Beyond U.S. Treasuries RWA Ondo Finance needs more

With the unsustainability of high APY projects in the bear market and the severe shrinkage of TVL in the DeFi field, the RWA narrative led by MakerDAO has gradually begun, and the market has focused its attention on real-world assets. Especially U.S. debt, an asset with no/low risk, stable interest-earning, and scalability.

Ondo Finance is the leading RWA project that grew up under this background. Recently, after the Ondo Foundation announced that it would unlock the circulation of ONDO Token on the 18th, Coinbase officially announced that Ondo Finance (ONDO) would be included in the currency listing roadmap. This decision of the Ondo Foundation will bring more incentives and liquidity to the Ondo Finance ecosystem.

Although the previous article also mentioned Ondo Fiance, this time I just took this opportunity to sort out the overview of Ondo Finance, the leading RWA project.

1. Introduction to Ondo Finance

Ondo Finance is a The RWA tokenized investment protocol launched Ondo v2’s tokenized U.S. bond fund in January 2023 and is committed to providing institutional-level investment opportunities for everyone. Ondo brings no/low risk, stable interest-earning, scalable fund products (such as U.S. Treasury bonds, money market funds, etc.) to the chain, providing investors on the chain with an alternative to stablecoins and making it easier to hold The investor, rather than the issuer, earns most of the income from the underlying asset.

According to data from RWA. Not counting MakerDAO's RWA U.S. debt volume of more than 2 billion U.S. dollars), Ondo's RWA U.S. debt market size has reached 125 million U.S. dollars, ranking third in the market, second only to Franklin OnChain U.S. Government Money Fund and Mountain Protocol.

（rwa.xyz）

2. Ondo Finance ’s tokenized products

Ondo tokenizes funds The $OUSG tokenized U.S. debt and $OMMF tokenized money market fund products were launched, allowing stablecoin holders to invest in bonds and U.S. Treasury bonds. Investors will receive equity certificates in the tokenized funds, and Ondo will charge 0.15% per year. management fees.

Since then, Ondo launched a tokenized bill project guaranteed by short-term U.S. Treasury bonds and bank demand deposits in August 2023-$USDY interest-bearing stable currency . Compared with traditional stablecoins, the innovation of USDY is that it provides global investors with an investment method that can not only store U.S. dollar-denominated value but also generate U.S. dollar income from it without permission.

In addition, due to regulatory compliance reasons, tokenized fund products are only available to KYC-licensed customers. Ondo has cooperated with the back-end DeFi protocol Flux Finance to provide stablecoin mortgage lending services for tokens such as $OUSG that require permissioned investment, enabling permissionless participation in the back-end of the protocol.

（ondo.finance/）

2.1 Interest-bearing stable currency $USDY

$USDY is a U.S. dollar interest-earning product for non-U.S. residents and institutions. The underlying assets are short-term U.S. Treasury bonds and bank demand deposits. Investment Investors need to pass KYC before entering and can obtain U.S. bond income on a U-standard basis. The current TVL reaches US$65.37 million.

Implementation path: $USDY is issued separately by Ondo USDY LLC. Ondo USDY LLC is a bankruptcy-isolated independent SPV that uses its assets/equities as collateral to issue $USDY. , and designate the $USDY holder as the ultimate beneficiary through a trust.

2.2 Tokenized U.S. Bond Fund $OUSG

$OUSG is a tokenized U.S. bond fund for global institutional users. The underlying asset is the BlackRock iShares Short Tearsury Bond ETF. Investors need to pass KYC before they can enter. The current TVL reaches US$114 million.

Implementation path: $OUSG is issued by Ondo Tokenization Fund, investors invest in USDC as LP, and Ondo Tokenization Fund withdraws funds to Clear Street through Coinbase. With legal currency custody and Clear Street acting as a broker to purchase ETFs, new earnings will be re-invested, thus automatically generating higher compound interest rates.

2.3 Tokenized Money Market Fund $OMMF

$OMMF is a U.S. dollar-pegged money market fund with relatively lower risk. No further information is available. But what you can imagine is this: This is a tokenized SEC-compliant money market fund based on the rebase model.

Path of implementation: Just like Compound founder Robert Leshner’s new company Superstate, it sets up SEC-compliant funds to invest in short-term U.S. Treasury bonds and pass them on the chain. (Ethereum) to handle the fund's transactions and records, tracking the fund's ownership shares, which will allow investors to obtain a record of your ownership of this mutual fund in traditional financial products, just like holding stablecoins As well as other crypto assets.

The following is a comparison of three tokenized products:

（docs.ondo.finance /general-access-products/usdy/comparison-ondo-products)

2.4 Flux Finance solves the problem of unlicensed investment

Flux finance is a set of decentralized lending protocols made by the Ondo team based on Compound V2. The protocol is basically similar to Compound's.

Since Ondo’s front-end products require licensing KYC access, Ondo has cooperated with the DeFi protocol Flux Finance on the back-end to provide licensing-based investment agents such as OUSG. The currency provides USDC, USDT, DAI, and FRAX mortgage lending services. The other side of the lending protocol is permissionless and any DeFi user can participate.

According to data from DeFiLlama, as of January 18, Ondo’s TVL was US$179 million, and its lending agreement Flux Finance’s TVL reached US$24.32 million, with the borrowing amount to $14.11 million.

3. Ondo Finance’s Listing Road

< strong>3.1 Financing

Ondo was founded in 2021 by two former Goldman Sachs employees. The founder, Pinku Surana, was once a vice president of Goldman Sachs’ technology team. Led Goldman Sachs' blockchain R&D team, whose team members have extensive backgrounds in various institutions and protocols such as Goldman Sachs, Fortress, Bridgewater and MakerDAO.

In August 2021, Ondo completed a $4 million Seed round of financing, which was led by Pantera Capital and included Genesis, Digital Currency Group, CMS Holdings, and CoinFund and Divergence Ventures, among others. In addition, angel investors such as Stani Kulechov (Founder of Aave), Richard Ma (Founder of Quantstamp) and Christy Choi (Former Investment Director of Binance) also participated in this round.

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

（icoanalytics.org/projects/ondo-finance/?）

On May 12, 2022, Ondo completed ICO financing of more than US$10 million through the CoinList platform, with the number of tokens accounting for 2% of the total, of which (1) 3 million ONDO were sold at a price of $0.03, with a lock-up period of 1 year and unlocking It will be released linearly within 18 months; (2) 17 million ONDO will be sold at a price of $0.055, with a lock-up period of 1 year, and will be released linearly within 6 months after unlocking.

（icoanalytics.org/projects/ondo-finance/?）

3.2 Token Economy

According to the proposal of the Ondo Foundation: the total supply of ONDO is 10 billion, and the initial circulation is 1,426,647,567 (~ 14.3%), more than 85% of ONDO tokens will still be locked, and the locked tokens will be unlocked 12, 24, 36, 48 and 60 months after the initial tokens are unlocked.

Private investors (excluding CoinList round investors) and core contributors will be locked in for at least 12 months and for the next four years ( be released within a total of five years); participants in the CoinList investor round (2%) will be fully unlocked, so their tokens represent a large portion of the initial circulating supply.

Token allocation is: CoinList round investors (2%), ecological incentives (52.1%), protocol development (33%), private equity investors ( 12.9%).

（https://forum.fluxfinance.com/t/fip-08-release-of-the-ondo-token-lock-up/563/9 )

Four. Write at the end

Team background: The elite nature of the Ondo project team and the endorsement of top capital have supported Ondo’s position in the RWA U.S. debt field. The project's compliance is relatively in place and has gone through multiple rounds of audits, and the $USDY transaction structure comes from MakerDAO's mature structure. Compared to some projects that only have one page of product description, it is much more solid.

Track: Ondo entered RWA early and directly. U.S. debt has a unique vision. U.S. debt, an asset with no/low risk, stable interest-earning, and scalability, is Currently the biggest beneficiary of the RWA track, and there is unlimited room for imagination in the future. This is much smoother than MakerDAO and Centriduge, which were the first to engage in credit asset RWA and now move to U.S. bond RWA.

Facing challenges: On the one hand, homogeneous competition from peers, such as the interest-bearing stablecoin project Mountain Protocol launched on September 11, 2023, in just 4 years The monthly TVL has surpassed Ondo, and Centrifuge has also reached cooperation with Aave, Frax Finance and other agreements through the U.S. debt tokenization fund Anemoy Liquid Treasury Fund. On the other hand, it comes from the single product. The only U.S. bond RWA products and interest-bearing stablecoin products have low thresholds. How to expand more channels or launch more attractive products is worth looking forward to.

Of course, it is worth looking forward to whether teams and investors with longer unlocking periods can use token incentives to create a growth flywheel.

Ondo needs more than US debt RWA.