Ondo Finance is a decentralized finance (DeFi) platform built on the Ethereum blockchain, engineered to bridge the gap between traditional finance (TradFi) and DeFi through the tokenization of real-world assets (RWA). By bringing institutional-grade financial instruments on-chain, Ondo empowers crypto traders and investors with access to secure, yield-generating assets that were once limited to traditional markets.
The platform is not a single product but an ecosystem of protocols and services designed to expand investment opportunities in the digital asset space. Key offerings include USDY, a yield-bearing stablecoin, and OUSG, a tokenized exchange-traded fund (ETF) providing exposure to short-term U.S. Treasury bonds. These products exemplify how Ondo is redefining accessibility and liquidity in finance.
👉 Discover how real-world assets are transforming DeFi—explore the future of yield generation.
Core Products of Ondo Finance
USDY: U.S. Dollar Yield Token
USDY is a crypto-native stablecoin that generates yield by being backed by short-term U.S. Treasury bonds and bank demand deposits. Unlike most stablecoins that maintain a 1:1 peg to the U.S. dollar without yield, USDY offers an attractive annual return—currently around 5.2%—while maintaining high security standards.
Issued in August 2023 by Ondo USDY LLC, a special-purpose entity with independent governance, USDY ensures transparency and risk mitigation. It features a 3% over-collateralization buffer to protect against short-term market fluctuations in Treasury prices. Independent custodian Ankura Trust oversees collateral verification and has the authority to liquidate assets and reimburse holders if Ondo ceases operations.
To acquire USDY, users must complete a strict identity verification process and register approved wallet addresses. Funding can be done via USDT, USDC, or direct USD bank transfers (for amounts over $100,000). After deposit, token issuance takes 40–50 days, during which users receive non-transferable token certificates that already begin accruing interest.
Once minted, USDY tokens can be freely transferred, traded, or used as collateral in DeFi lending protocols—making it one of the safest yield-bearing stablecoins available today.
OUSG: Tokenized U.S. Treasury Exposure
OUSG (Ondo Short-Term U.S. Treasuries) offers tokenized exposure to short-term U.S. Treasury bonds. These government-issued securities are widely regarded as low-risk investments due to the stability of U.S. monetary policy.
A key innovation behind OUSG is its integration with BlackRock’s tokenized fund, BUIDL, which is fully invested in cash, U.S. Treasuries, and repurchase agreements on Ethereum. Ondo migrated all of OUSG’s total value locked (TVL) into BUIDL, enhancing liquidity and operational efficiency.
Key benefits of OUSG include:
- 24/7 instant minting and redemption, overcoming traditional market hours
- Immediate settlement for both purchases and redemptions
Two token variants:
- OUSG: Accumulation-style token where value increases over time
- rOUSG: Rebase-style token that distributes daily yield as additional tokens
Access to OUSG is restricted to accredited U.S. investors—typically those with a net worth exceeding $5 million or $25 million in assets—due to regulatory requirements. This limitation ensures compliance but reduces accessibility for retail investors.
Flux Finance: On-Chain Lending Market
Launched in February 2023 as a spin-off from Ondo Finance, Flux Finance is a permissionless lending protocol based on Compound v2. It allows users to lend and borrow stablecoins like USDT and DAI using OUSG as collateral.
Flux effectively functions as an on-chain repo market, enabling traders to leverage their Treasury-backed tokens for further DeFi activities. For example, users can deposit OUSG to borrow USDT for trading or liquidity provision.
Although initially developed by Ondo, Flux was later sold to Neptune Foundation, allowing Ondo to focus exclusively on RWA tokenization and ecosystem growth.
Tools Enhancing Usability
Ondo Token Bridge
In partnership with Axelar and LayerZero, Ondo launched a cross-chain bridge for RWA tokens. Currently supporting USDY transfers between Ethereum and Mantle, the bridge uses a burn-and-mint mechanism: tokens are burned on the source chain and newly minted on the destination chain. This design minimizes the risk of fund loss during bridge exploits—a common concern in multi-chain environments.
Ondo Token Converter
Users can seamlessly swap between OUSG and rOUSG using the Ondo Token Converter without slippage or fees. This flexibility allows investors to choose their preferred yield distribution model based on tax strategy or investment goals.
ONDO Tokenomics
ONDO is the governance token of the Ondo Finance ecosystem, with a total supply of 10 billion tokens. It enables holders to vote on protocol upgrades, treasury management, token distribution, and strategic initiatives.
Token distribution includes:
- 5.21 billion for ecosystem growth
- 3.3 billion for protocol development
- 1.29 billion from private sales
- 198 million for community access sales
In May 2022, Ondo raised $20 million by selling 400 million tokens. Most tokens are subject to vesting schedules, with approximately 1.389 billion currently in circulation.
Advantages of Ondo Finance
- Bridges TradFi and DeFi: Enables seamless integration of regulated financial assets into decentralized ecosystems
- High-security yield: Offers some of the lowest-risk returns in DeFi through government-backed instruments
- Regulatory compliance: Prioritizes legal adherence and transparency with independent audits and custodianship
- Partnership with BlackRock: Adds institutional credibility and enhances trust in product offerings
Challenges and Limitations
- Limited product range: Only two core products available as of mid-2025
- Strict KYC requirements: Mandatory identity verification may deter privacy-focused users
- Accredited investor restrictions: Limits access to OUSG for most retail participants
- Token concentration: Significant holdings remain with early investors and team members
👉 See how institutional finance meets blockchain innovation—unlock new DeFi possibilities.
Frequently Asked Questions
Q: What are real-world assets (RWA) in crypto?
A: RWAs are physical or traditional financial assets—like bonds, real estate, or commodities—represented as tokens on a blockchain. They bring tangible value into DeFi ecosystems.
Q: Is USDY safer than other stablecoins?
A: Yes. USDY is over-collateralized and backed by short-term U.S. Treasuries, making it one of the most secure yield-generating stablecoins available.
Q: Can non-U.S. investors use Ondo Finance?
A: Yes, but only for certain products. USDY is accessible globally after KYC, while OUSG is restricted to accredited U.S. investors.
Q: How does OUSG generate yield?
A: Through exposure to U.S. Treasury bonds via BlackRock’s BUIDL fund, which invests directly in government securities and cash equivalents.
Q: What role does ONDO play in the ecosystem?
A: ONDO is a governance token that allows holders to participate in decision-making processes affecting the protocol’s future.
Q: Why did Ondo sell Flux Finance?
A: To streamline focus on core RWA tokenization efforts and accelerate development of its primary asset offerings.
Ondo Finance represents a pivotal evolution in decentralized finance—merging institutional-grade security with blockchain efficiency. While regulatory barriers and limited accessibility remain challenges, its innovative approach positions it at the forefront of the RWA movement.
As global interest in tokenized assets grows, platforms like Ondo are paving the way for a more inclusive, transparent, and efficient financial system. Whether you're seeking low-risk yields or exploring the future of asset tokenization, understanding Ondo’s model is essential in today’s evolving DeFi landscape.
👉 Start exploring real-world asset opportunities in DeFi—your next financial frontier awaits.