Ondo finance

Founded in 2021, Ondo Finance is a forward-thinking company in the digital asset sector. It was created by Nathan Allman and Justin Schmidt, two professionals with a strong background in traditional finance. Before founding the platform, both played key roles in strategic planning and product development within Goldman Sachs’ digital asset division. With deep expertise in bridging traditional financial systems and blockchain technology, Allman serves as CEO and leads the company’s overall strategy, while Schmidt, as president, drives the execution of business operations.

Less than a year after its launch, Ondo Finance proved its strong appeal to investors. In early 2022, the company secured $20 million in a Series A funding round co-led by the legendary Silicon Valley VC firm Founders Fund and crypto powerhouse Pantera Capital. It underscores the confidence of both traditional and crypto-native investors in Ondo’s vision. The round also drew participation from major industry players like Coinbase Ventures, which further cemented Ondo’s position as a rising force in the digital asset space.

Ondo Global Market (Ondo GM) is an innovative platform designed to tokenize publicly traded securities and bring them onto the blockchain. Ondo GM’s creation stems from the demand for increased accessibility, transparency, and efficiency in the traditional securities market. In the traditional market, investors face high costs, trading barriers, and complex settlement processes. This is particularly challenging for non-U.S. investors, as access to U.S. securities is often restricted. By tokenizing assets, Ondo GM breaks down these barriers and enables global users to directly access securities markets through simple web applications and flexible APIs, thus lowering the entry threshold.

The platform’s tokenized securities products include high liquidity public stocks such as Apple and Tesla, along with a broad range of traditional assets such as bonds and ETFs. In the future, Ondo GM will expand to include international stocks, corporate bonds, and other asset categories.

Advantages and Technical Features

Ondo GM provides liquidity comparable to traditional securities markets. This allows users to trade instantly on the platform with minimal slippage. Additionally, the platform’s seamless integration with decentralized finance (DeFi) enables users to directly use tokenized securities as collateral for loans, derivatives trading, and other operations.

Ondo GM leverages blockchain technology to provide transparent transaction records and enhanced security for all tokenized assets. The underlying securities are safeguarded by specialized custodians who protect investors’ funds. Additionally, asset transfers operate within a decentralized framework, which dramatically lowers the costs typically incurred by traditional market makers.

Ondo GM leverages blockchain technology to enable real-time settlement and seamless trading. All minting and redemption operations are executed on the blockchain through atomic transactions. When users place orders, the system coordinates with partner brokers to facilitate trades, while smart contracts instantly match funds and assets. This approach eliminates common inefficiencies in traditional finance, such as settlement delays and operational complexities.

Ecosystem

As per Ondo Finance’s official website, the Ondo ecosystem integrates with over ten public blockchain networks. It seamlessly connects exchanges, wallets, DeFi protocols, derivatives platforms, custodians, and other key ecosystem partners.

Key Partner Blockchains

Source: Ondo Finance Ecosystem

Core Partners:

• Renowned financial institutions, including Morgan Stanley, BlackRock, Ankura Trust, Clear Street, and NAV Consulting, provide asset custody, asset management, trust services, and other forms of support.
• Liquidity Providers: Bybit, Wintermute (OTC), and Uniswap offer users around-the-clock liquidity.
• Technology and Infrastructure Support: Partnerships with blockchain bridge providers such as Axelar help drive cross-chain operations and support leading Layer 1 and Layer 2 blockchain platforms like Ethereum, Solana, Mantle, and Polygon.

Ondo chain

As a Layer-1 blockchain infrastructure designed specifically for institutional financial markets, Ondo Chain innovatively combines public blockchains’ openness with permissioned chains’ compliance features. It creates a technical system that supports the full lifecycle management of real-world assets (RWAs).

Hybrid Architecture Design

The proprietary “public open layer + permissioned compliance layer” dual-track architecture:

On-chain and off-chain collaboration: By seamlessly bridging traditional financial systems with blockchain technology, clearing and settlement are automated through smart contracts. This cuts transaction costs by 80% while delivering millisecond-level response times to support high-frequency trading.

Compliance embedded in the protocol layer: Built-in smart contract templates compliant with global regulatory frameworks such as MiFID II and SEC automatically execute KYC/AML verification, transaction limit controls, and other compliance logic.

Ondo Chain’s hybrid architecture represents both a technological breakthrough and a reimagining of financial infrastructure. By integrating the compliance frameworks of traditional finance with blockchains’ efficiency, it tackles the key challenge of large-scale tokenization of RWAs—how to achieve institutional-grade risk control within an open ecosystem.

Native Support for RWAs

A technology stack built for the full lifecycle management of real-world assets:

Dynamic Oracle Network: By integrating over 50 licensed data providers (e.g., Bloomberg, Reuters), it enables the real-time injection of off-chain data like stock prices and bond rates. Utilizing zero-knowledge proof technology, the network ensures data authenticity with an error rate of under 0.05%.

Asset Protocol Standardization: It develops a dedicated smart contract library for RWAs that supports on-chain features such as automatic dividend distribution, corporate actions (e.g., stock splits), and tax calculations. Compliance tokenization has already been achieved for over 20 blue-chip stocks such as Apple and Tesla.

Cross-Chain Interoperability System

Building a global asset circulation network:

Native Ondo Bridge Cross-Chain Protocol: It supports seamless asset migration across 15+ public blockchains such as Ethereum, Solana, and Cosmos. It processes cross-chain transactions worth up to $1 billion daily.

Dynamic Security Enhancement Mechanism: The decentralized verification network (DVN) protects regular transactions. For transactions exceeding $10 million, multiple DVNs are triggered for joint verification, which provides a security level comparable to that of financial institution custodianship.

Partners: Building a Cross-Industry Ecosystem Alliance

Through its strategic partner network, Ondo Chain opens up the entire process of institutional asset tokenization:

Technical Support:
Google Cloud: It provides distributed node hosting services for Ondo Chain to ensure high availability and stability of the network. \
Accenture: It assists in developing traditional financial system integration modules that conform to ISO 20022 standards and enable seamless connections with financial infrastructures like SWIFT and Euroclear.

Asset Issuance and Management
BlackRock/Fidelity: Partners in issuing tokenized products like government bond ETFs and corporate bonds. Assets under management exceed $1.5 billion. It supports cross-chain staking and automatic coupon reinvestment.
WisdomTree: Co-creates an RWA liquidity pool to offer market-making algorithms and volatility hedging tools, with daily trading volumes consistently above $300 million.

Compliance and Risk Control Alliance
Ernst & Young: It designs an on-chain audit tracking system and generates accounting vouchers that comply with GAAP/IFRS standards for each transaction. This ensures transparency and compliance during the asset tokenization process.
McKinsey: It develops a three-year strategic roadmap focusing on expanding sovereign wealth fund asset tokenization in the Asia-Pacific and Europe regions to advance global asset tokenization.

Ondo Foundation: Native Token Management

The Ondo Foundation is dedicated to driving the democratization of institutional financial services. It aims to foster an open, transparent, and efficient global financial system through decentralized protocols and asset tokenization. Its core functions include supporting innovation, promoting ecosystem education and advocacy, managing the treasury, deploying smart contracts, collaborating with businesses and regulators, and advancing ecosystem development.

The Ondo Foundation has introduced a plan to unlock the ONDO token to decentralize financial markets. With a total supply of 10 billion ONDO tokens, 14.3% will be initially circulated, while the remainder will be gradually unlocked over a period of 12 to 60 months. ONDO token holders can engage in governance via the Decentralized Autonomous Organization (DAO). This allows them to influence decisions on listing new asset markets, pausing markets, and updating interest rate models. The Foundation also supports decentralized protocols like Flux Finance, which serves as a bridge to the real world to enable asset tokenization.

Native Stablecoin: USDY

USDY (USD Yield Token) is a tokenized note backed by short-term U.S. government bonds and bank deposits. It is designed to provide non-U.S. individual and institutional investors with access to a stablecoin-like product and allow them to enjoy high-quality dollar-denominated returns. USDY offers two versions:

Accruing (USDY): Token price increases as yields accumulate.
Rebase (rUSDY): Token price remains at $1.00, and yields are distributed daily in the form of new tokens.

USDY is issued by the independent legal entity, Ondo USDY LLC, and its assets are managed separately from Ondo Finance. As senior debt, USDY employs an over-collateralization mechanism to hedge against short-term fluctuations. Ankura Trust serves as the collateral agent that provides daily transparency reports. Unlike traditional stablecoins, USDY provides yield and transparency. Its returns are based on the yield from the underlying assets. It has a clear redemption process and timeline, though investment risks remain.

Compared to other stablecoins, USDY offers distinct advantages. USDY is not classified as a traditional stablecoin; rather, it is a tokenized debt instrument. Like stablecoins, USDY, as a holder’s asset, can be transferred without requiring the investor and issuer to engage in a settlement process, although minting or redemption requires such engagement. However, unlike stablecoins, USDY holders can receive almost all the income generated by the assets backing USDY.

The key differences between USDY and traditional stablecoins are as follows: First, stablecoins are typically issued by operating companies, which exposes holders to the risk of being unable to redeem their tokens if the issuer goes bankrupt. In contrast, USDY is issued by Ondo USDY LLC, a separate entity designed to mitigate bankruptcy risk by remaining isolated from other organizations, including Ondo’s operating company. Second, unlike stablecoin holders who earn no interest, USDY holders can generate income from the high-quality assets backing USDY, which is reflected in the increasing redemption value. Traditional stablecoins are unsecured liabilities, which means holders have no collateral rights and may face risks from other creditors’ priority claims. USDY, however, is backed by high-quality assets, offering holders collateral rights, and USDY represents the only debt of Ondo USDY LLC.

From a regulatory perspective, traditional stablecoins often exist in a regulatory gray area, while USDY adheres strictly to federal and state securities laws and financial crime compliance regulations. Furthermore, stablecoin issuers can unilaterally alter the assets backing their tokens, whereas Ankura Trust Company, an independent third-party supervisory entity, ensures that USDY’s assets meet the necessary qualifications and can be liquidated if non-compliant. If a stablecoin issuer fails to redeem tokens on time, holders may need to resort to legal action to recover assets. In contrast, USDY includes explicit default clauses, and if Ondo USDY LLC fails to redeem tokens, Ankura Trust will liquidate the portfolio and provide repayments based on holder approval. Overall, USDY offers superior protection and yield opportunities compared to traditional stablecoins.

Conclusion

Ondo’s standout advantage lies in its tokenized cash-equivalent products, which allow on-chain investors to earn superior yields compared to traditional stablecoins, all while benefiting from complete asset transparency. Furthermore, the ecosystem’s partners enhance liquidity, manage assets efficiently, and ensure the platform adheres to rigorous compliance standards and high-security protocols.

Ondo Chain serves as the technical backbone of Ondo Finance. It is designed to merge public blockchains’ transparency with permissioned chains’ compliance and security features, thus driving the widespread tokenization of real-world assets (RWAs). It introduces groundbreaking innovations, including:

Hybrid Architecture Design: By licensing a portion of the validators, Ondo Chain enhances compliance and investor protection while keeping the rest of the chain open. It allows anyone to issue tokens or develop applications, effectively balancing compliance with innovation.

RWA Support and Asset Staking: Ondo Chain facilitates the native tokenization of RWAs, especially the Ondo GM Token. It enables these tokens to be staked to secure the network while generating yield opportunities for otherwise idle assets.

Institutional Connections: Ondo Chain seamlessly connects with traditional finance (TradFi) by enabling selected financial institutions to run some validators. This facilitates access to unique assets and liquidity while reducing transaction delays and avoiding front-running.

Simplified Development Process: Ondo Chain simplifies data sharing, such as KYC status, sanction lists, and collateral quantities, which streamlines decentralized app development and improves efficiency.

The integration of Ondo Finance and Ondo Chain bridges the gap between blockchain and traditional finance, offering distinct advantages, especially in tokenizing real-world assets, strengthening compliance frameworks, improving data accuracy, and ensuring robust cross-chain interoperability. Leveraging its innovative ecosystem and technology, Ondo is pioneering blockchain integration in finance. It delivers secure, compliant, and efficient financial services to institutional investors and retail users alike.