On-chain Wall Street: Ondo Finance Bridges the Last Mile Between Real Finance and the Encryption World

1. Market Background

The next wave in the blockchain world is transitioning from technology to assets, with the RWA track leading this transformation. Currently, RWA has become the seventh largest category in DeFi, with a total locked value exceeding $12 billion.

U.S. Treasuries, as the most liquid financial assets globally, have an average daily trading volume of tens of trillions of dollars. They are backed by the U.S. government and have never experienced a substantial default, making them a representative of zero-risk assets. Their yields are considered by the industry as the risk-free rate, providing a reliable benchmark for pricing and risk management of various assets.

The combination of the RWA track and U.S. Treasury bonds has created a paradigm shift for off-chain assets moving towards on-chain innovation. Tokenized Treasury bonds not only inherit the core advantages of U.S. bonds but also incorporate the transparency, efficiency, and composability of DeFi. It is expected that by 2030, the global tokenized market for illiquid assets will reach $16 trillion, accounting for 10% of global GDP. As of May 2025, the market value of tokenized Treasury bonds has grown from approximately $1.39 billion a year ago to $6.89 billion.

Ondo Finance occupies a leading position in the tokenized U.S. Treasury market through its two major products, USDY and OUSG. These two products contribute approximately 25% of the market share, significantly ahead of other similar products. Ondo Finance's overall TVL has also continued to reach new highs, first exceeding $1 billion in March 2025, and is currently approaching $1.2 billion.

Against the backdrop of declining global inflation and differentiated interest rates, the demand for stable and highly liquid assets is continuously rising, leading to the emergence of tokenized government bonds. Next, we will delve into the innovative model of Ondo Finance and its core competitiveness.

2. Overview

2.1 Project Introduction

Ondo Finance has launched three tokenized U.S. Treasury and bond products by collaborating with institutions such as BlackRock and Pacific Investment Management Company: U.S. Government Bond Fund (OUSG), Short-Term Investment Grade Bond Fund (OSTB), and High Yield Corporate Bond Fund (OHYG).

Market share: approximately 20% Government bond product market value: $122,511,877 Management Fee: 0.15%

2.2 Core Product Introduction

Ondo Finance's two core and best-performing products are USDY and OUSG.

2.2.1 USDY

USDY is a yield-bearing stablecoin supported by short-term U.S. Treasury bonds and bank demand deposits. Holders earn interest on the underlying assets automatically without any additional actions.

Introduction to the mechanism:

• Issuance and Minting: For institutions and qualified investors outside the United States, minting and redemption can be done daily at net asset value, with a 40-50 day transfer lock-up period after the first minting.
• Interest Rate and APY: As of April 2025, the target annual yield for USDY is approximately 5.2%, determined by the actual income of the underlying assets, updated monthly.

2.2.2 OUSG

OUSG is an on-chain transferable fund that primarily invests in short-term U.S. Treasury bonds, providing holders with exposure to short-term U.S. Treasury bonds.

Mechanism composition:

• Underlying assets: Mainly invest in the BlackRock USD Institutional Digital Liquidity Fund and other high-grade government bonds and GSE funds.
• Fund Structure: Managed by Ondo Capital Management, holders obtain corresponding shares by minting/redeeming OUSG tokens.
• Price Release: Update the on-chain price Oracle after the end of each business day.

Fee Distribution:

• Management Fee: Annualized 0.15%
• Performance Fee: 0%
• No other hidden fees

APY calculation formula: (End NAV - Start NAV) / Start NAV * (365 / 30) * 100

Updated once every business day, annualized calculations are based on the changes in net income net worth over the past 30 days (and 7 days).

3. Key Mechanism: Bridging the "Last Mile"

3.1 Flux Finance

Flux Finance builds a collaborative transmission path for the industrial chain, introducing the liquidity of traditional assets into a multi-chain environment.

3.1.1 Technical Basics

By leveraging Layer 2 networks and Stellar's cross-border settlement capabilities, Flux has enabled the trading and liquidity provision of stablecoins and RWA tokens in DEX or AMM pools. Ondo Chain provides a native compliance verification network supporting RWA, while Ondo Global Markets has built an on-chain custody and cross-chain trading platform.

3.1.2 Upstream: Issuing End and Management End

After traditional financial assets are compliant custodial, they flow into centralized institutional accounts in the form of USDC, and then Ondo USDY LLC mints USDY and OUSG tokens, bringing the risk-free interest rates of real-world assets on-chain.

3.1.3 Midstream: Value-Added Mechanism

Through the Fund and Lend segments, Flux has released a large amount of potential liquidity, lowering the participation threshold for small and medium capital users.

3.1.4 Downstream: Value Transmission Mechanism

The RWA liquidity released by Flux transmits value to the entire Web3 ecosystem through on-chain lending, decentralized trading, and re-staking. At the same time, Flux continuously optimizes its governance and compliance framework to adapt to market demands.

3.2 Ondo Chain

Ondo Chain is a blockchain network designed for real-world assets, positioned between traditional permissioned chains and open public chains.

Core Components:

• Native support for real-world assets
• The "permission model" in the verification mechanism
• Ondo Bridge cross-chain tool
• Mandatory KYC process

3.3 Ondo Global Markets

Ondo Global Markets is a tokenization platform that puts traditional financial assets such as stocks, bonds, and ETFs on-chain, providing global investors with 24/7 on-chain trading channels.

Key part:

• Ondo Chain as the underlying infrastructure
• Ondo Bridge enables on-chain asset transfers
• Collaborate with the ecosystem of traditional financial institutions

4. Mechanism Comparison

Ondo Finance connects traditional finance and the encryption world through three key mechanisms:

1. Ondo Chain provides native support and compliance verification for high-grade assets.
2. Ondo Global Markets consolidates retail funds into a unified collateral pool.
3. The fToken mechanism on Flux Finance implements a closed loop of "interest accrual upon deposit and interest payment upon borrowing".

5. Conclusion

Ondo Finance has become the central hub for the on-chain transformation of real assets, efficiently facilitating institutional connections, compliant custody, retail participation, and derivative innovations. It is at the intersection of traditional finance and the on-chain world, sparking an unprecedented liquidity revolution.

In the future, with the continuous optimization of these mechanisms, Ondo Finance has not only opened up a blue ocean of 16 trillion but has also created incremental space beyond imagination in the process of digitization of real assets.

6. Highlights Summary

1. RWA empowers the on-chain ecosystem: introducing a "risk-free interest rate" benchmark for DeFi through products such as USDY and OUSG.

2. Three major mechanisms work together to release liquidity: Ondo Chain, Ondo Global Markets, and the Flux platform collaboratively bridge the "last mile" between traditional finance and the encryption world.

3. Small users and institutions in parallel: breaking the high threshold barriers, allowing small funds to participate in advanced strategies.

4. Instant, around-the-clock trading and settlement: supports 24/7 minting, redemption, and cross-chain asset transfers.

5. The pioneer of a 16 trillion blue ocean: deeply integrating traditional financial assets and on-chain innovation, paving the way for infinite incremental space in the digitalization of real assets.