Time to research: Ondo Finance

Ondo Finance is an institutional-grade DeFi protocol that tokenizes real world assets and is building the next generation of financial infrastructure to improve market efficiency, transparency and accessibility.

They currently have several products available for use:

1. $USDY or Ondo US Dollar Yield Token

• USDY is backed by a combination of US Dollars held in US Demand Deposit Accounts (i.e. Bank Accounts) and short-term US Treasuries.
• USDY is offered under a “Regulation S” exemption from the SEC. This exemption requires that Ondo only offer this product to non-US individuals or entities.
• After depositing funds you will receive a Token Certificate. To ensure compliance with US laws and regulations, USDY tokens are issued 40–50 days after you make your deposit.
• USDY is a tokenized interest-bearing note issued by Ondo USDY LLC, a bankruptcy-remote, wholly-owned subsidiary of Ondo Finance, Inc.
• USDY is a yield-bearing token backed by the highest-quality collateral and ideal for cash management. Holding USDY allows you to earn yield, an advantage over holding stablecoins. USDY can also be used as collateral when borrowing stablecoins. If the interest you pay for borrowing is lower than the yield earned from USDY, you can generate a profit.

• USDY offers a variable interest rate adjusted monthly in advance by Ondo. The yield automatically compounds meaning the value in USD at which USDY can be minted and redeemed slowly increases each day. USDY is currently yielding 5.10% APY while the blended US Treasuries and bank deposit portfolio is yielding approximately 5.35% APY. These rates are subject to change.

• USDY is senior debt that is secured by US bank demand deposits and short-term US Treasuries. USDY is overcollateralized by a 2.81% first-loss position funded in part by Ondo Finance, creating strong alignment between USDY and Ondo Finance. This overcollateralization also provides a buffer for short-term price decreases in the US Treasuries.
• Banks that are involved in the US bank demand deposits are: Morgan Stanley, First Citizens Bank and StoneX.

Some background of the banks involved here:

• Morgan Stanley is an American multinational investment bank and financial services company headquartered at 1585 Broadway in Midtown Manhattan, New York City. With offices in 41 countries and more than 75,000 employees, the firm’s clients include corporations, governments, institutions, and individuals. Morgan Stanley ranked №. 61 in the 2023 Fortune 500 list of the largest United States corporations by total revenue.
• First Citizens Bancshares, Inc. is a bank holding company based in Raleigh, North Carolina. Its primary subsidiary is First Citizens Bank, which operates over 500 branches in 23 states and is one of the largest banks in the United States. This bank is ranked the top 13th with $213.59B in total domestic assets.
• StoneX Group Inc. is an American financial services company. The company operates in six areas: commercial hedging, global payments, securities, physical commodities, foreign exchange and clearing and execution services. StoneX was founded in 1924. As of 2023, the company was ranked №. 59 in the Fortune 500 list of the largest United States corporations by revenue.

Portfolio Transparency:

The assets below reflect the sum of the USDY TVL ($127.27M) and the equity buffer ($3.58M).

USDY is currently overcollateralized by 2.81%.

Latest Ondo $USDY Daily Attestation

Latest Ondo $USDY Monthly Attestation

Latest Ondo $USDY Capitalization Report

$USDY Trust and Trasparency

Third Party Oversight

Ankura Trust serves as the Verification Agent and Collateral Agent to USDY in accordance with governing documents. As Verification Agent, Ankura posts daily reports that provide transparency into the assets of the issuer. As Collateral Agent, Ankura is prepared to seize the assets that secure USDY and repay holders if Ondo was to cease operations or breach certain covenants of the debt, subject to vote from USDY holders.

• Ankura Trust Company, LLC, a New Hampshire state-chartered trust company, provides independent, conflict-free indenture trustee, loan administrative agent, escrow agent, creditor representative, and other trustee services.
• Ankura Trust is led by a team of senior professionals, including former principals, bankers, executive directors — each with more than 20 years of experience. Their professionals have extensive experience acting as a fiduciary, steering committee members for bondholders, lender syndicates, funds and trusts. Ankura Trust executives have been involved in a majority of the largest Chapter 11 cases in history, providing independent oversight and administration in the representation of creditors. They are one of the few firms in the world that can provide a one-stop-shop for specialized corporate trust matters. They’ve managed globally recognized corporate trusts in some of the most high-profile matters and routinely work alongside the world’s leading law firms and corporations.

Currently the minimum for investment or redemption is $500, but they expect this minimum to decrease substantially over time. Their goal is to enable anyone that meets their eligibility criteria to invest or redeem. They also support investments via USD bank wire for amounts of $100,000 or more. At this time, however, redemption for Token Certificates (i.e. prior to your token issuance) is only available for amounts greater than $100,000.

2. $OUSG or Ondo Short-term US Government Treasuries

$OUSG provides liquid exposure to short-term US Treasuries and will soon offer 24/7 stablecoin subscriptions and redemptions. In addition, They are offering a new form of $OUSG — $rOUSG — with a constant $1.00 per share mint/redeem price, with yield distributed daily in the form of additional $rOUSG tokens via token rebasement. Finally, investors will also be able to easily and instantly convert between $OUSG and $rOUSG using the conversion tool on their website (and onchain).

The significant majority of this portfolio is currently in the BlackRock USD Institutional Digital Liquidity Fund (BUIDL), with the remainder in BlackRock’s FedFund (TFDXX), bank deposits, and USDC for liquidity purposes. The portfolio may, in the future, include other US Treasury funds and/or direct investments in US Treasuries.

OUSG shares are tokenized and can be transferred 24/7.

Ondo has received a fee waiver reducing the management fees for BUIDL from 0.50% to 0.20%; they pass these savings to $OUSG holders.

BUIDL Details

BlackRock USD Institutional Digital Liquidity Fund (BUIDL) seeks to offer a stable value of $1 per token. The Fund invests 100% of its total assets in cash, US Treasury bills, and repurchase agreements, allowing investors to earn yield while holding the token on the blockchain.

Some background of the banks and other entities involved:

• The Bank of New York Mellon Corporation, commonly known as BNY Mellon, is an American banking and financial services corporation headquartered in New York City. The bank offers investment management, investment services, and wealth management services. The Bank of New York Mellon ranks 149th in the Financial System Benchmark. In comparison to other banks in the benchmark, it ranks 78th out of 155.
• BlackRock, Inc. is an American multinational investment company. It is the world’s largest asset manager, with $10 trillion in assets under management as of December 31, 2023. Headquartered in New York City, Blackrock has 78 offices in 38 countries, and clients in 100 countries.
• Securitize is the #1 leader in RWA tokenization with $400M+ tokenized assets onchain and more than 500k accounts. This allows them to offer new benefits like 24/7/365 transfers, lending and borrowing, secondary market trading, on-chain yield and flexible custody. Securitize was named to Fast Company’s 2024 list of World’s Most Innovative Companies.
• PwC or PricewaterhouseCoopers International Limited is a multinational professional services brand of firms, operating as partnerships under the PwC brand. It is the second-largest professional services network in the world and is considered one of the Big Four accounting firms, along with Deloitte, EY, and KPMG. With offices in 151 countries and more than 364,000 people, they are among the leading professional services networks in the world. They help organizations and individuals create the value they are looking for, by delivering quality in Assurance, Tax and Advisory services. In FY23, PwC firms provided services to 87% of the Global Fortune 500 companies.

3. Ondo Bridge

This bridge offers a secure process of transferring Ondo’s tokens from Ethereum to Mantle (as of now) and vice-versa. They have partnered with prominent bridging technology, such as Axelar and LayerZero, and incorporated state-of-the-art, multi-chain communication primitives together with a novel Ondo risk management layer to help Ondo token holders bridge Real World Assets (RWAs) in a safe and efficient manner.

Current cross-chain gas fees are fluctuating and usually takes less than 30 mins. to bridge assets to another network.

4. Ondo Converter (currently only available in Mantle network)

Most Ondo tokens are yield-bearing. This yield can be paid out either in a distributing form or in an accumulating form.

For distributing tokens, the yield accrues daily via additional tokens distributed to your wallet. The redemption value per token stays stable at $1, and the amount of tokens in your wallet increases.

For accumulating tokens, the yield accrues daily via an increasing redemption value per token. The quantity of tokens in your wallet remains the same, but the redemption value per token has increased.

You can convert anytime between these two forms with no slippage.

5. Flux Finance

Flux is a fork of Compound v2, which has been around since 2019 and audited by industry leaders. It has been audited by TrailofBits, OpenZeppelin and Cretora. Flux Governance is managed by Ondo DAO.

Current stats of lend and borrow product:

Many wouldn’t possibly know that Reserve Protocol ($RSR) is also involved in Flux Finance. Reserve Protocol has enabled Flux Finance’s $fUSDC and $fDAI to be used as collateral as backing for its RTokens.

The Reserve Protocol enables the creation of RTokens, a form of programmable decentralized money backed by a basket of stable (and preferably yield-bearing) currencies. RTokens can be created permissionlessly, which allows for the customization of a stablecoin’s collateral basket and governance structure.

Reserve Rights (RSR) token holders can stake on an RToken of their choosing, which provides governance and acts as the first-loss capital in the event of a collateral default. In return, stakers receive a portion of the revenue generated by the RToken through its yield-bearing collateral. This dynamic proved resilient during the recent market turmoil that de-pegged USDC as low as 87 cents.

Flux’s additional functionality to support permissioned assets offers RTokens a new source of non-speculative yield, backed by safe and stable collateral in the form of Short-Term US Government Bond Fund (OUSG) tokens by Ondo Finance. OUSG is invested entirely into Blackrock’s SHV ETF, with a small portion of USD and USDC for liquidity purposes.

US Treasury yield now exceeds equivalent DeFi yields, enabling fUSDC and fDAI to offer arguably the best risk-adjusted permissionless yield available in DeFi, being collateralized by OUSG. At the target utilization rate of 90%, both assets currently yield 3.73% APY. By Enabling fUSDC and fDAI, RTokens can now benefit from exposure to the ‘risk-free’ rate alongside other diversified sources of DeFi yield, while being packaged into an overcollateralized stablecoin.

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They also integrated CoW Swap, CoW DAO creates user-protective products for Ethereum. MEV Blocker & CoW Swap fight MEV and give users more than they ask for. And YearnFi’s Seasolver — it helps Yearn users get the best prices when using yVaults.

Ondo Ecosystem

Ondo’s mission is to make institutional-grade financial products and services available to everyone via the power of public blockchain both by tokenizing real world assets (RWAs) and developing financial protocols that integrate those tokens.

The Ondo Ecosystem is the set of partners aligned with this mission, a network of strong partnerships with leading onchain providers across liquidity, custody, and other key onchain services.

Their ecosystem has a wide range of well-known projects, networks and protocols. They are integrated into 7 chains, 1 DeFi protocol, 29 liquidity/AMM hubs, 4 oracle solutions and 14 services providers.

For the complete list of the entities involved in their ecosystem, visit here.

Ondo Foundation

The Ondo Foundation (formerly known as the Neptune Foundation) was founded in 2022 as an independently governed and nonprofit Cayman Islands Foundation Company with no beneficial owners. The Ondo Foundation assisted in the launch of the Ondo DAO, which deployed and currently governs Flux Finance, the first lending protocol supporting tokenized securities as collateral.

Their mandate is focused on several key areas:

• Supporting innovation
• Educating and promoting awareness
• Treasury management
• Contract deployment
• Web application management
• Strategic partnerships and engagement
• Intellectual property management
• Community events and engagement

Ondo DAO

Stakeholders in the DAO — $ONDO holders — exercise control over the protocol, including economic parameters and smart contract upgrades, through on-chain governance proposals.

The governance process will typically follow a two-stage process: a forum discussion and an on-chain vote.

Governance proposals will typically start with a post on the Flux Finance Governance Forum. The post, though optional, is strongly encouraged. Feedback from the community and team will materially increase the chances of a successful and well-aligned governance proposal. Anyone can post and contribute to the discussion on the forum.

Once the governance proposal is finalized, you can submit a proposal for a binding on-chain vote. The DAO is a fork of Compound’s Governor Bravo and uses Tally to manage the on-chain voting process. Voting power is based on $ONDO token ownership, and token holders can delegate their voting power to other wallets.

The DAO parameters are set as follows:

Proposal Threshold: 100,000,000 $ONDO

• To submit a proposal, you need to have this much voting power (directly and/or delegated to you). This rule is necessary to reduce spam or malicious proposals.

Voting Period: 3 days

• Once the voting period is live, people will be able to cast votes during this period, after which the proposal becomes binding and can be executed.

Quorum: 1,000,000 $ONDO

• Proposals will only pass if there is enough voting power to pass the quorum.

Timelock: 1 day

• Successful proposals will execute after this delay period once the voting period completes.

$ONDO Token

Investor Allocations​

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 investment

Series A Investors

• <7%
• 1-year lock + 24-month release
• $20m equity investment

Ondo core team members and service providers are also bound by a minimum 1-year lock and subsequent 24-month release (3-year total lock-up)

Here are Ondo Finance’s token sales from May 2022 up to Feb 2024.

Here are Ondo’s fundraising rounds committed in 2021 and 2022.

$ONDO token holders on Ethereum grew from 16,000 wallet addresses up to 18,600 wallet addresses in just a matter of 1 month.

Balance of $ONDO in centralized exchanges.

$ONDO has made a 384% gain from its lows after its token launch.

Ondo Statistics

Ondo’s TVL grew drastically from March to October last year but somehow consolidated in the $200M bracket. We can still see a possibility of their TVL increasing in the coming months if they put out more tokenized products related to RWAs.

The highest TVL of Ondo comes from the Ethereum network, $132.54M, followed by Mantle, $60.96M, and the latter comes from 3 other chains which are Polygon, Solana and Sui totaling $221.21M TVL at the time this was posted.

Majority of the tokens in its TVL are in $USDY (56.16%) and $OUSG (42.8%).

There has been more USD inflows to Ondo since March last year compared to outflows due to the demand in RWA narrative because of institutions coming in the market.

In terms of sentiment or attention on Twitter, they are not really hyped up or mentioned frequently. The highest bar that you can see in the chart has 4 tweets in total. Unlike memecoins or other low cap RWA projects, Ondo has not been gaining the attention of retail people on Twitter/X.

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