jakiro
author:0xGreythorn
Ondo Finance stands out for several reasons.It targets the huge US Treasury market by integrating traditional finance with blockchain, with a wide market coverage.Its complementary approach involves cooperating with traditional financial giants such as BlackRock, thereby avoiding direct competition.Additionally, Ondo offers innovative products such as USDY and OUSG, offering safer and more transparent alternatives than traditional stablecoins.
Market Opportunities
BlackRock CEO Larry Fink believes tokenization is the future of finance and the next evolution of the market, and his position may affect the attitudes of other major financial game participants.As we highlighted in our previous research on Dusk Network, Real World Assets (RWA, real-world assets) are becoming an important asset class in the cryptocurrency industry.As of May 2024, the RWA market has exceeded US$6.6 billion, reflecting investors’ growing interest in this innovative financial product.Tokenizing RWA and introducing it into blockchain can provide earning opportunities in DeFi (decentralized finance).The asset tokenization market is expected to reach US$10 trillion by 2030.
Source: Roland Berge
The main attraction of this emerging market is not just to provide revenue opportunities for DeFi.By digitizing assets into tokens, it fragments assets—dividing assets such as Treasury 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.
Chainlink uses the illustration below to explain how asset tokenization works.Its main advantages include increasing liquidity and increasing accessibility through interoperable tokenized assets, enabling small investors to invest in high-yield assets with relatively low capital.Furthermore, due to the common nature of many blockchains, it increases transparency and enhances compositionality by connecting the value of real-world assets into the DeFi ecosystem.
Source: Chainlink
The market value of tokenized government bonds in the United States also grew from $114 million in 2023 to $845 million, with Franklin Templeton being the largest issuer in this asset class, accounting for about 38% of the market.
The latest research from Ernst & Young shows that 64% of high-net-worth investors and 33% of institutional investors plan to increase their investment in tokenized Treasury bonds by the end of 2024.
Although still in its infancy, asset tokenization represents one of the most promising and potential applications of blockchain technology.Ondo Finance (Ondo Finance) is in a favorable position in this trend with its Treasury tokenization services, with investor interest continuing to grow.
Ondo’s technology
Ondo is transforming finance through its decentralized protocols, leveraging blockchain to deliver institutional-level products.By tokenizing stable assets in traditional finance, Ondo combines reliability with the efficiency of blockchain.
Ondo has two main departments: Asset Management and Technology.The asset management department creates and oversees tokenized financial products, while the technology department develops protocols that support these products.
Currently, Ondo Finance offers two different investment options:
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USDY(Ondo US Dollar Yield Token)
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Tokenized notes backed by short-term U.S. Treasury bonds and bank deposits.
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Provides an annualized rate of return (APY) of 5.30%, with a total locked position (TVL) of US$315.35 million.
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More secure and transparent than traditional stablecoins such as USDT/USDC.
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Managed by Ankura Trust to ensure compliance and investor protection.
USDT USDY Base assets Treasury bonds, Bitcoin, unsecured loans Treasury bonds Bankruptcy quarantine uncertain yes Reserves and operating companies hold separately no yes Payment proceeds no yes Investor’s claim for reserves No guarantee Guaranteed Third-party reports Quarterly daily Third-party supervision no yes Regulatory status uncertain Compliance Source: Ondo Finance
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OUSG(Ondo short-term US Treasury bonds)
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Provide passive investors with low risk tokenized short-term U.S. Treasury bonds.
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Provides an annualized rate of return (APY) of 4.81%, with a total locked position (TVL) of US$221.32 million.
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Investment will be transferred from BlackRock’s SHV to BUIDL in March 2024.
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Ondo recently launched a new version of OUSG, called rOUSG, which provides investors with revenue through additional rOUSG tokens.
| OUSG | rOUSG | |
| Token type | Accumulated type | Heavy base type (distribution type) |
| How to distribute income | Reflected by increased redemption price (Network Asset Value per share) | Distributed daily with increased rOUSG token balance |
| As Treasury yields accumulate, token value | rise | Stay at $1.00 |
| Best for | Buy and hold cash management (some custodians only support cumulative tokens), collateral for smart contracts | Income settlement or exchange method |
Source: Ondo Finance
Ondo’s Flux Finance
Flux Finance, created by the Ondo Finance team, is an important advance in decentralized lending.It is based on Compound V2, but new features are added.It supports open tokens such as USDC and restricted tokens such as OUSG (Ondo Short-Term US Government Bond Fund).This means you are free to lend USDC, but using OUSG as collateral to borrow requires specific licensing requirements to ensure compliance and security.
Flux uses a point-to-pool (p2pool) model similar to Compound, allowing users to borrow and lend in an over-staked manner.Lenders can earn interest on the stablecoins they offer, while borrowers can borrow stablecoins using their collateral and follow the licensing requirements of the assets.Flux Finance is governed by Ondo DAO.
Competitors
Given that Ondo has established a relationship with giants like BlackRock, Ondo appears to be making his mark in traditional finance in the crypto RWA category, supplementing other TradFi companies.
In the field of decentralized finance, competition is intensifying.Centrifuge focuses on tokenized structured credit and uses NFT to issue debt.Ethena provides synthetic asset exposure, enabling users to trade without holding assets.Maple Finance offers low mortgage loans to institutions, emphasizing credit assessments and lending.Pendle handles tokenized earnings transactions, enabling users to separate and trade the earnings portion of the asset.
Ondo Finance stands out for several reasons.It targets the huge US Treasury market by integrating traditional finance with blockchain, with a wide market coverage.Its complementary approach involves cooperating with traditional financial giants such as BlackRock, thereby avoiding direct competition.Additionally, Ondo offers innovative products such as USDY and OUSG, offering safer and more transparent alternatives than traditional stablecoins.
Token Economics
ONDO Token Economics Abstract
Current price: $1.87
Market value ranking: #54
Comprehensive dilution valuation (FDV): $131.5B, ranking #16
Circulation supply: 1.44 billion ONDO (14.27% of total supply)
Total supply: 10 billion ONDO
Maximum supply: 10 billion ONDO
Next unlock: 1.67 million ONDO (about $2.19 million), 5 days later
Token allocation
Source: Dropstab
Events to be unlocked soon
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 usage
ONDO Tokens are governance tokens for Ondo Finance and its Flux Finance protocol.Holders have the right to vote on various proposals within Ondo DAO to ensure that all decisions are made transparently on-chain.
To initiate a proposal, an individual must hold or be entrusted with at least 100 million ONDO voting rights.
It is not clear whether other uses will be introduced for ONDO holders in the future.
Teams, fundraising and ecosystems
The Ondo Finance team has a diverse portfolio of people from traditional finance and Web3 fields.Founder and CEO Nathan Allman and President and COO Justin Schmidt are both from Goldman Sachs.Another important member, Katie Wheeler, is from BlackRock.In addition, the team includes developers from OpenSea, MakerDAO and Boson Protocol.This combination of expertise is highly consistent with Ondo Finance’s unique vision and goals.
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Source: Ondo Finance
Financing Summary
Seed wheel:In December 2021, Ondo Finance 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 sold (3% of the total supply) were led by Pantera Capital, with a 1-year initial lock-up period followed by a 24-month release period.
Public offering round:On May 12, 2022, $10 million was raised at a price of $0.03 per token, achieving a 43.28x return on investment (ROI).A total of 100 million tokens were sold (1% of the total supply) and conducted on Coinlist with a 1-year lock-up period followed by an 18-month release period.
Series A financing:In April 2022, $20 million was raised at a price of $0.02 per token, achieving a 64.92x return on investment (ROI).A total of 1 billion tokens sold (10% of the total supply) was led by Founders Fund, with a 1-year initial lock-up period followed by a 24-month release period.
Partnerships
Ondo Finance has formed several key partnerships to strengthen its blockchain and financial services:
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Aptos Foundation: This timeThe cooperation will show the integration of world assets and blockchain technology, starting with the tokenized US Treasury product USDY.
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Thala Labs:Cooperate to launch USDY in Thala’s AMM pool and use it as collateral for collateral debt positions (CDP), enhancing liquidity and DeFi solutions.
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Wintermute:Cooperate to improve the liquidity of the USDY USDY, a USD earnings stablecoin, providing all-weather liquidity across multiple blockchain platforms.
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BlackRock:Through a $95 million investment in BlackRock’s BUIDL fund, demonstrates the commitment to expanding tokenization efforts and integration with Ondo products.
Adoption and roadmap
Ondo Finance 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:
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OUSG:Tokenized BlackRock short-term US Treasury ETF.
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OMMF:Tokenized BlackRock money market fund.
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USDY:A replacement for income stablecoins.
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Flux Finance:Agreements that support tokenized securities as collateral.
These products drove significant growth, with Ondo’s TVL rising from $40 million to $534 million.Looking ahead, Ondo plans to expand the use of its tokenized cash equivalents by increasing adoption and liquidity of USDY, OUSG and OMMF.This will involve building partnerships and developing cross-chain tools to facilitate these processes.
Source: DeFillama
In the next phase, they aim to tokenize publicly traded securities, addressing challenges related to liquidity and infrastructure.Ultimately, Ondo hopes to innovate in traditional finance by extending the advantages of blockchain to a wider range of financial services, using a combination of centralized and decentralized mechanisms.This approach will help bring the advantages of blockchain technology to a wider range of financial operations.
Bullish fundamentals
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The tokenization industry will usher in significant growth, and Ondo Finance’s partnership with BlackRock is strategically positioned to introduce trillions of dollars into Web3.
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Ondo Finance’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 potential for early adoption.
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Ondo Finance is committed to developing its products to meet customer needs.
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Most of OUSG’s investments were initially in BlackRock’s iShares Short Treasury Bond ETF (SHV).In March 2024, they turned to BlackRock’s USD Institutional Digital Liquidity Fund (BUIDL), which is consistent with Ondo’s asset tokenization focus.
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Ondo Finance is a leader in crypto RWA and becomes the first choice.
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Ondo Finance holds about 38% of the current supply of BUIDL.
Bearish fundamentals
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The use of ONDO tokens shows significant centralization risks.
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Although all holders can participate in governance, the largest holders have the greatest influence.
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Approximately 85% of the total ONDO supply is controlled by the Ondo Finance team.
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Operating at the intersection of TradFi and cryptocurrencies, Ondo Finance enters a relatively untapped market with regulation posing a significant challenge.
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Bad debt is the main risk to the DeFi protocol, including Ondo Finance’s Flux.Bad debt occurs when the borrower’s collateral is lower than his debt.If the borrower’s equity becomes negative, Flux will use its reserves to alleviate losses.To minimize volatility and reduce the risk of adverse debt, Flux only accepts stable assets as collateral.
