How Ondo Finance Is Redefining Tokenization to Lead the RWA Market

Key Takeaways

• Over the years, improvements in infrastructure, clearer use cases, and active initiatives by major traditional financial asset managers toward asset tokenization have brought renewed attention to the narrative of "tokenized RWA."

• Among these, the sector of yield-bearing tokenized assets, which enhances the functionality of stablecoins, has grown rapidly, surpassing $2.4 billion in value just two years after its emergence.

• Leading this sector through tokenized U.S. Treasury products, Ondo Finance highlights that tokenization goes beyond merely tokenizing real-world assets on blockchain networks—it expands their usability, transforming them into more valuable assets.

• Ondo Finance aims to become a platform where a wide range of public securities, onboarded through strategic partnerships bridging Web2 and Web3, can be traded globally with abundant interconnected liquidity and institutional-grade investor protection.

1. Introduction

This year has seen heightened and proactive interest in tokenized real-world assets (RWAs), particularly from institutions. Established financial institutions like Citigroup, Boston Consulting Group, and Standard Chartered have published optimistic reports, forecasting that the tokenized RWA market could reach trillions of dollars in the near future, and BlackRock has launched a Tokenized Treasury Fund known as BUIDL (BlackRock USD Institutional Liquidity Fund) in collaboration with Securitize. PayPal also made headlines by successfully onboarding a stablecoin (PYUSD) issued in partnership with Paxos onto the Solana Network in late May, and recently, Stripe acquired the stablecoin infrastructure company, Bridge, for $1.1 billion.

However, tokenized RWAs are not exactly a novel concept in the blockchain industry (RWAs encompass a broad range of tangible assets (e.g., real estate, mining commodities, artworks) and financial assets (e.g., stocks, bonds). In reality, many early proponents of blockchain technology considered the “tokenization of all types of assets” as one of its most significant use cases, as undoubtedly, tokenization brings numerous benefits, such as improved capital efficiency and accessibility, agile infrastructure, automation via smart contracts, and enhanced regulatory compliance and transparency.

The real-world assets (RWAs) narrative is back in the spotlight, gaining attention due to improvements in infrastructure, clearer use cases, and growing exploration of tokenization by large traditional financial asset managers. Though regulatory and technical hurdles still exist, these recent advancements indicate that tokenizing assets will emerge as a predominant use case for blockchain and revolutionize the accessibility, transferability, and composability of traditional assets, making this the ideal moment to explore the RWA landscape and its future onchain.

In this article we’ll discuss the most successful tokenized RWA to-date, stablecoins, along with a more recent tokenized cash equivalents called ‘yieldcoins’ that have rapidly been gaining traction. We’ll also take a deep dive into one of the companies that’s been leading the RWA and yieldcoin category, Ondo Finance. This article also explores how Ondo Finance has made these assets more impactful, while establishing itself as a leader in this field.

2. A New Era of Finance: Where Currency Meets Asset

2.1 Stablecoins Were the First Onchain Use Case With Product -Market Fit

To date, the most successful example of tokenized RWAs is undoubtedly stablecoins, such as USDC or USDT, which are backed by the US dollar. These stablecoins aim to maintain a stable value and offer substantial liquidity, making them the most widely used type of asset for trading against crypto assets across a variety of networks.

According to Artemis, the total supply of stablecoins has risen dramatically from $27 billion in 2021 to about $160 billion today, with monthly onchain trading volumes approaching an average of $2.2 trillion.

Stablecoins serve as the foundational means of exchange and store value within the burgeoning DeFi ecosystem, so this surge in metrics can be seen as a natural outcome of the growing global interest in crypto. However, the graph above reveals that, independent of the fluctuating trends in public engagement or interest in crypto (i.e., Spot Trading Volume), the number of unique wallets interacting with stablecoins continues to increase. This indicates that interactions with stablecoins are not solely used as a means to acquire other crypto assets.

Where Is Global Demand Coming From?

The most likely explanations for this massive demand can be summarized in two key points.

First, is the use of stablecoins as a store of value for exposure to the U.S. dollar. The U.S. dollar is a central pillar currency in global finance, trade, foreign exchange markets, and more, but not all countries can easily access it. Reasons for this lack of access include capital controls, as seen in South Korea and China, or high inflation rates in economically unstable countries.

In the former case, stablecoins are observed being used to bypass capital controls, and in the latter, to protect personal assets - indeed, Chainalysis’ analysis suggests that countries experiencing high inflation are more likely to use stablecoins to mitigate the effects of inflation and currency devaluation.

Second, stablecoins have are increasingly making a foothold in international remittances (i.e., medium of exchange). If on-ramping mechanisms are supported in specific countries, anyone can easily hold stablecoins and use blockchain networks to transfer these assets to others or make near-instantaneous payments with low fees.

Considering that the international remittance market size runs into hundreds of billions and could significantly impact the economies of some countries (e.g., developing nations), if there is an infrastructure that supports cheap fees and immediate transfer and settlement with just an internet connection, there’s no reason it wouldn’t replace traditional systems.

Additionally, movements such as PayPal issuing its own stablecoin, PYUSD*, and Stripe acquiring the stablecoin infrastructure firm Bridge are energizing the global retail finance and payments market. These developments are driving rapid growth and increasing public interest in the stablecoin market.

*PayPal USD (PYUSD) is a stablecoin issued through a partnership between PayPal and Paxos. Like USDT and USDC, PYUSD is backed 1:1 by cash and cash-equivalent assets held in banks insured by the Federal Deposit Insurance Corporation (FDIC), and it was successfully onboarded to the Solana Network at the end of May.

2.2 Yield-Bearing Tokenized Assets Upgrade the Functionality of Stablecoins

Despite the advantages and growth potential, most of the current stablecoin supply, which is based on fiat currency, lacks adequate investor protection mechanisms and has been criticized for unreliable reserve management. For stablecoins to be widely used by retail and, particularly, institutional entities, regulatory frameworks ensuring sufficient protection against various crises, such as bankruptcy, are essential.

In reality, the billions of dollars held in reserve by these entities are typically invested in low-risk liquid assets like cash or government securities to generate interest income. However, in the case of Tether, the reserves are not segregated from the issuer's operating assets, and the absence of regular audits or third-party oversight means that there is no structure in place to mitigate bankruptcy risks. For Circle, reserve management and reporting are conducted relatively transparently compared to Tether; however, the limited number of custodians storing these reserves poses a risk, particularly in terms of concentration risk.

The new asset class defined by Ondo Finance, known as "Yieldcoins," was designed from the ground up with the structural stability issues of existing stablecoins in mind. The core concept of this asset class involves legally separating the reserve funds from operating assets, conducting regular and transparent reporting and audits, and strictly adhering to regulatory requirements to ensure ample investor protection, including guaranteeing redemption rights.

Additionally, as the name suggests, Yieldcoins primarily allocate the interest generated from the underlying assets to the holders, rather than the issuers.

For instance, in a high-interest-rate environment, investors in regions with relatively good financial infrastructure would typically prefer to deposit their money in low-risk options like government bonds or fixed deposits rather than holding stablecoins, which lack intrinsic yield, or engaging in high-risk onchain financial activities. In fact, as seen in a period when inflation hit record highs (i.e., between 2022 and 2024), interest rates were raised significantly, leading to a 25%+ reduction in the supply of onchain stablecoins.

In this context, yieldcoins can be securely held while continuously providing an interest rate capable of offsetting international inflationary trends. Moreover, when the environment becomes favorable for cryptocurrency investments due to lower interest rates, these assets can easily be converted to other cryptocurrency assets or interact compositely with various DeFi components.

Consequently, this asset class could represent a more attractive option for investors compared to stablecoins, in terms of asset stability, utility, and flexibility.

Currently, the composition of yieldcoins is being experimented with by various entities in numerous ways. However, products based on low-risk assets like government bonds are particularly popular, and their scale has grown rapidly, as indicated by above figures from January 2023, showing growth from $100 million to over $2.4 billion two years later. in various ways by different entities.

According to RWA.xyz, notable yield-bearing tokenized assets include BlackRock’s BUIDL (BlackRock USD Institutional Liquidity Fund), Ondo Finance’s USDY (US Dollar Yield Token) and OUSG (Ondo Short-Term US Government Treasuries), and Franklin Templeton’s FOBXX (Franklin OnChain US Government Money Fund). BUIDL, co-created by Securitize and BlackRock, reached a market cap of $375 million just six weeks after its launch and is currently (as of October 2024) the largest tokenized fund. Ondo Finance’s USDY and OUSG have also grown rapidly, currently recording a total TVL of $650 million, making Ondo Finance the largest provider of tokenized treasuries.

In addition, interest from institutions like Goldman Sachs and State Street in tokenized assets continues to expand, signaling that the traditional financial sector is increasingly seeking opportunities to broaden accessibility to existing assets by using blockchain technology.

So, as the driving force of this momentum in the tokenized treasury market, how has Ondo Finance pioneered this space, and what does the future envisioned by Ondo Finance look like?

3. Ondo Finance: The Leading Platform for Tokenized RWAs

3.1 Primer on Ondo Finance

Vision

Despite the immense potential of tokenized RWAs, widespread adoption has historically been tempered. This is primarily due to regulatory and technological barriers that needed to be overcome. Moreover, people also needed to see that these assets could indeed offer better utility by being onchain.

In other words, to pioneer the tokenized RWA market, comprehensive collaboration is necessary, involving legal bodies for regulatory compliance, custodians, appraisal services, security firms, and technical partners supporting advanced infrastructure, as well as players in the blockchain ecosystem.

In this challenging environment, Ondo Finance brought together various stakeholders under the vision of increasing access to diverse financial assets. As a result, it successfully opened new frontiers in the market through its pioneering tokenization of U.S. Treasury assets and introduction of the concept of "yieldcoin.”

Ondo Finance, through its initial products, OUSG and USDY, has successfully demonstrated that tokenized treasury assets can provide investor protection on par with traditional finance and offer utility beyond stablecoins*. These successes have helped the tokenized treasury market gain momentum, encouraging various stakeholders to resonate with Ondo Finance's vision and take an active interest in this market.

Starting with USDY and OUSG, Ondo Finance ultimately aims to onboard various public securities onchain and maximize their utility by integrating them seamlessly with various DeFi products in an omnichain environment.

*Currently, OUSG and USDY are available on the most blockchain networks and have the largest number of holders in the tokenized treasury market, making up about 27% of the $2.4 billion market. This has positioned Ondo Finance as a major issuer of tokenized bonds, surpassing traditional financial institutions like BlackRock and Franklin Templeton.

Roadmap

Ondo Finance has outlined its roadmap in three phases. Each phase is established based on their mission to "provide institutional-grade financial products and services to everyone" and is guided by four core principles: 1) security and transparency, 2) legal and regulatory compliance, 3) efficiency and investor protection, and 4) offering superior product experience.

Phase I: Drive Use of Tokenized Cash Equivalents

Currently, Ondo Finance is focused on maximizing the utility of its tokenized traditional financial assets (i.e., USDY, OUSG) by leveraging blockchain features and ecosystems.

Although we will delve more deeply into each of Ondo Finance's initiatives and its ecosystem expansion strategies in the following sections, Ondo Finance is working strategically with various ecosystem partners (e.g., custody, security, L1/L2, payments, liquidity provision, etc.) and develops tools and protocols (i.e., Ondo Bridge & Converter, Flux Finance) to ensure reliable distribution, extensive liquidity, and seamless integration for a wide range of use cases and adoption of its assets.

Phase II: Expand into Other Securities

As mentioned, to attract both retail investors and institutional investors, Ondo Finance needs to display a variety of attractive products that align with the rapidly changing macroeconomic environment. Accordingly, Ondo Finance has stated their intent to soon bring hundreds of additional RWAs onchain using the same institutional-grade standards they used for their yieldcoins.

Phase III: RWAs & Beyond

While details on this phase are still sparse, according to its roadmap publications, Ondo Finance aims to enhance its platform by distinguishing areas where centralized actors excel (e.g., customer service, tokenization processes) and areas where decentralized protocols can perform better (e.g., technical aspects like bridging).

Team Composition

Source: Ondo Finance

The successful product development and the promise of fulfilling this vision and roadmap at Ondo Finance can be attributed to its exceptional team composition. The Ondo Finance team consists of professionals from diverse Web2 and Web3 backgrounds, hailing from prestigious firms like Goldman Sachs, BlackRock, McKinsey, Bridgewater Associates, Circle, OpenSea, and MakerDAO. This blend of talent is adept at identifying and innovating solutions for the traditional financial market and quickly implementing these solutions through Web3 technologies, thereby solidifying Ondo Finance's position as a leader in the tokenized RWA market.

3.2 Products of Ondo Finance

Currently, Ondo Finance offers US Dollar Yield coin (USDY) and Ondo Short-Term US Government Treasuries (OUSG). Before diving into these two products, let's first highlight their three key features.

First, they offer high yields. Ondo Finance distributes most of the interest generated from the underlying assets to the token holders, keeping only a minimal spread.

Second, they offer both rebasing as yield-accrual as ways to distribute yield. The rebasing mechanism means that interest earned from holding the token is distributed in the form of additional tokens. In other words, in the former case, the interest is automatically reinvested, increasing the value of the token itself. In the latter case, the token's value remains stable at $1, but interest is paid out in the form of additional tokens, resulting in an increase in quantity rather than value.

Lastly, they both implement appropriate regulatory compliant criteria for investor eligibility. Here are the eligibility criteria for USDY and OUSG, respectively.

3.2.1 USDY, the Market-Leading Permissionless Yieldcoin

USDY is a yield-bearing asset based on short-term US treasuries and bank deposits. Unlike similar products from BlackRock's BUIDL or Franklin Templeton's FOBXX, USDY offers permissionless access for non-US investors, meaning any holders can automatically accrue yield akin to US Treasury interest just by holding the token.

How to Mint / Redeem USDY

1. To invest USDY, investors must first complete the KYC process, provide the wallet address where the tokens will be received, and sign the required documents.

2. Once onboarding is complete, investors will receive an email notifying them when they become eligible to invest. From then on, investors can deposit as little at $500* USDC at any time(with options for wire transfers in USD for deposits over $100,000).

3. After 2-3 days, once the deposit is processed, interest starts accruing. Investors receive temporary global certificates (i.e. prior to investors’ token issuance), and are assigned to a cohort based on the time of their USDY investment - the cohort is used for accounting and legal purposes, and it determines the date when the investment converts into fully transferable USDY, which can be transferred to anyone within the eligible regions or traded on secondary markets.

4. In accordance with regulatory guidelines, investors can claim their transferable USDY approximately 40-50 days after their deposit has been processed**.

Redemptions are possible anytime via a web interface, and if holding a provisional global certificate with deposits over $100,000, investors can consult the support team for redemption. Redemption requests are typically processed within 2-3 business days after receiving a valid request, and redemption fees are applied based on the amount being redeemed.

Investment and redemption regions for USDY are restricted - detailed information is available at this link.

*As of now, the minimum amount for investment and redemption is set at $500. However, this amount may be lowered over time.

**After the deposit is processed, the temporary global certificate that the investor receives indicates the date when they can receive the transferable USDY.

USDY's Price Mechanism & Rebasing Tokens (rUSDY & mUSD)

The interest on USDY compounds daily, meaning the interest earned each day is reinvested into the original asset's value, continuously increasing the value of the token. For example, if the interest rate is set at 5% APY, $1 worth of USDY will grow to $1.002673 after two days (= 100x[1+{(1+0.05)^1/365-1}]^2). USDY can also be converted into rebasing tokens like rUSDY on Ethereum or mUSD on Mantle. In this scenario, the value of the rebasing token remains at $1, but the quantity increases to 1.002673 units.

In summary, USDY combines the global accessibility and utility of stablecoins with the investor protection, yields, and transparency of traditional institutional finance. It is the second-largest tokenized yield-bearing asset after BlackRock's BUIDL, boasting a scale of approximately $440 million as of October, 2024, and an impressive number of around 7,000 holders, far surpassing other assets in terms of holder count.

As will be explained in the later section, USDY is integrated into eight blockchains, including Ethereum, Solana, Aptos, Sui, Mantle, Mantra, Cosmos, and Arbitrum One. It continues to solidify and expand its utility across more than 70 projects (e.g., collateral asset in Drift, a payment method via Sphere, Helio, and Solana Pay, etc.).

3.2.2 OUSG, the Institutional-Grade Permissioned Yieldcoin

OUSG is a permissioned fund-like asset that allows institutional investors to gain exposure to short-term U.S. Treasury products. A significant portion of the OUSG portfolio is currently backed by BlackRock's BUIDL, with the remainder comprising BlackRock's FedFund (TFDXX), bank deposits, and USDC. Despite being a fund-like asset, OUSG offers features such as 24/7 instant issuance and redemption*, a lower minimum order amount and fees compared to assets for other institutional investors, in addition to multi-chain support.

*Through its collaborations with BlackRock, Securitize, and Circle, OUSG currently holds onchain liquidity that allows for instant issuance and redemption of up to $25 million per day.

How to Mint / Redeem OUSG

1. To purchase OUSG, investors first need to onboard to Ondo’s Qualified-Access Funds - they can check the detailed eligibility requirements at this link.

2. Once their non-custodial wallet is approved for OUSG transactions through this process, they can easily mint/redeem on the official website.

Unlike USDY, purchasing OUSG tokens offers two options: Instant Mints and non-Instant Mints. The former is available exclusively on the Ethereum network, with a minimum investment and redemption amount of $5,000. When an investor deposits USDC, the corresponding value in OUSG tokens is immediately transferred to the investor's wallet. The latter option supports Ethereum, Polygon, and Solana networks, with minimum investment and redemption amounts of $100,000 and $50,000, respectively. For deposits made before 4 PM ET, investors will receive their OUSG tokens on the next business day*.

*Currently, OUSG only supports non-custodial wallets and Fireblocks wallets.

OUSG's Revenue Distribution Mechanism & Rebasing Tokens (rOUSG)

Ondo Finance updates the Net Asset Value (NAV) of its fund at the end of each business day, based on the performance of the underlying investments and any fees and/or expenses incurred. After this, the NAV per OUSG token is calculated and the OUSG Price Oracle is updated onchain. If an investor holds the rebasing token rOUSG, the rebase of the rOUSG token is automatically triggered, and the updated balance is reflected in the investor's wallet automatically. OUSG charges a management fee of 0.15%, which will be waived until January 1, 2025. Conversions between rOUSG and OUSG, or redemptions, like with USDY, can be made at any time for free through the web interface.

Ondo Finance updates the Net Asset Value (NAV) of its fund at the end of each business day, based on the performance of the underlying investments and any fees and/or expenses incurred. After this, the NAV per OUSG token is calculated and the OUSG Price Oracle is updated onchain. If an investor holds the rebasing token rOUSG, the rebase of the rOUSG token is automatically triggered, and the updated balance is reflected in the investor's wallet automatically. However, OUSG charges a management fee of 0.15%, which will be waived until January 1, 2025. Conversions between rOUSG and OUSG, or redemptions, like with USDY, can be made at any time through the web interface.

Currently, OUSG stands as the fifth-largest tokenized yield-bearing asset as of October 2024, with a size of approximately $210 million.

3.3 1st Party Protocols

Ondo Finance not only tokenizes various assets but also has its own protocol development initiatives to ensure that these assets are utilized to their fullest potential in a secure manner.

3.3.1 Flux Finance for Lending on Tokenized Securities

Source: Flux Finance

Flux Finance is a decentralized repo (Repurchase Agreement) market protocol governed by the Ondo DAO, based on a fork of Compound V2 - in this context, a repo market refers to a marketplace where buyers temporarily sell short-term securities to sellers with the agreement to repurchase them at a future date with interest. In other words, the repo market serves as an efficient mechanism for managing liquidity among market participants.

Since Flux Finance is a fork of Compound, it inherently offers similar functionalities and mechanisms. One important aspect to note is that, in addition to Ondo Finance products, Flux Finance supports other stable assets (e.g., DAI, USDT, USDC, FRAX). Particularly, to trade certain assets classified as Qualified-Access Products (i.e., OUSG) within Ondo Finance’s offerings, specific conditions must be met.

Additionally, the $ONDO token is used as the governance token in Flux Finance. Holders of the $ONDO token (i.e., Ondo DAO) can exercise voting rights proportional to their token holdings at this site. The scope of governance includes modifications to various parameters or updates to smart contracts for managing assets supported by Ondo Finance. Detailed information on the governance process and parameters (e.g., Proposal Threshold, Voting Period, Quorum, Timelock) can be found in this document.

3.3.2 Ondo Global Markets for Onboarding All Public Securities

As outlined in Phase II of Ondo's roadmap, Ondo Finance plans to bring various traditional public securities onchain, in response to the demand for tokenized assets across a range of liquidity and risk curves.

Ondo Global Markets (Ondo GM) stands as the cornerstone initiative to achieve this goal. Ondo GM aims to provide global investors and developers with seamless, instant access to the deep liquidity of traditional assets, comparable to the experience of using conventional financial platforms, along with institutional-grade investor protections. Additionally, by integrating various blockchain-native functionalities into these assets, Ondo GM plans to expand their utility, positioning itself as a key distribution partner for tokenized traditional assets, effectively bridging Web2 and Web3.

3.3.3 Ondo Bridge & Ondo Converter for Smooth Asset Conversion

Ondo Bridge

Source: Ondo Finance’s Docs

Ondo Bridge is a solution developed in collaboration with Axelar, designed to enable the secure transfer of various assets across chains supported by Ondo Finance. As a result, its messaging framework follows Axelar’s approach -

1. When an investor deposits assets into a contract (i.e., SourceBridge) on the Source Chain,

2. the contract burns the deposited assets and notifies the Axelar Gateway contract of the action.

3. At this point, the Axelar Network verifies the message and posts an approval signature to the contract (i.e., DestinationBridge*) on the Destination Chain**.

4. Depending upon the transaction size, one or more independent signatures may be required from Ondo itself.

5. Once the required number of signatures is reached, the assets are re-minted on the Destination Chain.

Currently, the Ondo Bridge web interface supports USDY transfers between the Ethereum and Mantle networks. Bridge aggregators and cross-chain swap platforms can integrate with Ondo Bridge to expand access to assets from Ondo Finance.

*This contract contains a daily mint limit value, which sets a cap on the amount that can be transferred in a single day to minimize potential losses from hacks.

**The number and entities of required approval signatures vary depending on the transfer size, which allows the Ondo Bridge to eliminate a single point of failure caused by any specific party or protocol. For detailed terms regarding these parameters, please refer to this document.

Ondo Converter

Previously, it was explained that the assets from Ondo Finance generate yield in two ways: 1) through accumulation of value directly into the token itself or 2) via a rebase mechanism. The Ondo Converter is a tool that enables seamless conversion between these two forms for each asset without any slippage.

3.4 Strategic Ecosystem Expansion

As highlighted, Ondo Finance’s primary focus is to bring public securities onchain to foster an inclusive financial market and to transform these assets into products that can fully realize their value. This approach is evident in Ondo Finance’s strategic and proactive expansion of its ecosystem. Through partnerships, Ondo Finance significantly enhances accessibility, liquidity, and utility of tokenized assets, while building the infrastructure needed to improve the traditional financial system’s efficiency.

3.4.1 Horizontal Expansion for Broader Adoption and Use Cases

Decentralized Finance & Liquidity Provision

In fact, despite the many advantages and business opportunities that have been identified, the primary reason why institutions are hesitant to expand into the crypto space is the uncertainty surrounding how much new revenue can actually be generated. To put it simply, achieving operational efficiency, tokenizing assets, and broadening the investment base doesn’t make building new infrastructure a particularly profitable endeavor. Instead, it is crucial to focus on developing new in-demand financial products, providing additional utility, and transitioning into a 24/7 global distribution channel that can create tangible revenue streams.

Ondo Finance is expanding the distribution channels and enhancing utilities of its products by having over 70 DeFi-related protocols across eight blockchain networks in its ecosystem - for example, USDY not only can be utilized to provide liquidity on DEXes such as Jupiter Exchange, Raydium Protocol, Orca, and Camelot, it can also be supported as a collateral asset on Perps Exchanges such as Drift Protocol, offering investors enhanced opportunities for additional returns. Additionally, while a pool is not yet established, Ondo Finance can collaborate with Pendle in the future to separate principal (e.g., zero-coupon bonds) and interest (e.g., coupons) from Ondo Finance's assets, thereby offering various yield optimization strategies.

Onchain Treasury Management

How a foundation or protocol allocates its reserves is crucial for managing funds more securely and utilizing them strategically. Therefore, reserve assets often include not only their native tokens but also a diverse range of assets from various networks, such as stablecoins, Bitcoin, and Ethereum, which are relatively safer and offer strategic utility.

USDY has recently seen increasing demand as a reserve asset for onchain treasuries, thanks to its recognized stability and profitability - A notable example is Arbitrum DAO, which, through the STEP (Stable Treasury Endowment Program) last July, diversified around 17% of Arbitrum’s treasury diversification allocation—equivalent to 6 million ARB—into USDY. Additionally, in September, Ondo Finance applied for the Tokenization Grand Prix with USDY and OUSG as assets to diversify the RWA portfolio within the Sky ecosystem(MakerDAO).

Payments

Payments using crypto assets (especially stablecoins) have long been recognized as a key use case for addressing challenges in traditional financial systems, such as intermediary issues, high fees, and slow transaction times, as well as for their potential to bridge onchain assets with off-chain services. Fueled by growing confidence in the rapidly expanding stablecoin market, we continue to hear about new crypto payment initiatives from leading fintech companies like PayPal and Stripe.

As a result, various infrastructure players supporting crypto payments are naturally gaining attention. The Solana ecosystem, in particular, has been actively strengthening its initiatives in the payment space with the slogan, "Make blockchain transactions as intuitive and simple as credit card payments." Among these efforts, Ondo Finance has formed partnerships with prominent players like Helio and Sphere in the Solana ecosystem. Through these collaborations, Ondo Finance has been able to distribute USDY to emerging markets and integrate it as a primary payment method in retail services like Shopify.

3.4.2 Vertical Expansion for Flexible and Secure Interactions

Traditional Finance & (Institutional) Custody & Asset Mgt. & Security

Ondo Finance partners with reputable players from the traditional finance sector to distribute and manage real-world assets in a reliable manner. For instance, the U.S. Treasury assets backing USDY are held in “cash custody” accounts at Morgan Stanley and StoneX, with deposits managed through Morgan Stanley and First Citizens Bank. Additionally, the USDY reserves undergo daily independent verification by Ankura Trust and are audited for asset quality, including NAV assessments.

In the digital space, Ondo collaborates with players such as Arculus, Coinbase, and Squads Protocol to ensure secure custody, asset management, and integration. To enhance the security of its smart contracts, it also works with Halborn Security.

Multi-Chain Feature

As the onchain world becomes ever more fragmented, users need an environment that supports a seamless asset experience to maximize their user journey and asset utilization.

To address this, Ondo Finance has integrated its assets across multiple blockchain networks (Ethereum, Solana, Aptos, Sui, Mantle, Polygon, Arbitrum, and Noble.), enabling distribution and utilities across various protocols and applications. Through cross-chain solutions like Layerzero, Switchboard, deBridge, and Ondo Bridge, they ensure smooth asset transfers between multiple networks. Additionally, multiple oracle solutions such as Pyth Network, Switchboard, and Supra provide reliable price feeds for these assets across all liquidity sources.

Web3 Wallet & Centralized Exchange

At the top of the funnel for the adoption and utilization of all crypto assets lies the 'trading experience.' CEXes (Centralized Exchanges) and Web3 wallet services are the primary gateways that support this initial trading experience, onboarding users into the crypto ecosystem. Thus, having an asset supported by various wallets and listed on CEXes is crucial for enhancing accessibility, liquidity, and expanding entry points.

As mentioned earlier, Ondo Finance has successfully onboarded its assets by integrating with various ecosystems. This allows users to interact with these ecosystems and utilize their assets through prominent Web3 wallets such as OKX Wallet, Binance Web3 Wallet, Metamask, Phantom, Sui Wallet, and Keplr. Additionally, efforts are actively being made to enhance accessibility by listing Ondo Finance's assets on major CEXes. For instance, USDY has been listed on platforms like Bybit and BiLira Kripto.

4. Tokenization Is More than Just Tokenizing Assets

With a deep understanding of both traditional financial markets and Web3 technologies, Ondo Finance is uniquely positioned to bring structural efficiency gains and additional revenue streams to the current financial system by leveraging the power of blockchain, the network effect of its ecosystem and expertise in onchain distribution.

Numerous projects have attempted to bring various real-world assets onto the blockchain, yet none have succeeded. The primary reason for this is their failure to provide clear and compelling value propositions that provide compelling business cases for tokenization.

The success of Ondo Finance so far, as demonstrated by its market leadership in tokenized US Treasuries, speaks volume about its differentiated approach and effective execution. Unlike other projects, Ondo Finance sees a future where public securities are traded via a financial infrastructure that seamlessly connects liquidity, wherever it may reside, with transaction orders from a global audience and allows for endless customization of risks and structures.

To Ondo Finance, tokenization is not merely about putting real assets on the blockchain network but about expanding the usability of those assets, transforming them into more valuable assets. With a consistent vision and proven execution capability, Ondo will continue to collaborate with financial institutions and develop strategic blockchain infrastructure. It is poised to not only fulfill its vision of becoming a trading platform for all types of public securities but will also set a positive precedent in tokenized RWAs to the broader global financial market.