What is Ondo Finance?

What is Ondo Finance?

Ondo Finance is a Cayman Islands-based foundation that is dedicated to building onchain financial infrastructure to improve market efficiency, transparency, and accessibility. Leveraging blockchain technology, Ondo offers institutional-grade products like USDY, a tokenized note secured by short-term US Treasuries and bank deposits, and OUSG, which provides liquid exposure to short-term US Treasuries.

Backed by Founders Fund, Coinbase, and Pantera, Ondo prioritizes quality, risk management, and client-focused service. Their offerings, including the Flux Protocol for decentralized lending, cater to individual and institutional investors, providing secure, compliant, and high-yield investment opportunities.

Ondo currently boasts over $570 million in total value locked across its product suite, positioning it as on of the most popular real-world asset projects in the DeFi sector. 

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How Does Ondo Finance Work?

Ondo Finance leverages the Ethereum blockchain to provide secure, onchain financial products backed by traditional assets. This enables individual and institutional investors to access high-yield investments with enhanced transparency and efficiency. 

Here's a quick breakdown of the user flow on Ondo’s platform:

• Onboarding: Investors undergo a Know Your Customer (KYC) verification to confirm identity and eligibility.
• Investment: Funds are deposited via USDC, USDT, or USD bank wires.
• Cohort Assignment: Investments are grouped into cohorts, determining token minting timelines.
• Token Issuance: USDY tokens are minted and distributed after a 40-50 day period.
• Yield Generation: USDY tokens, backed by short-term US Treasuries and bank deposits, provide stable, high-quality yield.
• Redemption: Tokens can be redeemed for USD or stablecoins, adhering to regulatory compliance and transfer restrictions.

Ondo Finance integrates blockchain technology with traditional finance, ensuring secure, transparent, and high-yield investment opportunities.

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USDY vs OUSG

Ondo Finance offers two distinct financial products: USDY and OUSG. Each caters to different investor needs and has unique features and benefits.

USDY (US Dollar Yield Token)

USDY is a tokenized note secured by short-term US Treasuries and bank deposits. It offers a stable, high-quality yield for non-US investors.

• APY: 5.30%
• TVL: $341.82M
• Target Audience: Non-US individuals and institutions
• Underlying Assets: Short-term US Treasuries and bank demand deposits
• Transferability: Freely transferable after 40-50 days
• Liquidity: Daily subscriptions and redemptions
• Compliance: Reg S compliant, not available to US persons

OUSG (Ondo Short-Term US Government Treasuries)

OUSG provides liquid exposure to short-term US Treasuries with instant minting and redemption capabilities for qualified purchasers.

• APY: 4.78%
• TVL: $233.93M
• Target Audience: Qualified purchasers
• Underlying Assets: US Treasuries and high-quality liquid assets
• Transferability: Instant mints and redemptions available 24/7 via stablecoins
• Liquidity: High liquidity with stablecoin redemptions
• Compliance: Suitable for qualified purchasers

USDY is ideal for non-US investors seeking high yield and secure, overcollateralized assets, while OUSG suits qualified purchasers seeking stable returns and high liquidity. Both products demonstrate Ondo Finance's commitment to secure, transparent, and compliant onchain investments.

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Ondo Finance BlackRock Partnership

Ondo Finance's strategic partnership with BlackRock is a major selling point, enhancing investor confidence in the ONDO governance token and the product's security. By transitioning the backing assets of its OUSG token to BlackRock's BUIDL tokenized fund from a short-term Treasury bond ETF, Ondo enables instant, 24/7 subscriptions and redemptions. 

Recently, Ondo moved $95 million to BlackRock's BUIDL fund, marking the first use of BlackRock's tokenized fund by a crypto protocol. This partnership underscores Ondo's commitment to leveraging high-quality, institutional-grade assets.

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ONDO Tokenomics

The ONDO token is the governance token for Ondo DAO and Flux Finance, enabling holders to control protocol parameters and smart contract upgrades via on-chain proposals. The governance process involves a forum discussion followed by an on-chain vote, using Compound's Governor Bravo model with Tally for voting.

Token Summary: 

• Address: 0xfAbA6f8e4a5E8Ab82F62fe7C39859FA577269BE3
• Initial Supply: 10 billion ONDO
• Inflation: None

Distribution: ONDO tokens became freely transferable on January 18, 2024, with a structured distribution:

• Coinlist Tranche 1: ~0.3%, 1-year lock + 18-month release
• Coinlist Tranche 2: ~1.7%, 1-year lock + 6-month release
• Seed Investors: <7%, 1-year lock + 24-month release ($4M equity)
• Series A Investors: <7%, 1-year lock + 24-month release ($20M equity)

Locked tokens can still vote, ensuring all stakeholders shape Ondo's future.

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Bottom Line

Ondo Finance is the fastest-growing real-world asset product in decentralized finance, attracting over half a billion in assets under management within its first year. By integrating blockchain technology with traditional finance, it offers secure, high-yield investments through USDY and OUSG. 

Strategic partnerships, such as with BlackRock, enhance market efficiency and transparency. Ondo Finance is a leader in onchain financial infrastructure for individual and institutional investors.