On January 10th, 2023, Nathan Allman, the founder of Ondo Finance, tweeted about Ondo’s financial ecosystem powered by real-world assets like US treasuries and corporate bonds.
1/ 🚨 @OndoFinance is bringing US Treasuries and institutional-grade bonds on-chain 🚨
We are making it possible for stablecoin holders to invest in US Treasuries through a daily liquid, bankruptcy-remote, tokenized fund with regulated service providers.https://t.co/9D6qYpZyg3
— Nathan Allman 🌊 (@nathanlallman) January 10, 2023
Ondo Finance is a decentralized investment bank on-chain that allows users to invest in multi-billion dollar, high liquidity bonds and US treasuries managed by regulated fund managers. This allows its users to enjoy high yields without the fear of bankruptcy or liquidity crunches. All of which are safu under US regulations.
In 2022, the crypto winter worsened because of the activities and crashes of unregulated crypto establishments, which is why Ondo Finance aims to work with only regulated third parties and custodians. Such regulated establishments as Coinbase Custody, Clear Street, NAV Consulting, and Coinbase Prime would serve as fund administrators and custodians, and Richey May would be the Fund’s tax auditor and advisor.
The project aims to bring low-risk investments to high liquidity, which allows quick and easy conversions between stablecoins and traditional assets like short-term bonds and treasuries, making the capital market available to users that have non-yield stablecoins.
The non-yield stablecoin is valued at around $100 billion and is collectively held by DAOs, startup entities, and individuals. Thus they are more likely to benefit from utilizing the Ondo platform.
Participants would receive tokenized ownership of funds, which are transferable between approved investors. This effects an authorized change of ownership on-chain, and the Funds administrators update it off-chain in the accounts of the investors so that the appropriate data is reflected in the partnership reports.
Here is how the tokenization works. Investors would contribute stablecoins or fiat to create an Ondo liquidity pool and be given tokens representing their share of the pool. They can also use smart contracts to interact in the pool, such as trading and lending between investors of that pool.
The smart contracts have to be whitelisted or approved as not containing any malicious intent and must be review-compliant with the transfer restrictions on the platform. These procedures are in place to secure user funds and ensure tokens don’t end up in the possession of unqualified investors in the fund.
The project is not just for investors, but also for developers who would be able to utilize its features in a compliant manner. Investors on the other hand are expected to pass both the KYC and AML requirements. They would then fund their accounts and sign subscription documentation.