What is Ondo Finance?

What is Ondo Finance?

Ondo Finance is a DeFi protocol that specializes in tokenizing real-world assets through blockchain to build infrastructure and services for financial products. So far, Ondo has expanded to eight networks, achieved over 80 integrations, and managed more than $600 million in total value locked (TVL).

The platform uses two core divisions: an asset management arm that creates and manages tokenized financial products and a technology arm that develops decentralized protocols. Each protocol is governed separately through its own web interface and independent entity, ensuring operational autonomy.

Supported by BlackRock, Founders Fund, Coinbase, and Pantera, Ondo offers several institutional-grade products. The two main ones are USDY, a tokenized note backed by short-term US Treasuries and bank deposits, and OUSG, which provides liquid exposure to short-term US Treasuries.

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How Does Ondo Work?

Ondo Finance bridges traditional finance and blockchain by offering tokenized cash-equivalent products, OUSG and USDY, customized for distinct investor needs and regulatory frameworks. Here’s how it works:

• Tokenization of Assets: Both OUSG and USDY are backed by short-term US Treasuries and bank deposits, with OUSG emphasizing exposure to BlackRock-managed money market funds and USDY incorporating additional security through equity subordination.
• Returns Mechanism: OUSG accrues yield by increasing the Net Asset Value (NAV) of its underlying assets, reflecting interest payments reinvested into the fund, while USDY provides a variable interest rate set by Ondo Finance, avoiding principal volatility fluctuations.
• Investor Eligibility: OUSG is available globally to institutional investors classified as Qualified Purchasers, while USDY is accessible to both retail and institutional investors in eligible non-US geographies without requiring accreditation.
• Trading and Accessibility: OUSG is tradable in secondary markets for investors who have completed onboarding, whereas USDY features an initial lock-up period before becoming freely tradable among eligible participants.

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How to Use Ondo

Getting started with Ondo Finance is simple. Begin by completing the onboarding process, which includes eligibility verification, KYC, and connecting your wallet.

Once approved, you can invest by depositing USDC, USDT, or USD bank wires, mint tokens like USDY or OUSG, and track your assets directly in your wallet.

For redemptions or conversions, Ondo's platform offers user-friendly options to manage and transfer your investments securely.

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Ondo Finance Products

Ondo Finance offers a suite of tokenized financial products designed to bridge traditional finance and blockchain technology, providing users with secure, compliant, and accessible investment opportunities.

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1. USDY: Tokenized Yield with Accessibility

USDY (US Dollar Yield Token) is a tokenized note and stablecoin secured by short-term US Treasuries and bank deposits, designed to provide stable and US dollar-denominated yield to non-US individual and institutional investors.

• Yield Options: Comes in two versions; USDY (Accumulating) with yield reflected in increasing token price, and rUSDY (Rebasing) with yield reflected in additional tokens distributed daily.
• Compliance Features: Requires a 40-50 day lock-up period before tokens can be transferred, ensuring adherence to US regulatory requirements.
• Ease of Use: Investors can convert between USDY and rUSDY without slippage via the Ondo platform.
• DeFi Metrics: 4.35% APY and $450 million in total value locked.

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2. OUSG: Exposure to US Treasuries

OUSG (Ondo Short-Term US Government Treasuries) provides tokenized exposure to short-term US Treasury securities, enabling instant subscriptions and redemptions via USDC.

• Flexible Yield Options: Available in accumulating (OUSG) and rebasing (rOUSG) versions.
• Instant Liquidity: 24/7 minting and redemption supported by integration with BlackRock’s BUIDL token.
• Low Entry Thresholds: Minimum investment of $5,000 for instant transactions.
• Multi-Chain Availability: Supported on Ethereum, Solana, and Polygon.
• DeFi Metrics: 4.33% APY and $167 million in TVL.

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3. Flux Finance: On-Chain Lending and Borrowing

Flux Finance is an overcollateralized lending and borrowing platform supporting both permissionless and permissioned assets.

• Permissioned & Permissionless Assets: Allows lending and borrowing of assets like USDC and OUSG under specific permissions.
• fTokens for Yield: Lenders mint fTokens to earn interest, which is reflected in the token exchange rate.
• Governance: Operated by the Ondo DAO.
• DeFi Metrics: 4.77% average APY for lending at around $39 million TVL.

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4. Ondo Token Bridge: Cross-Chain Transfers

Ondo’s token bridge enables cross-chain minting and burning of USDY using the LayerZero protocol.

• Decentralized Verification: Relies on multiple independent verifiers (DVNs) like Polyhedra and Axelar for security.
• Rate Limiting: Ensures controlled transaction volumes for safety and compliance.
• Chain Support: Ethereum, Mantle, and Arbitrum, with plans for further expansion.

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5. Ondo Token Converter: Flexibility for Investors

The Ondo Token Converter allows easy conversion between accumulating and rebasing versions of tokens.

• No Slippage: Instant conversion between token types without value loss.
• Investor Convenience: Choose a token form best suited for your investment goals, such as collateral or yield-bearing exchanges.

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ONDO Tokenomics

The ONDO token, launched in January 2024 on Ethereum, is the utility token powering Ondo Finance's ecosystem, with a maximum supply of 10 billion tokens with the following allocations:

• Community Access Sale: 198,884,411 tokens (~2%) distributed to early supporters via CoinList, with ~90% unlocked at launch.
• Ecosystem Growth: 5,210,869,545 tokens (~52.1%) for airdrops, contributor incentives, and expansion. 24% unlocked at launch, with the rest vested over five years.
• Protocol Development: 3,300,000,000 tokens (~33%) allocated to infrastructure and products building, locked for at least 12 months and gradually unlocked over five years.
• Private Sales: 1,290,246,044 tokens (~12.9%) given to seed and Series A investors, locked for at least 12 months with incremental releases over five years.

Investors, including CoinList participants, seed, and Series An investors have at least a 12-month lock and subsequent vesting over 18 to 48 months, ensuring long-term commitment to Ondo’s growth.

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Ondo Finance BlackRock Partnership

BlackRock partnered with Ondo Finance in March 2024, leveraging Securitize’s tokenization platform to launch BUIDL, a tokenized US Treasury fund.

Ondo Finance, the largest holder of BUIDL with 223 million tokens valued at $223 million, integrated it into its OUSG product, reducing the investment threshold from BUIDL's $5 million minimum to $100,000.

Additionally, Circle facilitated real-time USDC redemption with a $100 million reserve, enhancing liquidity and usability for both institutions and DeFi markets.

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Founder

Ondo Finance, founded in 2021, was established by Nathan Allman, formerly a Vice President at Goldman Sachs specializing in structured products. Nathan led efforts on crypto and blockchain initiatives at Goldman Sachs, providing expertise in financial structuring for institutional clients.

The project is now managed by the Ondo Foundation, a nonprofit based in the Cayman Islands, dedicated to promoting financial inclusivity and market efficiency through onchain institutional-grade financial products and services.

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Bottom Line

Ondo Finance was the fastest-growing RWA platform in 2024, scaling its tokenized financial products across multiple blockchains and attracting major institutional backing, most notably BlackRock.

In 2025, it plans to build on this momentum with initiatives like the Ondo Summit and the launch of Ondo Global Markets, which will expand its reach to both institutions and everyday onchain users.