On-chain Wall Street: Ondo Finance Builds a Bridge Between Real Finance and the Encryption World

1. Market Background

The next wave of the blockchain world is no longer just about performance and throughput, but about how to deeply integrate real-world assets with decentralized finance. Just as Ethereum laid the foundation for the era of smart contracts, the RWA track is leading the transformation from technology to assets, enabling 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 have characteristics of extremely high liquidity, zero default risk, and a risk-free interest rate, providing a reliable anchor for asset pricing and risk management. The combination of the RWA track and U.S. Treasury bonds has become the best paradigm for off-chain assets to innovate on-chain. Tokenized Treasury bonds not only inherit the core advantages of U.S. Treasury bonds but also integrate the transparency, efficiency, and composability of DeFi into sovereign bonds, creating an unprecedented investment tool.

The Boston Consulting Group predicts that by 2030, the global market size for tokenized illiquid assets will exceed $16 trillion, accounting for 10% of global GDP. As of May 13, 2025, the market value of tokenized government bonds has skyrocketed from approximately $1.39 billion a year ago to $6.89 billion, confirming the explosive growth potential of this sector.

A trading platform has established a leading position in the tokenized U.S. Treasury market through its two flagship products, USDY and OUSG. USDY and OUSG account for approximately 25% of the market share in all tokenized U.S. Treasury assets, significantly ahead of other similar products. Meanwhile, the platform's overall TVL has also reached new highs, first surpassing $1 billion on March 3, 2025, and is now approaching $1.2 billion.

Against the backdrop of global inflation receding and interest rate differentiation, the demand for stable and highly liquid assets is continually rising, leading to the emergence of tokenized government bonds. Next, we will delve into how a certain platform utilizes unique tools and architecture to bridge the last mile between the encryption world and Wall Street, achieving a true "seamless asset channel".

2. Overview

2.1 Project Introduction

A certain platform has launched three tokenized U.S. Treasury and bond products through large, highly liquid ETFs managed by asset management giants and Pacific Investment Management Company, namely the U.S. Government Bond Fund (OUSG), Short-Term Investment Grade Bond Fund (OSTB), and High Yield Corporate Bond Fund (OHYG).

• Market Share: Approximately 20%
• National debt 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, with each USDY backed by short-term U.S. treasury bonds and demand deposits in banks. 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 the United States, minting and redemption can occur 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 of USDY is approximately 5.2%, determined by the actual income of the underlying assets, set and published monthly by governance documents.

2.2.2 OUSG

OUSG is an on-chain transferable fund that provides holders with short-term exposure to U.S. Treasury bonds by being custodied with a certain institution's USD Institutional Digital Liquidity Fund and directly purchasing bonds. It updates its net asset value daily to reflect the latest asset performance and fee deductions.

Mechanism Composition:

• Underlying Assets: Primarily invested in short-term U.S. Treasury bonds from a certain institution's USD Institutional Digital Liquidity Fund, as well as high-grade government bonds and GSE funds from other institutions.
• Fund structure: Managed by a fund management company, holders obtain corresponding shares by minting/redeeming OUSG tokens; after the end of each business day, the on-chain price Oracle is updated according to the latest NAV.
• Price Release: The on-chain Price Oracle updates daily, deriving the daily price of each OUSG token by dividing NAV by the total token supply, and publicly posting it on-chain, supporting 24/7 instant investment and redemption.

Fee Distribution:

• Management fee: 0.15% annualized, used to cover platform operation and management costs.
• Performance Fee: 0%.
• Other fees: No subscription fee, redemption fee, or hidden fees; all fees are deducted from the daily NAV.
• Third-party service fee: The management fee of the underlying fund (approximately 0.10%-0.15%) is included in the management fee and NAV mentioned above, with no additional charges.

APY update rules: Updated once every business day, annualized calculation based on changes in net income net value over the past 30 days (and 7 days), reflecting historical performance but not representing future performance.

3. Key Mechanism: Bridging the "Last Mile"

3.1 Flux Finance

Flux Finance builds a collaborative transmission path for the industry chain, seamlessly introducing the liquidity of traditional assets into a multi-chain environment through a high-throughput, low-cost Layer 2 network and cross-border settlement capabilities. It promotes secondary market trading of stablecoins and RWA tokens on DEXs or aggregators or provides liquidity in AMM pools, creating additional income for LPs from fee sharing.

3.1.1 Technical Foundation

By leveraging Layer2 networks and cross-border settlement capabilities, Flux brings liquidity of traditional assets into a multi-chain environment. At the same time, a certain platform provides a native compliance verification network for RWA support based on its own chain and builds an on-chain custody and cross-chain trading platform, forming an end-to-end on-chain financial infrastructure.

3.1.2 Upstream: Issuer and Management End

• Traditional Finance: Compliance custody of high-quality traditional assets such as U.S. short-term government bonds, with large institutions providing underlying yield support through ETFs, and independent trust institutions responsible for defaults and supervision.
• On-chain finance: After traditional financial funds flow into centralized institution accounts in the form of USDC, they are transferred to the issuing company, which brings the risk-free interest rates of real-world assets on-chain through the minting of two tokenized income certificates, USDY and OUSG.

3.1.3 Midstream: Value-Added Mechanism

• Fund: Users can deposit stablecoins on the platform to obtain USDY or exchange for OUSG at a lower threshold through Flux Fund.
• Lend: OUSG becomes the only high-quality collateral. Licensed on-chain lending protocols or institutional borrowers will lend USDC to platform users, who will collateralize OUSG in the Flux OUSG Pool to achieve refinancing and leverage of yield certificates.

3.1.4 Downstream: Value Transmission Mechanism

• The RWA liquidity released by Flux transmits value throughout the entire Web3 ecosystem through on-chain lending, decentralized trading, and re-staking, providing stable and low-cost capital for DeFi protocols, smart contract applications, and emerging sectors.
• Flux continuously optimizes its governance and compliance framework, introducing multi-signature custody, off-chain audits, and on-chain contract upgrade mechanisms to adapt to the ever-changing regulatory environment and market demands.

3.2 Ondo Chain

Ondo Chain is a blockchain network designed for real-world assets, positioned as the underlying infrastructure serving institutional-level financial markets. It sits between traditional permissioned chains and open public chains, possessing the compatibility and connectivity of open blockchains while also meeting institutional demands for compliance and risk management.

Core components:

• Native support for real-world assets
• The "permissioned model" in the verification mechanism
• Self-developed cross-chain bridge tool
• Mandatory KYC process

Potential Defects:

• The permission verification mechanism may lead to an increase in the centralization of the network.
• Security aspects still need to be strengthened.

3.3 Ondo Global Markets

Ondo Global Markets is a tokenization platform aimed at putting traditional financial assets such as stocks, bonds, and ETFs on-chain, providing global investors with an around-the-clock on-chain trading channel. Its core innovation lies in the tokenization of traditional financial assets through blockchain technology, giving them liquidity and transferability similar to stablecoins.

Key part:

• Ondo Chain: as underlying infrastructure
• Ondo Bridge: Achieve asset transfers with multiple blockchain networks
• Collaborate with the ecosystem of traditional financial institutions: Ensure the safe custody and compliance of underlying assets.

Advantages:

• Provide unprecedented convenience for user investors
• For institutions, it simplifies traditional financial processes.

Potential defects:

• Not yet fully integrated with traditional finance.
• Weigh risks against rewards to ensure system stability.

4. Mechanism Comparison

A certain platform has achieved the on-chain transformation and complete release of liquidity of real-world assets through three key mechanisms, linking traditional finance with the encryption world:

1. Ondo Chain provides native support and compliance verification for high-grade assets.
2. Ondo Global Markets aggregates retail funds into a unified collateral pool.
3. The fToken mechanism on Flux Finance realizes a closed loop of "deposit earns interest, borrow pays interest".

5. Summary

These mechanisms work together to make a certain platform the central hub for the on-chain transformation of real assets. Whether it is institutional connectivity, compliant custody, or retail participation and derivative innovation, everything is efficiently completed on the same platform, truly bridging the entry of traditional finance with the exit of the encryption market. This platform is at the intersection of traditional finance and the on-chain world, sparking an unprecedented liquidity revolution.

In the future, with the continuous optimization of these mechanisms, the platform will not only unlock a blue ocean of 16 trillion, but also an incremental space that surpasses imagination in the digitalization process of real assets. Its rise and success are guiding the RWA market, which is poised for the next wave of explosion.

6. Highlights Summary

1. RWA empowers the on-chain ecosystem: By tokenizing the most liquid and secure U.S. Treasury bonds through products such as USDY and OUSG, it introduces a "risk-free interest rate" benchmark for DeFi.

2. Three major mechanisms work together to release liquidity: the native compliance layer of Ondo Chain, the inter-institutional liquidity pool of Ondo Global Markets, and the fToken lending closed loop of the Flux platform, collaboratively bridging the "last mile" between traditional finance and the encryption world.

3. Small users and institutions in parallel: Breaking down high barriers, small funds can participate in advanced strategies through a unified collateral pool, while meeting institutional-level compliance and security requirements.

4. Instant, around-the-clock trading and settlement: Combining permissioned nodes, KYC processes, and native cross-chain bridges to support 24/7 minting, redemption, and cross-chain asset transfers, creating an efficient and transparent on-chain financial infrastructure.

5. The pioneer of the 16 trillion blue ocean: By deeply integrating traditional financial assets with on-chain innovations, it is attracting a new wave of hot money influx, not only seizing the tokenization market expected to reach 16 trillion dollars by 2030 but also paving an infinite incremental space for the digitization of real assets.