Ever wondered why it’s so difficult to get real-world assets, like U.S. Treasury bills into the crypto space? like why can’t you just buy them on the blockchain?
Well, here’s where Ondo Finance comes into play!
Ondo Finance wants to bring financial tools to everyone using the power of blockchain and in this video we are going to explain how.
By the end of it, you will know what Ondo Finance is, how Ondo works with Coinbase and Blackrock to bring you tokenized U.S. Treasury bills and what the tokenomics of the ONDO, OUSG and USDY tokens are. So let’s get started!
What is Ondo Finance?
Alright, so, what is Ondo Finance? Ondo Finance was created in 2021 by Nathan and Pinku with backgrounds from places like Goldman Sachs.
They saw the need to make financial products better and easier to get to using blockchain technology.
Ondo’s main goal is to tokenize real-world assets like U.S. Treasury bills and put them on the blockchain.
This allows more people to use these assets in the Decentralized Finance world.
One example of what Ondo’s done is create things like OUSG, which gives investors a token version of U.S. Treasuries. This links Traditional Finance with Decentralized Finance, by providing a clear and regulated way to invest in real-world assets on-chain.
Let’s say you wanted to buy a tiny piece of a U.S. Treasury bill without going through the usual banking steps. Ondo Finance lets you buy a token instead. The token represents that bill piece, making it easier to access and use in crypto.
How Ondo Finance Works
But how does Ondo Finance work to bring U.S. Treasuries to the DeFi world?
It involves a few key players, and understanding how they all fit together is very important.
It all starts with a structure designed to ensure safety and compliance. Think of Ondo as building a safe, secure bridge for your money to travel from the crypto world to U.S. Treasuries.
To do this, they’ve created a “Fund.”
So, what exactly is this “Fund”? Think of it as a special legal container, called Ondo I LP, created specifically to hold the U.S. Treasury bills that back the OUSG token I mentioned earlier.
When you invest in OUSG, you start by depositing USDC, which is then converted into USD. Why? Because the U.S. Treasury market operates in traditional U.S. dollars, not in stablecoins like USDC. Coinbase is responsible for this conversion.
After this conversion, the USD becomes part of the Fund, which is officially named Ondo I LP. This Fund is designed to hold and manage the underlying assets that back OUSG tokens. More than 99.5% of the Fund’s assets are then invested into the BlackRock USD Institutional Digital Liquidity Fund, also called BUIDL. BUIDL is managed by BlackRock, one of the world’s most experienced and trusted asset managers. Essentially, the USD in the Fund is used to buy shares of BUIDL, where BlackRock carefully manages the portfolio to generate returns.
Now, what does BUIDL hold? BUIDL primarily invests in U.S. Treasury bills, along with other highly liquid, low-risk assets like bank deposits and money market funds. These assets provide stability and a steady, predictable yield.
Importantly, BUIDL’s assets are custodied by BNY Mellon, one of the largest and most secure banks in the world, overseeing nearly $50 trillion in client assets. This additional layer of protection ensures that these investments are safely managed and safeguarded against risk.
The foundation of this entire structure is the U.S. Treasuries themselves. These are debt securities issued by the U.S. government and backed by its full faith and credit, making them some of the safest and most reliable investments in the world.
In short, when you invest in OUSG, you’re not just buying a token, you’re accessing a carefully constructed system built on trusted institutions like Coinbase, BlackRock, and BNY Mellon, with the U.S. government itself backing the ultimate investments. Ondo Finance has created a bridge between the decentralized finance world and this stable, ultra-secure asset class, making it easier for anyone to access what are traditionally institutional-grade investments.
ONDO, OUSG, USDY Tokenomics
Ondo Finance has three main tokens, ONDO, OUSG, and USDY, each serving a different purpose within the Ondo ecosystem. The ONDO token has a maximum supply of 10 billion tokens, and it’s the native governance and utility token of the ecosystem. It allows holders to participate in decision-making processes, such as voting on protocol upgrades and governance proposals. Additionally, ONDO is used as a reward for liquidity providers and ecosystem participants.
The initial token allocation was as follows: 52.1% was allocated to the Ecosystem Growth, 33% to Protocol Development, 12.9% to Private Sales and the last 2.00% to Community Access Sale.
Unlike ONDO, OUSG and USDY don’t have a fixed supply. Their issuance grows with demand, increasing as more investors buy these tokens.
As I mentioned earlier, OUSG is a tokenized version of short-term U.S. Treasuries, giving investors access to a safe asset. It earns yield over time, making it a low-risk option for accredited investors looking to preserve their wealth on the blockchain.
USDY on the other hand, is a tokenized secured note for non-U.S. investors, backed by U.S. Treasuries and demand deposits. It offers a strong U.S. dollar yield and comes in two forms: one that grows in value over time and another, called mUSD, that distributes yield daily with extra tokens.
Conclusion
So, summing it up, Ondo Finance basically wants to bridge the gap between traditional and decentralized finance, by tokenizing real-world assets like U.S. Treasury bills.
It offers access to these assets using trusted partners and following rules.
As always, nothing is ever guaranteed in crypto of course. Changes in regulations and the market, as well as management from the top, could affect Ondo’s future.
Ondo Finance could change how we access and use real-world assets in DeFi.