC, USDT, DAI, and FRAX. The other side of the lending protocol does not require permission, allowing any DeFi user to participate.

As of January 18, Ondo's TVL was $179 million, with its lending protocol Flux Finance's TVL reaching $24.32 million and the borrowing amount totaling $14.11 million.

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The Development History of Ondo Finance

) Financing History

Ondo was founded in 2021 by two former Goldman Sachs employees. The founder, Pinku Surana, was the Vice President of the technology team at Goldman Sachs, leading the blockchain research and development team. Team members have extensive experience in institutions and protocols such as Goldman Sachs, Fortress, Bridgewater, and MakerDAO.

In August 2021, Ondo completed a $4 million seed round financing, led by Pantera Capital, with participation from Genesis, Digital Currency Group, CMS Holdings, CoinFund, and Divergence Ventures. Several well-known angel investors also took part.

In April 2022, Ondo completed a $20 million Series A financing round, led by Founders Fund and Pantera Capital, with participation from Coinbase Ventures, Tiger Global, GoldenTree Asset Management, Wintermute, Flow Traders, and Steel Perlot.

On May 12, 2022, Ondo completed an ICO funding of over $10 million through the CoinList platform, with the token quantity accounting for 2% of the total.

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) Token Economy

The total supply of ONDO is 10 billion tokens, with an initial circulation of approximately 14.3%. Over 85% of ONDO tokens are still locked and will be unlocked in batches after the initial token unlock at 12, 24, 36, 48, and 60 months.

Private investors ### excluding the CoinList round ( and core contributors will be locked for at least 12 months, and will be released over the next four years. CoinList round investors )2%( of the tokens will be fully unlocked, accounting for a large portion of the initial circulating supply.

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

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Summary

Ondo Finance, backed by its elite team and top-tier capital support, occupies an important position in the RWA U.S. Treasury sector. The project's compliance is relatively good, having undergone multiple rounds of audits, and the trading structure of $USDY draws on the mature model of MakerDAO.

Ondo entered the RWA U.S. Treasury bond field early, demonstrating unique insight. U.S. Treasury bonds, as low-risk, stable return, and scalable assets, are currently the biggest beneficiaries in the RWA sector, with enormous potential for the future.

However, Ondo also faces challenges. On one hand, there is homogenized competition from peers, such as the rise of projects like Mountain Protocol and Centrifuge. On the other hand, the lack of product diversity is also an issue; it is worth paying attention to how to expand more channels or launch more attractive products.

In addition, whether teams and investors with longer unlocking periods can create a growth flywheel through token incentives is also key to future development. Besides U.S. Treasury RWA, Ondo also needs to explore more possibilities to maintain its competitiveness in the rapidly developing RWA field.

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