1. Market Background
The next wave in 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 smart contract era, the RWA track is leading a transformation from technology to assets, enabling an unprecedented convergence between on-chain ecosystems and traditional wealth. Currently, according to defillama, RWA has become the seventh-largest category in DeFi, with a total locked value exceeding $12 billion.
RWA Track Total TVL (source: defillama)
US Treasury bonds are considered the most liquid financial assets globally. The daily trading volume has consistently been in the trillions of dollars, with immediate tradability and extremely low bid-ask spreads; backed by the US government's "full faith and credit", they have never experienced a substantial default, exemplifying zero default risk; their yield is viewed by the industry as a risk-free rate, meaning investors can obtain a benchmark return without any credit risk, providing the most reliable anchor for asset pricing and risk management.
The RWA track, with its unique value of connecting to the real economy, combined with US Treasury bonds - the most liquid and secure global asset - has become the best paradigm for moving off-chain assets to on-chain innovation. Tokenized Treasury bonds not only inherit the core advantages of "risk-free rate" and highest credit endorsement but also integrate DeFi's transparency, efficiency, and composability into sovereign bonds, creating an unprecedented investment tool. Boston Consulting Group predicts that by 2030, the global non-liquid asset tokenization market will exceed $16 trillion, accounting for 10% of global GDP, including emerging on-chain asset tokenization and traditional ETF, real estate investment trust share models. As of May 13, 2025, the tokenized Treasury bond market value has surged from approximately $1.39 billion a year ago to $6.89 billion, confirming the explosive growth potential of this track.
(Translation continues in the same manner for the entire text)l Traditional Finance: Its mechanism begins with compliant custody of high-quality traditional assets such as U.S. short-term Treasury bonds, supported by underlying returns provided by institutions like BlackRock, Franklin Templeton, and WisdomTree through iShares Short Treasury Bond ETF (SHV), and managed by independent trust institutions such as Ankura Trust Company for default and regulatory oversight.
l On-chain Finance: After traditional financial funds flow into centralized institution accounts like Coinbase in the form of USDC, they are transferred to Ondo USDY LLC, minting two tokenized yield certificates, USDY and OUSG, bringing the risk-free rate of real-world assets on-chain.
3.1.3 Midstream: Value Appreciation Mechanism
l Fund: Users can deposit stablecoins on the Ondo Finance platform to obtain USDY (direct income type) or exchange for OUSG through Flux Fund at a lower threshold, with the latter releasing significant potential liquidity through the "Fund" stage.
l Lend: In Flux's "Lend" stage, OUSG becomes the only high-quality collateral. Permitted on-chain lending protocols or institutional borrowers lend USDC to platform users, who pledge OUSG to the Flux OUSG Pool, achieving refinancing and leverage of yield certificates. This process not only allows holders to earn Treasury yields without active management but also lowers the entry barrier for small and medium capital users, enabling more retail investors to participate in the RWA market with a low threshold.
Flux Finance ensures controlled price volatility risk of collateral through continuous monitoring and automatic liquidation mechanisms of the OUSG collateral pool, maintaining the safety and efficiency of the entire ecosystem.
3.1.4 Downstream: Value Transmission Mechanism
l The RWA liquidity released by Flux is transmitted through on-chain lending, decentralized trading, and re-pledging to the entire Web3 ecosystem, providing stable, low-cost capital for DeFi protocols, smart contract applications, and emerging tracks like AI+Blockchain and DePIN.
l Simultaneously, Flux continues to optimize its governance and compliance architecture, introducing multi-signature custody, off-chain audits, and on-chain contract upgrade mechanisms to adapt to changing regulatory environments and market demands.
Flux Finance closely integrates U.S. Treasuries, a "hard currency," with an efficient on-chain market, not only achieving value interconnection between on-chain and off-chain assets but also injecting unprecedented massive liquidity into the crypto world. Within this ecological closed loop, the Flux mechanism fulfills the RWA track's promise of "stability and efficiency coexisting," opening up a new paradigm for deep integration of traditional finance and Web3.
3.2 Ondo Chain
Ondo Chain is a blockchain network launched by Ondo Finance, designed specifically for real-world assets, positioned as infrastructure for institutional-level financial markets. It sits between traditional permissioned chains and open public chains, possessing the compatibility and connectivity of open blockchains while meeting institutional needs for compliance and risk management.
Ondo Chain is composed of several core components.
l Native support for real-world assets: Providing services from the bottom layer for on-chain mapping of assets like government bonds and money market funds.
l "Permissioned model" in verification mechanism: Unlike public chains where anyone can participate, only reviewed nodes can verify transactions, to some extent preventing destructive behaviors like MEV.
l Ondo's self-developed cross-chain bridge tool, Ondo Bridge: Supporting native communication with chains like Ethereum, Arbitrum, and Solana, reducing asset mobility barriers.
l Mandatory KYC process: Ensuring user identity compliance.
Ondo Chain achieves mapping and interconnection between on-chain assets and traditional financial products through native RWA support and integrated compliance mechanisms (permissioned verification, KYC processes), bridging the gap between blockchain and traditional financial systems.
Potential Deficiencies:
l While the permissioned verification mechanism enhances security, it also increases centralization, with verification rights held by limited large capital entities, and the degree of mechanism innovation may be restricted.
l Security still needs strengthening. Despite Ondo Chain adopting various security mechanisms like permissioned verifiers and cross-chain bridges, security at the verification and intermediate layers still requires further validation. Considering the massive fund volume, any security incident would be unimaginably consequential.
3.3 Ondo Global Markets
A tokenization platform launched by Ondo Finance, aiming to bring traditional financial assets like stocks, bonds, and ETFs on-chain, providing global investors with all-weather on-chain trading channels. Its core innovation lies in tokenizing traditional financial assets through blockchain technology, giving them liquidity and transferability similar to stablecoins, thus breaking down barriers between on-chain and traditional finance.
Ondo GM is implemented through multiple key components:
l Ondo Chain: Serving as underlying infrastructure, providing an environment combining public blockchain openness with permissioned chain compliance, supporting issuance, trading, and management of tokenized assets.
l Ondo Bridge: The platform achieves asset transfer with multiple blockchain networks through integrated Ondo Bridge, enhancing cross-chain interoperability.
l Collaboration with traditional financial institution ecosystems: Ensuring safe custody and compliance of underlying assets.
Advantages:
l For user investors, Ondo GM offers unprecedented convenience.
Unlike traditional financial institutions' asset custody methods, Ondo GM enables cross-institution and cross-company aggregation of scattered retail funds into unified collateral pools, releasing potential liquidity of small capital retail investors. This allows ordinary investors to participate in financial operations like margin trading, derivatives, and perpetual options through Ondo GM, which were previously only accessible to large institutions.
l For institutions, Ondo GM leverages blockchain smart contract advantages to simplify traditional financial processes.
Subscription and redemption operations can be directly completed through wallet address interactions and mapped to real-world assets, reducing intermediate steps and improving efficiency. Additionally, blockchain mechanisms can automatically handle default risks, simplifying processes, enhancing efficiency, and improving system security and reliability.
Potential Deficiencies:
Ondo GM is still in its early stages and has not yet achieved complete integration with traditional finance. As integration deepens, crypto mechanisms like re-pledging and flash loans could potentially cause significant impacts on traditional assets with insufficient liquidity depth. While pushing financial innovation, Ondo should also balance risks and returns to ensure system stability.
4. Mechanism Comparison
Mechanism Comparison (source: Cecelia)
Ondo Finance connects traditional finance and the crypto world through three key mechanisms, achieving on-chain transformation and complete liquidity release of real-world assets.
l Ondo Chain provides native support and compliant verification for high-grade assets like U.S. Treasuries and money market funds, with permissioned nodes and KYC processes ensuring each on-chain transaction is backed by credible real-world assets;
l Ondo Global Markets aggregates scattered retail funds into cross-institution and cross-company unified collateral pools, with smart contracts automatically completing subscriptions, redemptions, and derivative trades, allowing small investors to participate in advanced strategies like margin trading and perpetual options previously monopolized by large institutions;
l The OUSG/USDY fToken mechanism on Flux Finance enables users to not only redeem underlying assets at any time after staking short-term Treasury fund or stablecoins but also use fTokens representing shares for lending, market-making, or secondary trading, with borrowers' interest fully returned to supporters, creating a closed loop of "deposit and earn, borrow and distribute."
5.Summary
These mechanisms work together to make Ondo Finance the central hub for on-chain real-world assets. Whether it's institutional access, compliant custody, retail participation, or derivative innovation, everything is efficiently completed on the same platform, truly bridging the entry point of traditional finance and the exit of the crypto market. Ondo Finance is creating an unprecedented liquidity revolution at the intersection of traditional finance and the on-chain world. It rapidly releases market potential by deeply integrating compliant RWA underlying assets, cross-institutional fund aggregation, and the instant interest-generating fToken ecosystem, continuously attracting a new wave of hot money.
In the future, with continuous optimization of these mechanisms, Ondo Finance is opening not just a $16 trillion blue ocean, but an incremental space beyond imagination in the process of real asset digitization. Like the bull's horns raised by the Wall Street Bull, Ondo Finance's rise and success are guiding the RWA market, which is poised for the next wave of breakthrough.
6.Key Highlights
In just a few years, Ondo Finance has successfully built a bridge between traditional finance and the on-chain world through its forward-looking design concept and multi-layered product architecture. It not only opened up the mapping and circulation path of RWA on the blockchain but also released the on-chain potential of high-quality assets like government bonds globally, driving on-chain finance towards mainstreaming and institutionalization. We draw the following key insights:
1. RWA Empowering On-chain Ecosystem: Through products like USDY and OUSG, Ondo Finance tokenizes the most liquid and secure US government bonds, introducing a "risk-free interest rate" benchmark for DeFi, quickly promoting the RWA sector to become the seventh category of DeFi.
2. Three Mechanisms Collaboratively Releasing Liquidity: Ondo Chain's native compliant underlying layer, Ondo Global Markets' cross-institutional capital pool, and Flux platform's fToken lending closed loop work together to break through the "last mile" between traditional finance and the crypto world.
3. Small Users and Institutions in Parallel: Breaking down high-barrier walls, small funds can participate in advanced strategies like financing, margin trading, and perpetual options previously limited to large institutions through a unified collateral pool, while simultaneously meeting institutional-level compliance and security requirements.
4. Instant, 24/7 Trading and Settlement: Combining permissioned nodes, KYC processes, and native cross-chain bridges, supporting 24/7 minting, redemption, and cross-chain asset transfers, building an efficient and transparent on-chain financial infrastructure.
Pioneer of a $16 Trillion Blue Ocean: By deeply integrating traditional financial assets and on-chain innovation, Ondo Finance is attracting a new wave of hot money, not only seizing the expected $16 trillion tokenization market by 2030 but also paving the way for unlimited incremental space in real asset digitization
