Ondo Finance: Successful transformation, TVL ranks among the top three in the RWA track
Written by: How
RWA (real world assets) is hailed as the key to the opening of DeFi 2.0, but it seems to be "far away" from most ordinary investors. After all, purchasing RWA products requires KYC and meeting certain asset conditions, which is too high for most retail investors.
How to seize the investment opportunity and get a piece of the pie before the RWA track explodes?Token; The second is to purchase RWA products with lower purchasing conditions.
第一种方法，投资者需要了解该项目的基础面，以及该项目的产品设计和风险把控。大多数 RWA 产品需要 SPV（特殊目的实体）作为资金管控方来实现风险隔离，这其中就需要关注该实体是否满足当地的法律，以免造成未知的项目风险。购买代币应该是大多数加密投资者主要的投资方式，也是相对来讲，利润最高的方式。
The second method is that RWA products generally tokenize real assets, such as US dollars and US Treasury bonds. If investors meet the investment criteria, the rate of return is relatively stable and the risk is low. However, there are currently few RWA products that can be participated in, and most of the KYC and asset standards are not suitable for crypto investors.
Combining the above two situations, Odaily Planet Daily found Ondo Finance, which meets the requirements in the RWA track. This article will introduce the past history, products and tokens of Ondo Finance, hoping to provide readers with a suitable RWA investment target.
After 1 year, Ondo Finance successfully transformed
Ondo Finance was founded in 2021 and initially focused on the Laas (liquidity services) track. However, as the market entered a bear market, the DeFi market value and on-chain liquidity shrank, causing the project to encounter bottlenecks in its development. It then transitioned to the RWA track in January 2023, which took a year. So far, according to Deflama data, Ondo Finance's TVL ranks third in the RWA track, with a TVL of US$183 million.
Ondo Finance’s TVL ranks third, thanks to its product design. RWA products do not require special design in nature. They are tokenized targets in traditional finance, which requires closer and more integrated connection between reality and virtuality.SafetyThe difficulty of RWA product design and the process of investors purchasing or redeeming RWA assetsSafetySafety and standardization are the goals of product design.
The three RWA products currently launched by Ondo Finance are OUSG, USDY and OMMF.
OUSG (U.S. Treasury Bonds)
OUSG is the main product contributing to TVL in Ondo Finance, with a TVL of $117 million. The majority of OUSG's underlying assets come from BlackRock's short-term US Treasury ETF: iShares Short Treasury Bond ETF (NASDAQ: SHV), and a small portion is USDC and USD as liquidity.
SHV ETF was established in 2007. It refers to short-term government bonds with an investment cycle of less than 1 year. It tracks the ICE US Short-Term Treasury Bond Index. According to Yahoo data, the current opening price of SHV ETF is 110.42 USD, with total assets of approximately 18.4 billion USD, an annualized return rate of 5.17%, and a S&P rating ofXiaobai Navigation Level AA.
The current price of OUSG is 104.66 USD, with an annualized yield of 4.69%. It supports purchases on Ethereum, Polygon and Solana chains. It is worth noting that Ondo I LP, as the fund manager, manages the SHV ETF shares of OUSG purchased by investors. As the SPV of OUSG, Ondo I LP is a US entity company, which is conducive to investor risk isolation and helps users redeem shares in emergencies (emergencies are caused by project bankruptcy, etc.).
In terms of related fees, OUSG charges a fund management fee of 0.15%, a maximum of 0.15% is used to pay the fund manager, auditors and other service providers, and there is also an ETF management fee of 0.15% charged by BlackRock, the issuer of the ETF itself.
However, the purchase requirements of OUSG are relatively high. KYC verification is a prerequisite, and the requirements for being "Qualified Purchasers" must also be met. This requirement requires investors to hold at least a $5 million investment portfolio, and the minimum purchase amount of OUSG is 100,000 USDT.
However, compared with the sharp price fluctuations in the bear market, RWA products that invest in short-term US Treasury bond ETFs with an annualized return of about 5% are suitable targets. Therefore, in the past year, the scale of TVL of OUSG has grown rapidly and has become the main product of Ondo Finance.
USDY (US dollar interest rate)
USDY is a tokenized note guaranteed by short-term U.S. Treasury bonds and bank demand deposits. USDY is available to ordinary investors, with a purchase amount of more than $500, and can be minted and transferred on the 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 US dollars.
Compared with the stablecoins USDT and USDC that are frequently used in the crypto world, USDY is more like an interest-bearing stablecoin, and can also be classified as an interest-bearing stablecoin. However, compared with other interest-bearing stablecoins, it is backed by traditional banks, and according to its official website, USDY complies with US regulatory requirements.
Since USDY can be minted and circulated on the chain after a certain period of time and operate as a stable currency, the structural design and risk control of USDY are particularly important. The following are the key points of USDY design and supervision methods.
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Structural design: USDY is issued by Ondo USDY LLC and acts as an SPV. Assets are managed separately from Ondo Finance and independent books and accounts are maintained. This structure ensures the separation of USDY collateral assets from the potential financial risks of Ondo Finance;
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Overcollateralization: USDY uses overcollateralization as a risk mitigation measure. The minimum first loss position of 3% is used to mitigate short-term fluctuations in US Treasury prices. Currently, USDY is overcollateralized by a first loss position of 4.64%;
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First priority: USDY investors have "first priority" on underlying bank deposits and Treasury bonds. Ankura Trust acts as a collateral agent to monitor the collateral of USDY holders.SafetyInterest. A control agreement is established with the bank and custodian that holds the assets, granting Ankura Trust the legal rights and obligations to control the assets and repay token holders in the event of certain defaults or when the loan is accelerated through a vote by USDY holders;
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Daily Transparency Reports: Ankura Trust acts as a verifier and provides daily transparency reports on reserves. These reports detail asset holdings, ensuring transparency and accountability. Reports are independently verified, providing additional assurance of reliability;
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Asset Allocation: USDY adopts a cautious investment strategy to maintain theSafetyThe asset allocation target is 65% of bank deposits and 35% of short-term US Treasury bonds. This conservative investment approach focuses only on these safe and liquid instruments to minimize risk exposure;
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Asset Custody: The US Treasury bonds that support USDY are stored in Morgan Stanley and StoneX's "cash custody" accounts to ensure asset safety. These assets will not be re-pledged again. Ankura Trust verifies the existence of these deposits every day.
Through the above methods, USDY products isolate assets and crypto projects to reduce project RUG risks; over-collateralize collateral to buffer the risk of a treasury bond interest rate cut; Ankura Trust acts as a regulatory agency to protect the security of investors' funds and returns; and deposit collateral in a traditional bank's cash custody account to ensure that the funds will not be reused.
The investment threshold of USDY is lower than that of other RWA products, and in addition to purchasing with USDC on the chain, you can also participate through wire transfer.
USDY is subject to certain legal constraints to some extent, and has certain interest-bearing advantages compared to other stablecoins. However, the current usage rate of USDY is relatively low.
OMMF (U.S. Government Money Market Fund)
OMMF is an RWA token based on the US government money market fund (MMF). This product has not yet been officially released. It will be supplemented after the subsequent release.
Flux Finance (Lending Platform)
In February 2023, Ondo Finance launched the Flux Finance lending platform, a lending protocol built on Compound V2. According to the official website, the capital utilization rate is currently above 85%.
Flux Finance is one of the three channels provided by the project to redeem RWA products. It provides a new liquidity method to solve the time cost problem of redemption through official channels. This is because redemption through official channels cannot be redeemed directly through the chain. It is necessary to wait for the SPV of the RWA product to sell the product before redemption, which involves a time cost of 1-5 days.
However, Flux Finance currently supports OUSG product lending. As for USDY, it can be transferred through the on-chain DEX after minting.
Betting on the success of the RWA track, but the future use of tokens is still unclear
Before the transformation, Ondo Finance issued the ONDO token and sold it publicly on Coinlist. However, the token was locked for one year after purchase and released monthly thereafter. The token can be used as the governance voting quota of Flux Finance.
But through the chainCommunityVoting, the ONDO token was unlocked for circulation on January 18 this year. The current price of ONDO token is 0.27 USDT, which is nearly 2.5 times higher than the token after unlocking.
At the same time, Coinbase added Ondo Finance (ONDO) to the asset listing roadmap. Coinbase is not only an investor in Ondo Finance, but also the only channel for USDC to exchange for USD in the RWA product.
However, in the past two days, the Ondo project’s address has transferred ONDO tokens toexchangeThis move may be market making or shipping, and investors need to be cautious.
According to the official article, ONDO tokens are used as Ondo DAO and Flux Finance's governance token. Since it is not clear whether ONDO tokens can be related to RWA products, it is not ruled out that ONDO tokens will be used as an incentive for RWA products such as USDY in the future. After all, among the total number of tokens announced, both investors and Coinlist public sales only hold 16%, and the remaining 84% tokens have not yet been clearly allocated.
If ONDO tokens can be combined with RWA products, with Flux Finance as the platform, and ONDO tokens as incentives for the flow of RWA products on the chain, it will undoubtedly promote RWA products into the vision of the general public crypto investors.
The article comes from the Internet:Ondo Finance: Successful transformation, TVL ranks among the top three in the RWA track
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