A Rising Star in the RWA Sector: The Transformation and Product Innovation of Ondo Finance

With the arrival of the DeFi 2.0 era, real-world assets (RWA) are becoming the new focus of the industry. However, for ordinary investors, RWA products often have a high threshold, making participation difficult. This article will introduce a noteworthy RWA project, Ondo Finance, exploring its development history, product design, and future prospects.

The Successful Transformation of Ondo Finance

Ondo Finance was established in 2021, initially focusing on liquidity services in the ( LaaS ) field. However, in January 2023, the project decisively shifted to the RWA track. After a year of development, Ondo Finance has now ranked among the top three in the RWA field, with a total locked value of ( TVL ) reaching 183 million dollars.

Three Major RWA Products

OUSG( US Treasury Bonds )

OUSG is the flagship product of Ondo Finance, with a TVL of $117 million. Its underlying assets mainly come from BlackRock's short-term US Treasury ETF (SHV), supplemented by a small amount of USDC and USD as liquidity reserves. OUSG has an annualized yield of about 4.69% and supports multi-chain purchases on Ethereum, Polygon, and Solana.

It is worth noting that OUSG adopts the SPV( special purpose entity) structure, managed by Ondo I LP as the fund manager, which is beneficial for investor risk isolation. However, OUSG has a high investment threshold; in addition to requiring KYC verification, investors are also required to hold at least a $5 million investment portfolio, with a minimum purchase amount of 100,000 USDT.

USDY( dollar interest rate )

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

The design focus of USDY includes:

• Structural Design: Uses SPV structure, separating asset management from Ondo Finance.
• Over-collateralization: At least 3% of the initial loss position is used to mitigate risk
• First priority: Investors have priority over the underlying assets.
• Transparency: Daily release of independently verified asset reports
• Cautious investment: 65% bank deposits + 35% short-term US Treasury bonds
• Asset Custody: Held in custody accounts at Morgan Stanley and StoneX.

OMMF( U.S. Government Money Market Fund )

OMMF is an RWA token based on the US government money market fund (MMF), which has not yet been officially released.

Flux Finance Lending Platform

In February 2023, Ondo Finance launched the Flux Finance lending protocol based on Compound V2, providing users with a channel for the quick redemption of RWA products and addressing the time cost issue of 1-5 days for official redemption channels. Currently, Flux Finance supports OUSG lending, with a capital utilization rate of over 85%.

ONDO Token: The Future Still Holds Uncertainty

Ondo Finance issued the ONDO token before its transformation, and it 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, which has increased nearly 2.5 times since the unlock. Although Coinbase has included ONDO in its listing roadmap, the specific use of the token remains unclear.

In the future, ONDO may have a deeper integration with RWA products, such as serving as an incentive for the liquidity of RWA products on the Flux Finance platform. This will help bring RWA products into the view of more crypto investors. However, investors still need to remain vigilant about the recent frequent transfers of tokens to exchanges by the project team.