On-chain Financial New Wave: Ondo Finance Builds a Bridge Between Real World Assets and the Crypto Market

1. Market Background

The next wave in the blockchain world is not only about performance and throughput, but also about how to deeply integrate real-world assets with decentralized finance. The RWA track is leading the transformation from technology to assets, achieving an unprecedented convergence between the on-chain ecosystem and traditional wealth. Currently, RWA has risen to become the seventh largest category in DeFi, with a total locked value exceeding $12 billion.

U.S. Treasury bonds are one of the most liquid financial assets in the world. They are backed by the "full faith and credit" of the U.S. government and have never experienced a substantial default, making them a model of zero default risk. Their yields are regarded as the risk-free rate in the industry, providing a reliable anchor for pricing various assets and managing risk.

The combination of the RWA track and U.S. Treasury bonds has become the best paradigm for off-chain assets to move towards on-chain innovation. Tokenized Treasury bonds not only inherit the core advantages of U.S. bonds but also integrate the transparency, efficiency, and composability of DeFi, creating an unprecedented investment tool. It is expected that by 2030, the global market size for tokenized non-liquid assets will exceed 16 trillion USD, accounting for 10% of the global GDP. As of May 13, 2025, the market value of tokenized Treasury bonds has surged from approximately 1.39 billion USD a year ago to 6.89 billion USD.

In this context, Ondo Finance occupies about 25% of the tokenized US Treasury market through its two flagship products, USDY and OUSG. Its overall TVL has also been steadily rising and is now close to 1.2 billion dollars.

2. Project Overview

Ondo Finance has launched three tokenized U.S. Treasury and bond products: U.S. Government Bond Fund (OUSG), Short-Term Investment Grade Bond Fund (OSTB), and High Yield Corporate Bond Fund (OHYG). These products are managed by asset management giants such as BlackRock and Pacific Investment Management Company.

Main Data:

• Market share: about 20%
• National debt product market value: $122,511,877
• Management Fee: 0.15%

2.1 Core Product Introduction

USDY (US Dollar Yield Token)

USDY is a yield-bearing stablecoin backed by short-term U.S. Treasury bonds and bank demand deposits. Holders can automatically earn interest generated by the underlying assets without participating in additional contracts or staking.

Introduction to the mechanism:

• Issuance and Minting: For institutions and qualified investors outside of the United States, minting and redemption can be done daily at net asset value, with a transfer lock-up period of 40-50 days after the initial minting.
• Interest Rate and APY: As of April 2025, the target annual yield is approximately 5.2%, determined by the actual income of the underlying assets, updated monthly.

OUSG (Ondo Short-Term US Government Treasuries Fund)

OUSG is an on-chain transferable fund that provides holders with short-term exposure to US Treasury bonds through custody with the BlackRock USD Institutional Digital Liquidity Fund (BUIDL) and direct bond purchases.

Mechanism Composition:

• Underlying assets: Mainly invest in short-term US Treasury bonds in BUIDL, as well as high-grade government bonds and GSE funds from other institutions.
• Fund structure: Managed by Ondo Capital Management, holders obtain corresponding shares by minting/redeeming OUSG tokens.
• Price Release: Daily updates on on-chain price Oracle, supporting 24/7 instant investment and redemption.

Fee Allocation:

• Management Fee: Annualized 0.15%
• Performance fee: 0%
• Other fees: No additional subscription fees, redemption fees, or hidden charges.

APY Calculation Method: Based on the net income net value changes over the past 30 days (and 7 days) for annualization, updated once every business day.

3. Key Mechanism: Bridging the "Last Mile"

3.1 Flux Finance

Flux Finance leverages Layer2 networks and Stellar's cross-border settlement capabilities to bring traditional asset liquidity into a multi-chain environment. It promotes the secondary market trading of USDC, fUSDC with OUSG, fOUSG on DEXs or aggregators or providing AMM liquidity.

The main components of Flux Finance:

1. Upstream (Issuing side and management side)

   • Traditional finance: Provides underlying yield support through ETFs managed by large institutions.
   • On-chain finance: Bringing the risk-free interest rate of real-world assets on-chain through the minting of USDY and OUSG tokens.

2. Midstream (Value-Added Mechanism)

   • Fund: Users can deposit stablecoins to obtain USDY or exchange for OUSG through Flux Fund.
   • Lend: OUSG serves as the only high-quality collateral for refinancing and leveraging of income certificates.

3. Downstream (Value Transmission Mechanism)

   • Delivering value to the entire Web3 ecosystem, providing stable and low-cost capital for various applications.
   • Continuously optimize governance and compliance frameworks to adapt to the changing regulatory environment and market demands.

3.2 Ondo Chain

Ondo Chain is a blockchain network designed for real-world assets, combining the compatibility of open blockchain with institutional-level compliance requirements.

Core components:

• Native support for real assets
• "Permissioned Model" in the verification mechanism
• Ondo Bridge cross-chain tool
• Mandatory KYC process

3.3 Ondo Global Markets

Ondo Global Markets is a tokenization platform that puts traditional financial assets such as stocks, bonds, and ETFs on-chain, providing a round-the-clock on-chain trading channel.

Key part:

• Ondo Chain as underlying infrastructure
• Ondo Bridge enables on-chain asset transfers
• Collaborate with the ecosystem of traditional financial institutions

Advantages:

• Provide ordinary investors with the opportunity to participate in advanced financial operations.
• Simplify traditional financial processes and improve efficiency

4. Mechanism Comparison

Ondo Finance connects traditional finance with the crypto world through three key mechanisms:

1. Ondo Chain: Provides native support and compliance verification for high-grade assets.
2. Ondo Global Markets: Aggregating retail funds to achieve a unified collateral pool across institutions and companies.
3. Flux Finance: Through the OUSG/USDY fToken mechanism, achieve a closed loop of "deposit to earn interest, borrow to pay interest".

5. Summary

Ondo Finance has become the central hub for the on-chain transformation of real assets, bridging the entrance of traditional finance and the exit of the crypto market. It integrates compliant RWA underpinnings, cross-institutional capital aggregation, and the instant-interest fToken ecosystem, which is unleashing tremendous market potential.

6. Highlights Summary

1. RWA empowers on-chain ecosystem: introducing "risk-free interest rate" benchmark to promote rapid development of RWA sector.
2. The three major mechanisms work together to release liquidity: bridging the "last mile" between traditional finance and the crypto world.
3. Small users and institutions run in parallel: lowering the participation threshold while meeting institutional-level compliance requirements.
4. Instant, round-the-clock trading and settlement: building efficient and transparent on-chain financial infrastructure
5. 16 trillion blue ocean pioneers: deeply integrating traditional financial assets and on-chain innovation, paving the way for unlimited incremental space for digitalization of real assets.