ondo Finance tokenizes US Treasury bonds through USDY and OUSG, building an on-chain yield asset ecosystem. Combined with infrastructure such as Ondo Chain and Flux Finance, it bridges the gap between traditional finance and the crypto world.

1. Market Background

The next wave in the blockchain world is not just about performance and throughput, but more about how to deeply integrate real-world assets with decentralized finance. Just as Ethereum laid the foundation for the smart contract era, the RWA (Real-World Assets) track is leading a transformation from technology to assets, enabling an unprecedented convergence of on-chain ecosystems and traditional wealth. Currently, according to DeFi Llama, 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 the most liquid financial assets globally, with daily trading volumes consistently reaching trillions of dollars. They are highly tradable with minimal bid-ask spreads and are backed by the "full faith and credit" of the US government, which has never defaulted. The yield on these bonds is considered the risk-free rate, providing a benchmark return for investors without credit risk and serving as a reliable anchor for asset pricing and risk management.

RWA Track Total TVL (source: defillama)

The unique value of the RWA track in connecting to the real economy, combined with the highly liquid and secure US 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 US bonds as a "risk-free rate" and the highest credit endorsement but also integrate the transparency, efficiency, and composability of DeFi into sovereign bonds, creating an unprecedented investment tool. Boston Consulting Group predicts that by 2030, the global market for tokenized illiquid assets will exceed $16 trillion, accounting for 10% of global GDP. This includes both emerging on-chain asset tokenization and the fractionalization of traditional ETFs and real estate investment trusts. As of May 13, 2025, the market value of tokenized Treasury bonds has soared from approximately $1.39 billion a year ago to $6.89 billion, demonstrating the explosive growth potential of this track.

US Treasury Bond Tokenization Protocol Market Value Ranking (source: rwa.xyz)

Ondo Finance has firmly established itself at the forefront of the tokenized US Treasury bond market through its two flagship products, USDY and OUSG. USDY and OUSG account for two of the top five tokenized US Treasury bond assets, contributing approximately 25% of the market share, significantly leading other similar products.

Meanwhile, Ondo Finance's overall TVL has also reached new heights. On March 3, 2025, the platform announced that its TVL had exceeded $1 billion for the first time, and in just two months, it has approached $1.2 billion.

Amidst the backdrop of global inflation decline and interest rate divergence, the demand for stable and highly liquid assets continues to rise, and tokenized bonds have emerged accordingly. How does Ondo Finance continue to lead with its innovations? Where does its core competitive advantage come from? Looking ahead, how will Ondo use its unique tools and architecture to bridge the gap between the crypto world and Wall Street, achieving a true "seamless asset corridor"? We will delve into this next.

2. Overview

2.1 Project Introduction

Ondo Finance has launched three tokenized US Treasury and bond products through large, highly liquid ETFs managed by asset management giants such as BlackRock and PIMCO. These products are the US Government Bond Fund (OUSG), Short-Term Investment-Grade Bond Fund (OSTB), and High-Yield Corporate Bond Fund (OHYG).

• Market Share: Approximately 20%

• Treasury Product Market Value: $122,511,877

• Management Fee: 0.15%

2.2 Core Product Introduction

The two core and best-performing products of Ondo Finance are USDY and OUSG, which form the foundation of its RWA product system, catering to stable yield needs and US Treasury investment scenarios, respectively.

2.2.1 USDY

USDY (US Dollar Yield Token) is an interest-bearing stablecoin issued by Ondo USDY LLC. Each USDY is backed by short-term US Treasury bonds and bank current deposits. Holders can automatically earn interest generated by the underlying assets without participating in additional contracts or staking.

Mechanism Introduction:

• Issuance and Minting: Available to institutions and accredited investors outside the US, USDY can be minted and redeemed daily at net asset value ($1 USDY ≈ $1 USD). After the initial minting, there is a 40–50-day transfer lock-up period on Ondo Finance.

• Interest and APY: As of April 2025, the target annualized yield for USDY is approximately 5.2%, determined by the actual income of the underlying assets (Treasury bonds and deposits) and set and published monthly by the governance document.

2.2.2 OUSG

OUSG (Ondo Short‑Term US Government Treasuries Fund) is a transferable on-chain fund that provides short-term US Treasury exposure to holders through custody in the BlackRock USD Institutional Digital Liquidity Fund (BUIDL) and direct bond purchases. It updates its net asset value (NAV) daily to reflect the latest asset performance and fee deductions.

• Mechanism Composition:

  • Underlying Assets: Primarily invested in short-term US Treasury bonds in the BlackRock USD Institutional Digital Liquidity Fund (BUIDL), as well as high-grade Treasury and GSE funds from institutions such as Franklin Templeton, WisdomTree, and Wellington Management.

  • Fund Structure: Managed by Ondo Capital Management, holders obtain their shares by minting/redeeming OUSG tokens. After each business day, the on-chain price Oracle is updated based on the latest NAV.

  • Price Publishing: The on-chain Price Oracle, updated by Ondo, calculates the daily price of each OUSG token by dividing the NAV by the total number of tokens and publishes it on-chain, supporting 24/7 instant investment and redemption.

• Fee Allocation:

  • Management Fee: 0.15% annually, charged by Ondo Capital Management to cover platform operation and management costs.

  • Performance Fee: 0%, meaning no additional profit-sharing regardless of returns.

  • Other Fees: No subscription fees, redemption fees, or hidden charges. All fees are deducted from the daily NAV, with no additional redemption fees for holders.

  • Third-Party Service Fees: The management fee of the underlying BUIDL fund (≈0.10%–0.15%) is included in the above management fee and NAV, with no extra charges.

• APY:

  • Formula:

  APY=(Start NAVEnd NAV​)30365​−1

  Where "End NAV" and "Start NAV" are the fund's net asset values at the beginning and end of a 30-day period, respectively.

  • Update Rule: Updated once each working day (excluding holidays), based on the net income and NAV changes over the past 30 days (and 7 days), reflecting historical performance but not future returns.

3. Key Mechanisms: Bridging the "Last Mile"

3.1 Flux Finance

Flux Finance Builds an Industry Chain Synergy Path (source: Cecelia)

3.1.1 Technical Foundation

Leveraging high-throughput, low-cost Layer 2 networks such as Arbitrum and Mantle, as well as Stellar's cross-border settlement capabilities, Flux seamlessly integrates traditional asset liquidity into a multi-chain environment. This enables stablecoins (USDC, fUSDC) and RWA tokens (OUSG, fOUSG) to be traded in secondary markets on DEXs or provide liquidity in AMM pools, generating additional revenue for LPs through fee-sharing.

Meanwhile, Ondo Finance provides native support for RWA through its own Ondo Chain, a compliance verification network. Ondo Global Markets builds an on-chain custody and cross-chain trading platform based on it, forming an end-to-end on-chain financial infrastructure.

3.1.2 Upstream: Issuance and Management

• Traditional Finance: The mechanism begins with the compliant custody of high-quality traditional assets such as short-term US Treasury bonds. Institutions like BlackRock, Franklin Templeton, and WisdomTree provide underlying yield support through iShares Short Treasury Bond ETF (SHV), while independent trust companies like Ankura Trust Company handle default and regulatory oversight.

• On-Chain Finance: Traditional financial funds flow into centralized institutional accounts such as Coinbase in the form of USDC, then pass to Ondo USDY LLC. By minting USDY and OUSG tokens, the risk-free rate of real-world assets is brought on-chain