New Star in the RWA Track: The Transformation Journey and Product Innovation of Ondo Finance

In the DeFi 2.0 era, real-world assets (RWA) are seen as an important breakthrough. However, for ordinary investors, the threshold for RWA products is high, making participation difficult. This article will introduce a noteworthy RWA project, Ondo Finance, and explore its development history, product features, and token situation.

Ondo Finance Successfully Transforms into the RWA Track

Ondo Finance was established in 2021, initially focusing on liquidity services in the ( LaaS ) sector. However, with the arrival of the bear market, the DeFi market cap and on-chain liquidity shrank, leading to a bottleneck in project development. In January 2023, Ondo Finance decisively transitioned to the RWA track. After a year of efforts, it currently ranks third in TVL on the RWA track, reaching $183 million.

The success of Ondo Finance is inseparable from its product design. The core of RWA products lies in seamlessly connecting real-world assets with the virtual world while ensuring security. Ondo Finance has currently launched three RWA products: OUSG, USDY, and OMMF.

OUSG: Tokenized product of US Treasury ETF

OUSG is the flagship product of Ondo Finance, with a TVL of $117 million. Its underlying assets mainly come from the short-term US Treasury ETF (SHV) under BlackRock, supplemented by a small amount of USDC and USD as liquidity reserves.

The SHV ETF was established in 2007, investing in short-term government bonds with a maturity of less than 1 year, tracking the ICE U.S. Short-Term Government Bond Index. Currently, the SHV ETF has an opening price of $110.42, total assets of approximately $18.4 billion, an annualized return of 5.17%, and a S&P rating of AA.

The current price of OUSG is $104.66, with an annualized yield of 4.69%. It supports purchases on Ethereum, Polygon, and Solana chains. Ondo I LP, as the fund manager and SPV, benefits investor risk isolation.

OUSG charges a 0.15% fund management fee, up to 0.15% for paying service provider fees, and a 0.15% ETF management fee.

The purchasing threshold for OUSG is relatively high; KYC verification must be completed, and the "qualified purchaser" requirements must be met. One must hold at least a $5 million investment portfolio (. The minimum purchase amount is 100,000 USDT.

) USDY: Dollar Interest Rate Tokenized Product

USDY is a tokenized note backed by short-term U.S. Treasury bonds and bank demand deposits, aimed at ordinary investors. The minimum purchase amount is $500, and it can be minted and transferred on-chain 40-50 days after purchase. Currently, the price of USDY is $1.02, with an annualized return of 5.10% and a TVL of $66.2 million.

USDY is similar to an interest-bearing stablecoin, characterized by:

1. Structural design: Issued by Ondo USDY LLC and acted as an SPV, with assets managed separately from Ondo Finance.
2. Over-collateralization: A minimum of 3% first loss position is used to mitigate price volatility.
3. First priority: Investors have priority over the underlying assets.
4. Daily Transparency Report: Independently verified by Ankura Trust.
5. Asset allocation: 65% bank deposits, 35% short-term U.S. Treasury bonds.
6. Asset Custody: Funds are held in cash custody accounts at Morgan Stanley and StoneX.

USDY reduces project risks and ensures the safety of investors' funds through these measures.

OMMF: U.S. Government Money Market Fund

OMMF is a RWA token based on the U.S. government money market fund and has not been officially released yet.

Flux Finance Lending Platform

In February 2023, Ondo Finance launched the Flux Finance lending protocol based on Compound V2. This platform provides new liquidity channels for RWA products, addressing the time cost issue of official redemption channels. Currently, it supports lending for OUSG products.

ONDO Token: Future Uses Still to Be Clarified

Ondo Finance issued the ONDO token before its transformation, which will be unlocked for circulation on January 18, 2024, after a one-year lock-up period. Currently, the price of ONDO is 0.27 USDT, an increase of nearly 2.5 times since the unlock.

The ONDO token currently serves as the governance token for Ondo DAO and Flux Finance. In the future, it may be integrated with RWA products to promote the adoption of products as an incentive. However, the specific use of the token is still unclear, and 84% of the token distribution plan has not yet been announced.

Overall, Ondo Finance has demonstrated strong capabilities in the RWA sector, but the value of its tokens still needs further observation. Investors should closely monitor the project's development trends and rationally assess investment risks.

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