Traditional assets are the top choice for long-term investments according to most sophisticated investors.

Assets such as bonds, bank time deposits, and cash are usually some of the most common assets for the wealthy to earn stable returns or even to protect their portfolios when trying to diversify into riskier assets.

The prominence of traditional assets is increasing along with the growing awareness of financial education especially among the younger generation.

However, there is one glaring limitation of these assets, which is limited access due to geographical differences that are sometimes also accompanied by regulatory restrictions.

The good news is that through blockchain technology, this problem can be overcome, giving everyone in the world access to these types of assets, without being limited by regulations and their location.

One company that is trying to drive the adoption of traditional assets through blockchain technology is Ondo Finance.

Getting to know Ondo Finance

Ondo Finance is a company launched in 2021 with the aim of bringing institutional-standard quality financial assets to the public blockchain world, so that more people can access them regardless of their location.


The company aims to address the problem of limited access to certain financial assets in some countries due to geographical and regulatory restrictions.

It does this by creating a platform where users can purchase institutional-grade financial assets in tokenised form, such as bonds and bank deposit slips, through blockchain technology.

Despite using blockchain technology, Ondo Finance still requires users to go through an identity verification process to remain compliant with regulatory requirements.

Originally launched as an ERC-20 project on the Ethereum Blockchain, Ondo Finance has now expanded to other blockchains such as Polygon, Manta, and Solana.

Although the project was launched in 2021, Ondo Finance just launched their token, ONDO, in January 2024, promoting it as a transaction and governance tool.

The Ondo Finance team itself consists of 22 individuals led by the project's founder and CEO, Nathan Allman.

Nathan Allman is an individual with over 5 years of experience in traditional finance through his work history at renowned institutions such as Goldman Sachs.

Ondo Finance has also successfully partnered with some of the major players in the traditional finance industry, such as BlackRock and Morgan Stanley.

In addition, Ondo Finance managed to bring 34 projects and companies into its ecosystem to collaborate and run everything smoothly.

The first products launched by Ondo Finance in 2021 were the Vault and Liquidity as a Service platforms.

These platforms still exist, but are not being used, as the company has shifted focus to bring other products in the realm of tokenisation of traditional financial assets.

To launch these new products, Ondo Finance has also partnered with Coinbase to streamline all custodial and off-ramp processes for smooth transactions.

Ondo Finance Products

To understand what products Ondo Finance provides, this article will explain all the products provided as well as how the mechanism is used for users to make transactions on the Ondo Finance platform.


There are currently three main products that the Ondo Finance Team is marketing to the public, which are likely to be the products that drive higher adoption.

US Dollar Yield (USDY)

The first product is USDY, which is a tokenisation of an asset that moves like a mutual fund.


This mutual fund is a portfolio that contains several assets such as bank time deposits and short-term bonds of the US Treasury.

Through this product, users will have a token that represents ownership called the USDY Token.

It should be noted that USDY is not a stablecoin, as the value of this token is based on the value of the product, where the price changes based on the sale and purchase of the token itself, similar to a balanced mutual fund.

Ondo Finance users can invest in this product by depositing their money through the available blockchains, namely Ethereum, Manta, and Solana, in the form of USDC.


But before making a deposit, users need to undergo KYC and AML processes which will take about 5 to 15 minutes.

After that, users can connect their crypto wallets and deposit their funds in USDC so that they can start buying USDY.

However, after purchasing USDY, users will only start earning interest once the transaction is completed, which will take about two to three business days according to Ondo Finance's whitepaper.

Once the process is complete, users will start earning interest that will be sent automatically to their wallets.

But, even though the interest earning process has begun, users will only get USDY Tokens once the token creation process is complete, which is about 40 to 50 days after purchase.

This process takes a long time because Ondo Finance will create a certificate of ownership that will be attached to the USDY Tokens that are specifically printed every time a purchase occurs.


The profit per annum of this product is about 5.10%, which includes the calculation of Ondo Finance's discounted fee for management fees.

Ondo Finance promotes transparency so that users will know when profits change as they are not only transparent with their fees, but also publish their portfolio that supports the profit generation of this product.


The portfolio information supporting this product can be seen on the official website of Ondo Finance where users can find out the original returns of the portfolio before Ondo Finance takes a cut for fees.

It is worth noting that there is no minimum investment amount for this product, but when looking to take profits and capital, there is one thing to note.

Ondo Finance implements a mechanism where users need to wait for USDY Tokens to be minted to be able to take back their capital and profits.

But if the deposit amount is more than $100,000, users do not need to wait for the tokens to be minted because withdrawals can be made at least four days after the deposit is made.

Users who deposit more than $100,000, can also make transactions directly through bank transfers and do not use crypto wallets.

This product is Ondo Finance's most retail-friendly of all the three new products being promoted as there is no minimum investment amount.

US Treasuries (OUSG)

The next product is OUSG, which is a more formalised and less retail-friendly product compared to USDY.


OUSG is a tokenised sheet of ETF holdings whose value is based on US Government bonds with a short-term expiry.

The difference with USDY is that the underlying assets of OUSG are focused on bonds and those bond assets are directly managed by real financial institutions in traditional markets, such as BlackRock.

As a result, these assets move like ETFs but in tokenised form, where the OUSG Token is a representation of ownership of the ETF.

The transaction mechanism of OUSG is almost the same as USDY where users must undergo KYC and AML processes for Ondo Finance to verify them.

After verification, users can then deposit their USDC as a form of payment for OUSG Tokens.

The difference is that the minimum deposit amount in this product, where OUSG requires a minimum deposit of 100,000 USDC, so users cannot purchase OUSG with less than 100,000 USDC.


The profit per annum on this product stands at around 4.73%, which is already factored in with discounted fees, as explained on Ondo Finance's official website.

The original return of the product is also displayed where users can see how much the original return is as per SEC regulations, and the Yield to Worst figure which is the lowest rate of return of the product, as the return moves throughout the year based on the underlying asset.

This product may seem less suitable for retail when considering the mandatory minimum deposit amount.

However, on the upside, OUSG can be used as collateral when borrowing on the Flux Finance protocol, which is a lending protocol created by the Ondo Finance Team.

US Money Market (OMMF)

Last but not least is OMMF, a tokenised product that symbolises ownership of a portfolio of funds managed in the US money market, similar to a Money Market Mutual Fund but based on funds managed in several financial institutions in the US.

This product is yet to be launched but is rumoured to have lower risk than OUSG.

Despite the lower risk, it is rumoured that the returns between OUSG and OMMF will be in the same ballpark, so it is likely to be the preferred option.

Unfortunately, just like OUSG, this product is also not very retail investor-friendly as it will also have a minimum fund deposit amount of USDC 100,000.


Not many details are known yet as the product is still under development, but the transaction and management fees of this product will be around 0.30%, which is relatively low.

It should be noted that both OUSG and OMMF have KYC and AML verification processes that users must go through.

Also, keep in mind that Ondo Finance can approve or reject certain users so not everyone with a deposit of USDC 100,000 will be given access to these products.


To summarise the differences between the three, Ondo Finance has provided a comparison table, for users to better understand their three main products.

Vault dan Liquidity as a Service

Vault and Liquidity as a Service In addition to these three main products, Ondo Finance has several other protocols and DApps in its ecosystem.

One of them is the Vault Platform for LaaS or Liquidity as a Service where investors can lock up a certain amount of tokens and get rewarded for providing liquidity for some decentralised exchanges or DEXs.


Unfortunately, this DApp is currently not in use as all pools have expired. Previously, Ondo Finance used this platform to provide liquidity in the form of some ERC-20 tokens on the most popular DEXs on Ethereum such as Uniswap and Sushiswap.

The pools on the platform are also separated into two categories, the DAO pool and the Community Pool.

The difference is that the DAO pool is managed by the Ondo Finance DAO and the Community Pool is managed by the community.
Both are populated with supporters of the Ondo Finance ecosystem, so there isn't much difference other than how they are managed, how they are allocated, and how they are rewarded.

Ondo Finance DAO

Regarding the Ondo Finance DAO, it is currently active and has processed nine proposals in total that serve to improve the quality of the Ondo Finance ecosystem.

The DAO itself is called Ondo DAO which is run by the Ondo Foundation through the participation of ONDO Token holders.


Currently, only about 10% of all ONDO Token holders participate in the DAO. This is one of the things that the Ondo Finance Team needs to pay attention to as it can be a trust barrier to increase adoption to its ecosystem.

The DAO itself can be accessed by connecting the crypto wallet containing ONDO to the Flux Finance DApp, as the governance page of the DAO is accessible through Flux Finance.

Flux Finance

The Flux Finance decentralised application (DApp) is a decentralised version of a repo market for institutions, where investors can use their OUSG as collateral to borrow crypto on the platform.


The platform was created by Ondo Finance, but its ownership has now been purchased by the Neptune Foundation.

However, Flux Finance continues to operate within the Ondo Finance ecosystem so every behind-the-scenes mechanism is still connected to Ondo Finance.

Currently, there are two services provided: lending and borrowing. For the lending aspect, users must have OUSG as collateral before borrowing anything.


On the lending side, the protocol seems quite simple as users only need to connect their crypto wallet and provide the available crypto within.


Currently, there are five cryptos that can be borrowed and lent on the platform, namely USDT, USDC, DAI, FRAX, and OUSG.

The lending and borrowing rates seem to be moving around 4% to 5%, just like the three main products offered by Ondo Finance.

Updates and Future Plans

As of now, Ondo Finance's focus seems to be on increasing adoption, as some of the updates that have been made lately are integrations to other blockchains such as Solana and Mantle.

In 2023, Ondo Finance successfully integrated with Solana, making the protocol's transaction fees cheaper than before.


In addition, Ondo Finance has launched a new conversion tool for investors to convert their USDY into mUSD, a stablecoin from the Mantle Blockchain.

With this conversion, owners of USDY that have been converted into mUSD, will still receive their reward yield per year automatically.

But because it has been converted to mUSD, the mUSD owner can use it for other purposes, such as to earn more additional rewards in the Mantle DeFi ecosystem.

Ondo Finance has also successfully created a bridge for its platform users to move tokens like USDY from one blockchain wallet to another.


For example, users can now transfer USDY from Ethereum to Mantle as seen in the image above so they can transact with lower fees when they want to redeem.

Last but not least, Ondo Finance is also increasing transparency by displaying all the portfolios used to derive yields from their products. In 2024, according to an article written by the Founder and CEO of Ondo Finance, there are three main phases that are focused on.

The first phase is to increase adoption through collaboration with more blockchains, be it layer one or layer two blockchains.

The second phase is to expand to other public securities assets so that users have more product options that may not be solely focused on the American market.

The third phase is to expand the product to more real-world assets other than securities, such as property and other commodities, bringing a more diverse selection of traditional institutional-grade assets to the crypto ecosystem.

If all goes according to plan, Ondo Finance could become one of the major players in the real-world asset (RWA) tokenisation sector of the crypto market.

ONDO Token

Apart from these plans, the main focus is also on expanding the adoption of the newly launched ONDO Token in January 2024.

The token has a maximum supply of 10 Billion ONDOs with 1.37 Billion ONDOs already circulating in the market today, according to verified data from Coinmarketcap.


The allocation itself seems quite fair with most of the tokens being controlled by the public so the potential for market manipulation perspectives to emerge remains low.

Most of the tokens are currently controlled by the Ondo DAO and will be used to fund the growth of the Ondo Finance ecosystem itself.

All of this will be supported by proposals on the DAO which will be driven by ONDO investors thus keeping the high decentralised aspect of the Ondo Finance ecosystem.

The vesting period seems to be quite long as all the tokens will hit the market thoroughly in about five and a half years starting from 2024.

Overall, all the data is in line with Ondo Finance's statement in its token allocation publication with verification from onchain data from Solscan and Etherscan where the largest owner of ONDO is still Ondo DAO, thus showing transparency which can increase trust among the community.

Conclusion

In conclusion, Ondo Finance has the potential to be a strong long-term project, especially given the backing of world-renowned institutions, such as BlackRock and Morgan Stanley.

Before purchasing ONDO Tokens for long-term investment, there are two things to consider, namely adoption limitations and future uncertainties.

The adoption limitations of the Ondo Finance ecosystem can stem from three things, namely the KYC and AML process, the minimum investment amount, and the annualised returns of the Ondo Finance products themselves.

Given that users need to go through a verification process that takes quite a long time especially with the additional deposit processing time of up to 50 days, there are some users who may want to opt out and directly purchase the original asset if they have access from other platforms.

The verification process may also make some users who want to maintain anonymity choose to use other platforms, which could be a barrier for some.

Another thing to consider is that two of Ondo Finance's three main products require a minimum deposit of 100,000 USDC which can be daunting for retail investors, especially since 100,000 USDC is a fairly large amount.

The last thing is the yield itself which is currently quite average compared to treasuries or bonds in other countries that can yield more than 5.10%, which is the highest yield currently on the platform.

However, all these issues can be overcome with upgrades and innovations, some of which are already planned according to an article written by the CEO.

If investors are considering buying ONDO, this token may be a good choice to hold in the long term especially if the Real World Asset narrative continues to expand in the predicted bull market of 2024.

However, even though it looks good, investors still need to be cautious and do good risk management because like every other project in the crypto space, something that looks good may not last long, especially due to the amount of uncertainty in new projects.