Ondo Finance is a decentralized finance (DeFi) platform built on the Ethereum blockchain, designed to bridge the gap between traditional finance (TradFi) and the crypto economy through the tokenization of real-world assets (RWA). Rather than operating as a single product, Ondo has developed a suite of financial instruments that bring institutional-grade assets on-chain—making them accessible to a global audience.
Among its flagship offerings are USDY, a yield-bearing stablecoin, and OUSG, a tokenized exchange-traded fund (ETF) providing exposure to short-term U.S. Treasury bonds. These products not only democratize access to high-quality financial instruments but also enable seamless integration with DeFi protocols.
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Understanding Ondo Finance
Ondo Finance empowers cryptocurrency traders with access to financial products typically reserved for institutional investors in traditional markets. Its core mission is to decentralize elite financial tools and make them available to anyone with an internet connection.
The two cornerstone products—USDY and OUSG—are backed by regulated, income-generating assets. USDY delivers yield in U.S. dollars, while OUSG offers exposure to U.S. Treasury securities through a tokenized ETF structure. These innovations have paved the way for new DeFi applications, such as Flux Finance, a lending and borrowing protocol launched by Ondo that allows users to leverage tokenized Treasuries as collateral.
Given that Ondo deals with highly regulated assets like U.S. government bonds, compliance is a top priority. Some products require rigorous Know Your Customer (KYC) verification, and certain offerings—like OUSG—are restricted to accredited investors in the United States, defined as individuals with a net worth exceeding $5 million or $25 million in assets.
Ondo Finance is a pioneer in the real-world asset (RWA) sector, which has seen explosive growth in 2025. As institutional interest in blockchain-based finance rises, Ondo stands out as one of the lowest-risk yield-generating platforms in the RWA space.
The Origins of Ondo Finance
Founded in 2021 by Nathan Allman and Pinku Surana—both former Goldman Sachs executives—Ondo Finance was born from a vision to democratize access to elite financial products. Allman worked in digital assets at Goldman, while Surana served as a technology vice president, leading blockchain development initiatives.
In 2022, Ondo raised $20 million through a token sale and an additional $20 million in a Series A funding round led by Coinbase Ventures, Tiger Global, and other major investors. This capital fueled the transition from its initial liquidity vault model to Ondo V2, which introduced its current suite of tokenized asset products.
How Ondo Finance Works
Ondo Finance leverages blockchain technology to tokenize real-world financial instruments, enhancing liquidity, enabling 24/7 trading, and accelerating settlement times. Below is a breakdown of its key products.
USDY: A Yield-Bearing U.S. Dollar Stablecoin
USDY is a crypto asset backed by short-term U.S. Treasury bonds and bank demand deposits. Unlike traditional instruments limited to U.S.-based investors, USDY allows global participation—with added security and yield.
- Yield: Currently around 5.2%, generated from underlying Treasury holdings.
- Issuer: Ondo USDY LLC, a special-purpose entity with an independent board and auditor.
- Overcollateralization: Maintains a 3% buffer to protect against short-term Treasury price volatility.
- Custodian: Ankura Trust serves as an independent custodian, empowered to seize collateral and redeem tokens if Ondo ceases operations.
To purchase USDY:
- Complete identity verification.
- Deposit funds via USDT, USDC, or bank wire (for deposits over $100,000).
- Receive token certificates immediately—these earn interest while awaiting minting.
- After 40–50 days, claim your USDY tokens on-chain.
Once issued, USDY can be transferred, traded, or used as collateral across DeFi platforms—all while continuing to accrue yield.
OUSG: Tokenized U.S. Treasury Exposure
OUSG (Ondo Short-Term U.S. Treasuries) provides tokenized access to short-term U.S. Treasury bonds—among the safest assets in global finance.
OUSG now integrates BUIDL, BlackRock’s Ethereum-based tokenized fund, which holds 100% of its assets in cash, Treasuries, and repurchase agreements. Ondo migrated all OUSG TVL (Total Value Locked) into BUIDL to enhance security and efficiency.
Key benefits:
- 24/7 availability: Unlike traditional Treasury markets (limited to business hours), OUSG enables instant minting and redemption.
- Instant settlement: No delays in transactions.
Two token versions:
- OUSG: Accumulation-style—price increases with earned yield.
- rOUSG: Rebase-style—daily yield distributed as additional tokens.
Access to OUSG requires U.S. accreditation due to regulatory requirements—a significant limitation for non-accredited investors.
Flux Finance: Lending Against Tokenized Treasuries
Launched in February 2023, Flux Finance is a permissionless lending protocol based on Compound v2. It supports USDT, DAI, and—critically—OUSG as collateral.
Users can:
- Lend OUSG to earn additional yield.
- Borrow stablecoins against their OUSG holdings for DeFi trading or liquidity needs.
Originally developed by Ondo, Flux was later sold to the Neptune Foundation, allowing Ondo to focus exclusively on RWA tokenization.
Ondo Token Bridge & Converter
To enhance usability, Ondo provides two key tools:
- Token Bridge: Built with Axelar and LayerZero, it enables cross-chain transfers of USDY (currently between Ethereum and Mantle). Tokens are burned on the source chain and minted on the destination—eliminating bridge hack risks.
- Token Converter: Allows frictionless swapping between OUSG and rOUSG without slippage.
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ONDO Tokenomics
ONDO is the native governance token of the Ondo ecosystem, with a total supply of 10 billion tokens.
Distribution:
- 5.21 billion: Ecosystem growth
- 3.3 billion: Protocol development
- 1.29 billion: Private sales
- 198 million: Community access sale
In May 2022, Ondo raised $20 million by selling 400 million tokens. Most tokens are subject to vesting schedules. As of 2025, circulating supply is approximately 1.389 billion.
Holders can vote on:
- Protocol upgrades
- Treasury management
- Token distribution
- Governance proposals
Advantages of Ondo Finance
- Bridges TradFi and DeFi: Brings regulated financial assets on-chain with blockchain efficiency.
- Institutional-grade backing: Partnerships with firms like BlackRock enhance credibility.
- Regulatory compliance: Strong KYC and legal frameworks increase user trust.
- Low-risk yield: USDY is among the safest yield-generating stablecoins available.
Challenges and Limitations
- Limited product range: Only two core offerings as of mid-2025.
- Strict access controls: KYC requirements may deter privacy-focused users.
- Accreditation barriers: OUSG is inaccessible to most retail investors.
- Token concentration: High ownership by team and early investors raises decentralization concerns.
Frequently Asked Questions (FAQ)
Q: Is Ondo Finance fully decentralized?
A: While built on decentralized infrastructure, Ondo enforces KYC and regulatory compliance—making it a hybrid model rather than fully permissionless.
Q: Can non-U.S. investors use USDY?
A: Yes—USDY is available globally after identity verification, unlike many traditional financial products.
Q: What makes USDY safer than other yield-bearing stablecoins?
A: It’s overcollateralized by U.S. Treasuries and managed by an independent entity with third-party custody.
Q: How does OUSG generate yield?
A: Through exposure to short-term U.S. Treasury bonds via BlackRock’s BUIDL fund.
Q: Can I stake ONDO tokens?
A: ONDO is primarily for governance; staking functionality may be introduced via future proposals.
Q: Is there a risk of regulatory changes affecting Ondo?
A: Yes—being tied to regulated assets means policy shifts could impact product availability or structure.
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Final Thoughts
Ondo Finance is at the forefront of merging traditional finance with decentralized innovation. By tokenizing real-world assets like U.S. Treasuries, it delivers faster settlement, global access, and reliable yields—all within a compliant framework.
While barriers like accreditation requirements and limited product diversity remain, Ondo’s progress signals a growing appetite for secure, institutional-grade DeFi solutions. As the RWA sector matures in 2025 and beyond, platforms like Ondo could play a pivotal role in transforming how value moves across financial systems.
This content is for informational purposes only and does not constitute financial, legal, or investment advice. Cryptocurrency investments carry high risk—always conduct your own research.