Ondo
Ondo Finance Leads the Market in Real World Assets, Bringing DeFi and TradFi Together
Overview
Ondo Finance marries real world assets, including US Treasuries and other securities, with the transparency, accessibility, and interoperability of decentralized finance (DeFi) through the tokenization of assets and development of DeFi protocols.
Ondo works with institutional-grade asset managers and service providers such as BlackRock and Morgan Stanley.
Ondo’s product line offers accessibility to a broad array of investor types.
Unlocking New Horizons with Ondo
In 2023, the landscape of decentralized finance and the management of tokenized assets saw significant evolution, with industry leaders such as Larry Fink of BlackRock highlighting the crucial role of tokenizing assets in reshaping the financial industry. We believe that certain assets represented as tokens that move on blockchain-based rails can offer many benefits, including enhanced liquidity, democratized ownership, better security and transparency, and lower cost compared to legacy systems. The tokenized US treasury market has grown to over $850M, with Ondo Finance at the forefront. The total value of tokenized treasuries is up 7.4x since the start of 2023.
Ondo has a vision to blend the best of both traditional finance and DeFi to create an ecosystem that is both transparent and broadly accessible. Since its launch in 2021, Ondo has played a key role in the expansion of the real world asset (RWA) sector, with its management of assets topping $200 million. By partnering with leading firms including BlackRock and Morgan Stanley, Ondo makes institutional-grade products that can garner investor confidence.
Tokenization: How Ondo Works
Tokenization, the process of representing real world assets such as conventional securities with digital tokens stored on a blockchain, offers numerous benefits such as increased liquidity, transparency, and accessibility, and allows for assets to be usable in on-chain financial infrastructure (e.g. DeFi lending protocols). This innovation has the potential to revolutionize traditional financial markets by modernizing and democratizing investment opportunities.
Diversified Product Suite:
Ondo Finance introduces an innovative range of financial solutions, tailoring its offerings to meet the needs of a broad audience, from novice investors to seasoned financial experts. This strategic approach has led to the creation of a multifaceted product ecosystem that simplifies access to complex financial instruments, such as specialized lending services and bond investments, without overwhelming users with technical details.
Ondo has a suite of tokenized cash equivalents which offer yield-bearing substitutes to conventional stablecoins, showcasing different means of tokenizing RWAs for different target audiences and use cases.
Ondo also develops protocols and infrastructure that enhance the utility and function of tokenized RWAs. Two examples are lending protocols and cross-chain bridges.
Flux Finance: Flux is the first DeFi lending protocol to support both permissionless assets (like most stablecoins) and permissioned assets (like many tokenized securities) together. Functionally, Flux allows for lending and borrowing of stablecoins over-collateralized by Ondo’s tokenized US Treasuries. Flux is effectively acting as a form of on-chain US Treasury repo markets.
Ondo Token Bridge: Ondo's seamless integration into the multi-chain DeFi ecosystem is showcased through its creation of the Ondo Bridge, a tool for transferring RWAs across different blockchains without reliance on any individual cross-chain messaging protocol. This venture seeks to minimize the perils associated with cross-chain bridging while boosting the scalability of RWAs.
The Visionaries Behind Ondo
Leading Ondo Finance are Nathan Allman and Justin Schmidt, who bring together a blend of finance, technology, and digital assets expertise. Nathan and Justin worked together at Goldman Sachs on the Digital Assets team, which Justin led from 2018-2020. Most of their efforts were specifically on the tokenization of securities, which is Ondo’s primary focus. In particular, they led the first rated bond tokenized on a public blockchain, issued by the European Investment Bank. They also have backgrounds in institutional finance, with Nathan coming from private equity and private credit investing (at Prospect Capital) and Justin coming from trading (at WorldQuant/Millennium).
Conclusion
Pantera Capital is a proud early investor in Ondo Finance. The company is at the forefront of a financial revolution, seamlessly blending the realms of traditional finance and DeFi. Boston Consulting Group estimates that there will be $16 trillion in tokenized assets by 2030. By cementing Ondo’s position as the leader in asset tokenization with a focus on compliance, security, and client service, Ondo is well-situated to capture a material percentage of that flow.
- Paul Veradittakit
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ABOUT ME
Hi, I’m Paul Veradittakit, a Managing Partner at Pantera Capital, one of the oldest and largest institutional investors focused on investing in blockchain companies and cryptocurrencies. I’ve been in the industry since 2014, and the firm invests in equity, early stage token projects, and liquid cryptocurrencies on exchanges. I focus on early-stage investments and share my thoughts on what’s going on in the industry in this weekly newsletter.