Ondo Finance (ONDO) has recently increased more than 14 times since January due to the topic of RWA (Real World Assets). What does Ondo Finance do? How is its tokenized note USDY different from stablecoins?
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ToggleIntroduction to Ondo Finance
The decentralized investment platform Ondo Finance was founded in 2021 by former Goldman Sachs employee Nathan Allman. With its understanding of traditional finance, it entered the RWA (real world assets) track in January 2023. According to Defillama data, Ondo Finance’s TVL ranks third in the RWA track, with a TVL of $464 million, and is issued on six chains: Ethereum, Solana, Mantle, Polygon, Sui and Aptos.
If measured purely by tokenized securities, according to Dune Analytics data, the market value of tokenized securities (including bonds and ETFs investing in bonds) has continued to grow since February 2023, and the current market value has exceeded US$968 million. The first place is the Wall Street giant BlackRock, which only joined this year. Its BUIDL has a market value of US$450 million, accounting for 45% of the overall market value of tokenized securities. The second place is Ondo, with a market value of US$303 million.
Ondo Finance’s main tokenized products
Ondo Finance announced the launch of a tokenized Treasury product in January last year, allowing stablecoin holders to invest in U.S. Treasuries and investment-grade corporate bonds through its tokenized funds. Judging from the information on Ondo's website, there are currently two products to choose from. One is OUSG, which is suitable for professional investors and invests in U.S. Treasury bonds. The current return is 4.96%, while USDY, which can also be purchased by non-Americans, is The return is 5.2% and is a tokenized note guaranteed by short-term U.S. Treasury bills and bank demand deposits.
OUSG invests in BlackRock funds
OUSG, established for professional investors holding large amounts of stablecoins, initially invested in BlackRock iShares ETFs (symbol SHV). This wave follows BlackRock launching its first token issued on a public blockchain (Ethereum). Monetization fund - BlackRock USD Institutional Digital Liquidity Fund (BUIDL), OUSG also transferred most of its assets to BUIDL, and the rest was dispersed in BlackRock Federal Fund (TFDXX), bank deposits and liquidity USDC for sexual purposes.
The minimum investment amount in OUSG is US$100,000. The current asset size reaches US$215 million. The management fee is 0.2%, of which the fund fee paid to BlackRock is 0.15%.
USDY Tokenized Notes
Ondo launched USDY in August last year. USDY is a tokenized note guaranteed by short-term US Treasury bonds and bank demand deposits. USDY is available to non-U.S. individual and institutional investors with a minimum purchase amount of only $500 and can be transferred on-chain 40-50 days after purchase.
USDY represents debt issued by Ondo USDY LLC, a SPV special purpose vehicle wholly owned by Ondo Finance and managed by a board of directors including independent directors designed to maximize bankruptcy isolation.
Its partners include Morgan Stanley and StoneX, which are responsible for holding short-term U.S. Treasury bonds, while First Citizens and Coinbase Prime also provide guarantees for bank deposits and cash equivalents (accounting for less than 0.01%).
USDY can be invested in USDC and USDT, and if it exceeds US$100,000, it can also be transferred via US dollar bank wire. USDY supports Ethereum personal wallets (such as Metamask) and multi-signature, but does not support custodial accounts (such as Coinbase or Binance).
Mortgage Loan Agreement Flux Finance
Ondo Finance has also launched Flux Finance, a mortgage loan protocol. Flux actually moves the U.S. Treasury repurchase market onto the chain, demonstrating decentralization, globalization, and transparency.
With the recent popularity of re-hypothecation, Ondo Finance also announced its cooperation with ether.fi to launch the USDY-WEETH liquidity pool on CurveFinance.
These are all applied on the chain, allowing its tokenized funds to have wider benefits and uses.
Is USDY a stablecoin?
Although USDY is listed as a stable currency on CoinMarketCap, in fact, it has no effect of anchoring legal currency. USDY has a floating interest rate adjusted in advance by Ondo every month, and the rate of return is automatically compounded, which means that it can be minted and The USD value for redeeming USDY slowly increases every day. In other words, the price of USDY should theoretically continue to increase in value at a rate of 5% per year (assuming the rate of return remains unchanged). The current price of USDY is US$1.04.
However, Ondo Finance also compared the differences between USDY and traditional stablecoins on its website, including whether to implement bankruptcy isolation, as well as the interest rate issue that everyone is most concerned about. Stablecoin issuers such as Tether and Circle invest U.S. dollar assets in U.S. government bonds and bank deposits. In the high interest rate environment of the past two years, they have obtained high interest rates, but these earnings have flowed directly into the hands of stablecoin issuers. Tether, the issuer of the leading stablecoin USDT, achieved a record profit of US$4.52 billion in the first quarter of this year, of which approximately US$1 billion in profits came from holdings of US Treasury bonds.
Ondo Finance, on the other hand, emphasizes that income is distributed directly to investors after deducting fees, with an annualized rate of return of up to 5%. USDY also claims that it is issued under an exemption from the SEC's Reg S regulations and is compliant, except that it does not provide investment by Americans.
ONDO jumps on the RWA train and skyrockets
According to crunchbase information, Ondo Finance investors include Pantera Capital, Founders Fund, Coinbase Ventures and Tiger Global, etc., and will conduct an initial coin offering (ONDO) in July 2022 and will be publicly sold on Coinlist. The tokens can be used as Ondo Used for the governance voting quota of DAO and Flux Finance.
ONDO finally unlocked circulation on January 18 this year. Recently, it has been on the topic of RWA (real world assets), with an increase of more than 14 times since January.
Mike Dudas, founder of The Block, was very dissatisfied with this. He dug out conversations in which some Internet celebrity investors praised ONDO on Twitter. They focused on the fact that cooperation with BlackRock is good for brand marketing, and through The extremely small circulation volume makes their investors on Coinlist feel that they are making money and reduce the behavior of direct dumping.
Dudas believes that the way Ondo Finance bills itself as a security cannot completely avoid the risks of regulation and will end in tears.
( Mike Dudas, founder of The Block: Ondo will end in tears )
