ONDO Finance is a Crypto-native company that enables individuals and businesses to access institutional-grade financial products and services.
Unlike most DeFi products, Ondo takes legal and regulatory compliance very seriously. By structuring products with conservative risk management and consulting with multiple legal, tax, and regulatory experts, ONDO ensures a safe and trustworthy offering, with the added benefits of blockchain technology, such as 24/7 operation and worldwide access.
How does it work?
ONDO Finance has innovatively merged the worlds of regulatory compliance and crypto, creating a framework that offers the best of both. This unique approach allows crypto's frictionless nature to coexist with the compliance and regulations synonymous with TradFi, providing a secure and efficient financial ecosystem.
On the technical side, ONDO implements smart contracts on prominent blockchains such as Ethereum, Solana, Polygon, and others. These smart contracts play a crucial role in each product's daily operations, guaranteeing transparency, security, and effectiveness.
The other side of the equation encompasses all the guidelines ONDO must follow to meet the TradFi regulations, including collaboration between many parties, such as asset managers, custodians, fund administrators, counterparties, lawyers, and more.
Product suite
In contrast to the typical DeFi product, which experiences fluctuating yields depending on on-chain activity, ONDO's products represent a more conservative and predictable long-term approach to DeFi.
USDY (US Dollar Yield) is a yield-baring tokenized note secured by short-term US Treasuries and bank demand deposits. The product stands out because it offers non-US residents a secure and compliant means to access stable and predictable yields supported by the world's largest economy. The only caveat to this product is that individuals must first go through a KYC/AML process to access the product.
OUSG (Ondo Short-Term US Government Treasuries) provides institutional investors and companies access to short-term US Treasuries ETF with 24/7 access to stablecoin mints and redemptions. This offers the benefits of ultra-low risk, stable returns, and deep liquidity, making it an attractive option for investors seeking safety and stability.
Unlike USDY, where a simple KYC check is sufficient to purchase the product, OUSG requires a thorough background check. The most common criteria are individuals with a net worth of over $5M or organizations or entities with over $25M in assets.
FLUX Finance, ONDO's third offering, is a peer-to-peer lending market where participants can lend their stablecoins to earn stable yields or borrow stablecoins by providing collateral.
The protocol is based on Compound V2 but includes extra features to accommodate permissionless tokens (USDC; USDT) and permissioned (OUSG). It operates on an overcollateralized system, requiring borrowers to provide collateral exceeding the value of the debt to ensure an incentive for repayment.
Ecosystem and partners
ONDO Finance backers include some of the biggest names in Crypto, such as Pantera Capital, Coinbase Ventures, Founders Fund, and Digital Currency Group. In addition, ONDO’s executive team has diverse experience across leading institutions like Goldman, Bridgewater, Millenium, and MakerDAO.
On the institutional side, ONDO Finance collaborates with the leading service providers, custodians, asset managers, and funds to ensure compliant and safe investment vehicles. That includes industry giants like Blackrock, Coinbase, Morgan Stanley, First Citizens, etc.
ONDO products also receive support from various crypto infrastructure providers, which offer bridging solutions, Oracle services, market makers, and access to the most prominent blockchain networks.
ONDO Tokenomics
$ONDO is an ERC-20 token deployed on the Ethereum mainnet and serves as a governance mechanism for the Ondo DAO and Flux Finance. The total supply of ONDO is 10 billion, with an Initial Circulating Supply of 1,426,647,567 (~14.3%).
More than 50% of the total supply is allocated to Ecosystem Growth for incentives such as airdrops and compensation for contributors to the Ondo ecosystem, including developers, educators, researchers, and strategic contributors.
RWA narrative
The tokenization and Real-World-Asset narrative is becoming increasingly popular among retail investors and institutions alike, and Ondo Finance is a direct beneficiary of this trend. Boston Consulting Group even states that the Tokenization of illiquid assets is a $16 trillion opportunity globally.
Despite the increased attention and excitement surrounding RWA projects, it's important to recognize that these projects will inevitably face heightened regulatory scrutiny, among other roadblocks. Additionally, RWA projects rely more on third parties, such as asset custodians and asset managers, which can create additional friction.
Ultimately, to encourage institutions and individuals to transition to on-chain solutions, RWA projects must offer a superior product with equivalent safety assurances as existing offerings, and Ondo Finance is a great example of that.
