On-chain Wall Street: Ondo Finance connects real finance with the encryption world

1. Market Background

The next development stage of the blockchain industry focuses not only on performance and throughput, but also on how to deeply integrate real-world assets with decentralized finance. The RWA track is leading the transformation from technology to assets, facilitating an unprecedented convergence of on-chain ecology and traditional wealth. Currently, RWA has become the seventh largest category in DeFi, with a total locked value of over $12 billion.

U.S. Treasury bonds are one of the most liquid financial assets in the world. Their average daily trading volume reaches hundreds of billions of dollars, and they can be traded at any time with very low bid-ask spreads. The U.S. government backs them with "full faith and credit," and there has been no significant default to date, making them a benchmark of zero default risk. Their yields are regarded as the risk-free rate by the industry, providing a reliable benchmark for pricing various assets and managing risks.

The RWA track, with its unique value connecting the real economy and combined with U.S. Treasury bonds, has become the best example of off-chain assets moving towards on-chain innovation. Tokenized Treasury bonds not only retain the "risk-free rate" and high credit backing advantages of U.S. bonds but also incorporate the transparency, efficiency, and composability of DeFi, creating a brand new investment tool. It is expected that by 2030, the global market size for tokenized non-liquid assets will reach $16 trillion, accounting for 10% of global GDP. As of May 2025, the market value of tokenized Treasury bonds has grown from $1.39 billion a year ago to $6.89 billion, demonstrating tremendous growth potential.

Ondo Finance occupies a leading position in the tokenized U.S. Treasury market through its two major products, USDY and OUSG. These two products hold a significant share in the tokenized U.S. Treasury assets, contributing approximately 25% of the market share together. At the same time, Ondo Finance's total value locked continues to reach new heights, currently approaching $1.2 billion.

In the context of global inflation receding and the divergence in interest rates, investors' demand for stable and highly liquid assets is continuously increasing, leading to the emergence of tokenized government bonds. How does Ondo Finance maintain its leading position through innovation? Where does its core advantage come from? In the future, how will Ondo bridge the last mile between the crypto world and Wall Street through unique tools and architecture to achieve a truly "seamless asset channel"?

2. Overview

2.1 Project Introduction

Ondo Finance has launched three tokenized U.S. Treasury and bond products through asset management institutions managing large, highly liquid ETFs: U.S. Government Bond Fund ( OUSG ), Short-Term Investment Grade Bond Fund ( OSTB ), and High-Yield Corporate Bond Fund ( OHYG ).

• Market share: approximately 20%
• Government bond product market value: $122,511,877
• Management Fee: 0.15%

2.2 Core Product Introduction

2.2.1 USDY

USDY is an interest-bearing stablecoin supported by short-term U.S. Treasury bonds and bank demand deposits, allowing holders to automatically earn interest on the underlying assets without any additional action.

Introduction to the mechanism:

• Issuance and Minting: Targeting institutions and qualified investors outside 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 first minting.
• Interest Rate and APY: As of April 2025, the target annual yield for USDY is approximately 5.2%, determined by the actual income of the underlying assets and updated monthly.

2.2.2 OUSG

OUSG is an on-chain transferable fund that provides holders with short-term U.S. Treasury exposure through custody in institutional investment funds and direct bond purchases, with daily updates of net asset value reflecting the latest asset performance.

Mechanism composition:

• Underlying Assets: Primarily invests in short-term U.S. Treasury bonds and high-grade government bond funds from institutions like BlackRock.
• Fund Structure: Ondo Capital Management is responsible for management, and holders obtain shares by minting/redeeming OUSG.
• Price Release: Daily updates on-chain price Oracle, supporting 24/7 instant investment and redemption.

Fee allocation:

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

APY:

• Based on the annualized calculation of net value changes over the past 30 days, updated once every business day.

3. Key Mechanism: Connecting the "Last Mile" Bridge

3.1 Flux Finance

Flux Finance has built a collaborative transmission path for the industrial chain, bringing traditional asset liquidity into a multi-chain environment, promoting the trading and liquidity provision of RWA tokens in DEX or AMM pools.

3.1.1 Technical Foundation

With the help of Layer 2 networks and Stellar's cross-border settlement capabilities, Flux achieves seamless circulation of stablecoins and RWA tokens in a multi-chain environment. Ondo Chain provides a native compliance verification network for RWA, while Ondo Global Markets builds an on-chain custody and cross-chain trading platform, together forming an end-to-end on-chain financial infrastructure.

3.1.2 Upstream: Issuer and Management

In traditional finance, compliance custody of assets such as US short-term Treasury bonds is provided by large institutions to support underlying returns. In on-chain finance, traditional funds flow in the form of USDC, bringing risk-free interest rates on-chain through the issuance of USDY and OUSG.

3.1.3 Midstream: Value-Added Mechanism

Fund: Users deposit stablecoins to obtain USDY or exchange for OUSG through Flux Fund.

Lend: OUSG becomes the only collateral, achieving refinancing and leverage utilization of revenue certificates.

3.1.4 Downstream: Value Transmission Mechanism

The RWA liquidity released by Flux transmits value to the entire Web3 ecosystem through on-chain lending, decentralized trading, and re-staking, providing stable and low-cost capital for various applications.

3.2 Ondo Chain

Ondo Chain is a blockchain network designed for real-world assets, situated between traditional permissioned chains and open public chains.

Core Components:

• Native support for real-world assets
• Verification mechanism's "permissioned model"
• Cross-chain bridge tool Ondo Bridge
• Mandatory KYC process

Potential defects:

• Higher degree of centralization
• Security still needs to be strengthened

3.3 Ondo Global Markets

Ondo GM aims to put traditional financial assets on-chain, providing global investors with 24/7 on-chain trading channels.

Key part:

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

Advantages:

• Provide users and investors with unprecedented convenience
• Simplified traditional financial processes for institutions.

Potential defects:

• Not yet fully integrated with traditional finance.

4. Mechanism Comparison

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

• Ondo Chain provides native support and compliance verification for high-level assets.
• Ondo Global Markets pools retail funds into a unified collateral pool.
• The fToken mechanism on Flux Finance achieves a closed loop of "earn interest when storing, pay interest when borrowing".

5. Summary

Ondo Finance has become the central hub for the on-chain transformation of real assets, sparking a liquidity revolution at the intersection of traditional finance and the on-chain world. It integrates compliant RWA underlying assets, cross-institutional capital aggregation, and the instant-yielding fToken ecosystem, unlocking market potential and attracting new funds.

In the future, as the mechanisms continue to optimize, Ondo Finance will not only explore a 16 trillion blue ocean but will also create unimaginable incremental space in the process of digitizing real assets.

6. Highlights Summary

1. RWA empowers the on-chain ecosystem: Tokenizing U.S. Treasury bonds through products like USDY and OUSG, introducing a "risk-free interest rate" benchmark for DeFi.

2. Three major mechanisms work together to release liquidity: Ondo Chain, Ondo Global Markets, and the Flux platform collaborate to bridge the "last mile" between traditional finance and the encryption world.

3. Retail users and institutions in parallel: breaking down high barriers to entry, allowing small funds to participate in advanced strategies while meeting institutional-level compliance requirements.

4. Instant, round-the-clock trading and settlement: Supports 24/7 minting, redemption, and cross-chain asset transfers, building an 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 the digitalization of real assets and creating infinite incremental space.