Foreword:

This article will analyze the rwa track and track segment player ondo finance from the following three aspects in order:

1. Starting from the macroscopic status of web3, by extracting recent market data and combining data from the two major global securities markets, A-shares and US stocks, for comparative analysis, we will observe the current problems and status of the web3 track.

2. Starting from the RWA track, analyze the impact of the RWA track on the industry ecology

3. Use Ondo Finance as a use case to analyze the revenue solution of this product

1. Analysis of current situation of Web3

(1) Web3 development status

According to market data, the average market value of the cryptocurrency market in 2024 will be approximately US$2.6 trillion, an increase of 62.5% from the previous bull market (average market value in 2021 of US$1.6 trillion);

Many leading financial and fund companies have included cryptocurrency assets in their asset allocation, and many sovereign countries have accepted cryptocurrency assets as strategic reserves; representative cases include: MicroStrategy, Grayscale, Tesla…

But at the same time, cryptocurrency also faces many challenges, such as insufficient liquidity, ambiguous value evaluation, security and centralized review.

(2) Data analysis and comparison

1.Concentration & Market Capitalization

According to data on the afternoon of February 23, 2025, the market value of the cryptocurrency market was US$3,319.774 billion. During the same period, according to closing data on February 20, 2025, the total market value of China’s A-share market was approximately US$13,784.617 billion, and the total market value of the US US stock market was approximately US$82,102.492 billion. Detailed data is shown in the table below:

Data source: CoinGecko, wind

The data shows that regardless of whether the influence of Bitcoin and Eth, the two largest cryptocurrencies in the current cryptocurrency market, is excluded or not, the concentration of the cryptocurrency market is much higher than that of the A-share and US stock markets.

This means that the Crypto market is in a highly monopolized ecosystem, with BTC+ETH accounting for 70% of the market value, forming a duopoly structure.

It reflects the market’s lack of confidence in holding other cryptocurrencies. To put it bluntly, it means that altcoins have lost their “value recognition” and funds are concentrated in mainstream currencies. The result is a serious lack of liquidity in long-tail projects, which has been shown in TGE’s project price trends.

2.Trading volume & market capitalization

According to data on the afternoon of February 23, 2025, the cryptocurrency market trading volume was US$84.74 billion. During the same period, according to closing data on February 20, 2025, the total trading volume of China’s A-share market was approximately US$255.923 billion, and the total trading volume of the US US stock market was approximately US$536.172 billion. Detailed data is shown in the table below:

Unit: billion US dollars

Data source: CoinGecko, wind

Data shows that the ratio of cryptocurrency market trading volume to market capitalization (2.55%) is better than A-shares (1.86%) and US stocks (0.65%), but market liquidity is still insufficient. The reason is that apart from the cryptocurrencies with good liquidity, the liquidity of the remaining cryptocurrencies is seriously lacking; in short, most traders gather on the top mainstream currencies to trade, and the number of traders in altcoins is relatively small.

Unit: billion US dollars

Data source: CoinGecko, wind

The top 40 cryptocurrencies by trading volume contributed 99.67% of the trading volume, while the remaining cryptocurrencies contributed 0.33% of the trading volume, and their market trading volume to market capitalization ratio (a/b) was only 0.09%. However, the market value of other cryptocurrencies is about 90% of the market value of eth. From the perspective of market value alone, this is a very large currency collection.

To give another data reference, the average daily real estate transaction amount in Beijing in 2023 will account for approximately 0.042% of the amount of real estate for sale (new + second-hand) in Beijing in 2023. Based on the above comparison, the liquidity of non-top cryptocurrencies is indeed worrying, which also matches the information from the concentration data very well.

3.Transaction price volatility

As can be seen from the table below, the volatility of cryptocurrency is indeed higher than that of traditional currencies or the general equivalent of gold. However, due to the strengthening of consensus and the development of the industry, the digital gold attributes and currency attributes of Bitcoin and Ethereum are becoming more prominent, and value fluctuations tend to stabilize. Other currencies (such as SOL, for example) fluctuate quite violently, and they are more like encrypted securities than cryptocurrencies.

I believe that if we extract other cryptocurrencies with less liquidity and lower market capitalization discussed above, the volatility reflected in the data will be even more severe. Severe price fluctuations increase the risk of liquidity provision, which will reduce the willingness of market makers and liquidity providers to provide liquidity in the context of income mismatch, thus forming a negative cycle. Even if many cryptocurrencies can be listed on exchange platforms, many of them reach their peak, and investment institutions and retail investors have invested and withdrawn until liquidity dries up.

Data source: CoinGecko, wind, the US dollar index uses the 1973 US dollar as the anchor of 100.

Statistical scope: January 1, 2021 - February 23, 2025, excluding dates without comex gold transaction data, the trading range of products other than cryptocurrency is natural days, and the closing price of cryptocurrency transactions is calculated at 0:00 Beijing time zone.

Indicator calculation: The average absolute value calculation formula of volatility is abs (today’s closing price/previous day’s closing price - 1), which is averaged within the statistical range; the maximum volatility calculation formula is within the statistical period (maximum value/minimum value - 1).

(3) Analysis of existing problems

1.Liquidity dilemma

Personally, I think the liquidity dilemma exists in two aspects:

One is because the consensus is concentrated on the top cryptocurrency, and it is due to the investment strategies of currency holders and consensus mechanisms such as POS. The liquidity caused by currencies such as BTC and ETH being held for a long time or pledged/lost on the corresponding chain cannot be released.

Solutions in this area are already very abundant in applications and projects in various Defi fields. Whether it is Solv issuing pledged tokens for secondary pledge through re-pledge, LSD and LST mechanisms, or Babylon releasing liquidity by remotely pledging Btc, they all provide many solutions for the liquidity release of top currencies.

On the other hand, according to the previous data analysis, the liquidity dilemma is reflected in the lack of liquidity of non-top cryptocurrencies (altcoins).

I think the main reasons for this are:

(1) Actual application scenarios and users’ judgment of project fundamentals are the driving force for liquidity. If the actual application scenarios are vague and lack fundamental support, then weak currency consensus will naturally lead to a lack of liquidity;

(2) The liquidity of the blockchain market is often driven by “hot narratives”, and these narratives are usually short-term. Once the narrative loses its appeal, market funds quickly evacuate/transfer, causing liquidity to dry up and tokens to lose traders. It is difficult for liquidity providers and project parties to grasp the time in this process, and they must bear high risks while providing liquidity for the currency.

2.Ambiguous value

The value of cryptocurrency comes from consensus, and the embodiment of consensus is the collection of mainstream and non-mainstream values ​​and things recognized by different groups; just like BTC has shaped a decentralized currency system, which is recognized by everyone as: the trend of the next stage of society, that is, the future

Many cryptocurrency enthusiasts agree that the future society will be decentralized

Every cryptocurrency must find its own value, whether it is culture & emotion (meme), defi (bringing more benefits to cryptocurrency holders and pledgers), or reducing original transaction costs through expansion, but the prerequisite for achieving consensus is a clear value.

It is undeniable that those advanced terminology and application scenarios are very fascinating, but the cryptocurrency market is still in the stage of rapid growth and accepting external members. Business logic that can be recognized by many new investors with less knowledge reserves will help web3 gain more attention and builders.

3.How to spread faith

Events such as the Russia-Ukraine war have exposed the untrustworthiness of the centralized financial system, and the decentralized nature of the cryptocurrency system provides the possibility to solve this problem. How to speed up the acceptance process, gain majority trust and spread faith are important topics.

The tokenization of real-world assets can serve as a case worth studying in this context, because it can better convince external investors of the value of Web3.

2. RWA track analysis

(1) Definition

To bring real-world assets into DeFi, the value of the asset must be “tokenized”—referring to the process of converting something of monetary value into a digital token so that its value can be represented and traded on the blockchain.

Tokenized real-world assets (RWAs) are digital tokens recorded on the blockchain that represent ownership or legal rights to physical or intangible assets. Any real-world asset with a clear monetary value can be represented by an RWA, which can represent tangible assets including real estate (residential, commercial properties, and real estate investment trusts REITs), commodities (gold, silver, oil, and agricultural products); and intangible assets such as art and collectibles (high-value art, rare stamps, and vintage wine), intellectual property (patents, trademarks, and copyrights), carbon emissions indicators, and financial instruments (bonds, mortgages, and insurance policies).

Source: Binance Research
Source: Binance Research

(2) Tokenization process and method

Tokenization process:

The four methods of tokenization are as follows:

• Direct title: In this approach, the digital token itself serves as the official record of ownership, eliminating the need for a custodian. This approach only works for digitally native assets. The system uses a single ledger (possibly a distributed ledger) to record token ownership. For example, rather than issuing tokens backed by a share registry, the registry could be tokenized directly, making the token an actual record of ownership. This streamlined approach eliminates the need for custodians or duplicate registrations. While this approach can use distributed ledgers, the registration system itself does not necessarily need to be distributed. However, the current legal framework for most asset classes for this approach to tokenization remains limited and regulatory structures are immature.
• 1:1 asset-backed tokens: In this approach, the custodian holds the asset and issues tokens that represent a direct interest in the underlying asset. Each token can be exchanged for real assets or their cash equivalents. For example, a financial institution could issue bond tokens based on bonds held in a trust account, or a commercial bank could issue stablecoin tokens backed one-to-one by commercial bank currency in a dedicated account.
• Collateralized tokens: This method is used to issue asset tokens that are collateralized by assets other than the assets or related interests intended to represent them. Typically, tokens are overcollateralized in response to fluctuations in the value of the collateral assets relative to the token’s expected asset value. For example, the stablecoin Tether is not only backed by cash but also by a range of other assets such as fixed income securities. Likewise, it is possible to create a government bond token backed by commercial bank bonds, or an equity token backed by an overcollateralized portfolio of underlying stocks.
• Under-collateralized tokens: Tokens issued under this method are designed to track the value of an asset but are not fully collateralized. Similar to a fractional reserve banking system, maintaining token value requires active management of a fractional reserve portfolio and open market operations. This is a riskier form of asset token and has a history of failure. For example, the collapsed Terra/Luna stablecoin was not backed by an independent asset and instead relied on algorithmic stabilization through a supply control algorithm. Other less risky partially collateralized tokens have also been issued.

(3) Development history and current situation

1.Development process

Historically, physical holding certificates have been used to prove ownership of assets. While useful, these certificates are vulnerable to theft, loss, counterfeiting, and money laundering. Digital holding instruments have emerged as a potential solution since the 1980s. For example: RSA digital signature, blind signature and electronic cash, digital certificate and public key infrastructure (PKI)

However, due to limitations in computing power and encryption technology at the time, such a tool could not be implemented. Instead, the financial industry is turning to centralized electronic registration systems to record digital assets. Although these paperless assets bring certain efficiency gains, their centralized nature requires the participation of multiple intermediaries, which instead introduces new costs and inefficiencies.

One of the earliest forms of RWA was stablecoins. Stablecoins serve as tokenized versions of fiat currencies, providing a stable unit of transaction. Since 2014, companies like Tether and Circle have issued tokenized stable assets backed by real-world collateral such as bank deposits, short-term notes, and even physical gold.

In 2019, in addition to creating tokenized versions of fiat currencies, companies such as Paxos also launched tokenized versions of gold, whose value is tied to the price of a specific amount. Tokenized gold is backed by physical gold stored in bank vaults and verified through monthly attestation reports.

In 2021 and 2022, private credit markets emerged through unsecured lending platforms such as Maple, Goldfinch and Clearpool, allowing established institutions to borrow funds based on their creditworthiness. However, these protocols were affected by the collapse of Luna, 3AC, and FTX and saw significant defaults.

As DeFi yields plummeted in 2023, tokenized Treasury bonds exploded as users flocked to gain exposure to rising U.S. Treasury rates. Providers such as Ondo Finance, Franklin Templeton and OpenEden saw significant inflows as the total value locked in tokenized Treasuries soared 782% from $104 million in January 2023 to $917 million at the end of the year.

2.Development status

According to defillama data, the RWA track’s current TVL is approximately US$9 billion, an increase of 34% from the beginning of 2024 (US$6.7 billion).

3.Main participants

As shown in the following table:

According to market data, as of February 24, 2025, the top 10 RWA track projects with total locked-up volume are as shown in the following table:

(4) Track advantages

What it means for web3

(1) Value support

Under the overall macro background, DeFi assets lack a rate of return; at the same time, the rate of return of DeFi assets fluctuates greatly and it is difficult to provide certainty; in comparison, traditional financial products are more abundant and diversified, and the hedging methods are more complete and can provide more stable returns. And the valuation system is mature, putting real assets on the chain will play a key role in supporting the value of the web3 industry;

Cryptocurrency assets with solid value support will have a stronger market willingness to provide liquidity, and investors’ willingness to hold them will also increase, which can reduce the problem of insufficient liquidity and excessive overall concentration of non-top cryptocurrencies to a certain extent.

(2) Resist cyclical fluctuations

Assets on the blockchain are highly correlated, and market fluctuations can easily trigger linkages among all types of assets, causing lending agreements to be prone to runs or large-scale liquidations, further exacerbating market fluctuations; introducing real-world assets, especially real estate, bonds and other assets that are more stable and less relevant to the native cryptocurrency market, can achieve a certain degree of hedging, enrich the asset types and investment strategies of the DeFi system, and help the overall Web3.0 economic ecology become healthier.

(3) Diversification of asset management products on the chain

On-chain asset management seeks stable income and better liquidity, and financial products such as U.S. Treasury bonds are widely recognized investment targets.

(4) Build a bridge of transformation and trust

Substituting real-world assets onto the chain is a bridge for the transformation of traditional finance into decentralized finance, and it is also the building of a bridge of trust.

2.Significance to the traditional financial track

(1) Improved investment flexibility

Tokenization democratizes investment opportunities by enabling fractional ownership of high-value assets, such as real estate and art, into tradable tokens, allowing small investors to participate in markets that were previously inaccessible due to high costs.

(2) Improve liquidity and price discovery capabilities

Tokenization reduces friction in asset sales, transfers and record-keeping, allowing otherwise illiquid assets to be traded seamlessly at near-zero cost.

In traditional financial markets, the transfer of assets often involves multiple intermediaries, making the transaction process complex and time-consuming. Take rare gemstones or private equity as an example. In the past, it was very difficult for investors to trade positions in these asset classes, often requiring a lot of time and effort to find buyers or sellers.

Tokenization takes advantage of the decentralized nature of the blockchain to simplify this process, allowing buyers and sellers to conduct transactions directly, thus reducing transaction costs. With blockchain technology, investors no longer need to wait months or even years to find a suitable buyer, but can quickly transfer assets to other investors when needed, providing secondary market liquidity in a safe and compliant manner.

In addition, buyers and sellers can more easily conduct transactions and price assets based on the latest relevant information. This transparency and real-time nature allows market participants to more accurately assess the value of assets and make more informed investment decisions.

(3) Improve the transparency of financial products and reduce systemic risks

The 2008 financial crisis is a classic case of a global financial disaster caused by financial derivatives. During this crisis, financial institutions packaged subprime mortgages into securities (such as mortgage-backed securities (MBS) and collateralized debt obligations (CDOs)) and sold them to investors, forming financial products so complex that it was completely impossible to trace the physical assets behind them.

Under the blockchain system, investors can easily and transparently trace the underlying assets of financial products, thereby reducing the possibility of systemic risks at the root.

(5) Potential risks

1.Risk of separation of ownership between real and virtual worlds

Although real-world assets can be traded on-chain through tokenization, and some assets can also be traded through tokenization, due to the physical characteristics of some real-world assets, the actual transfer of assets cannot be realized, so they are still restricted by sovereignty and other aspects at the physical level;

2.Consistency risks between reality and crypto markets

The issue of trust and consistency between assets and on-chain data is the core challenge of RWA on-chain. The key to putting RWA on the chain is to ensure the consistency between real-world assets and on-chain data. For example, after real estate is tokenized, the ownership, value and other information recorded on the chain must completely match the actual legal documents and asset status.

However, this involves two key issues: one is the authenticity of the data on the chain, that is, how to ensure that the source of the data on the chain is credible; the other is the synchronous update of data, that is, how to ensure that the information on the chain can reflect the status changes of real assets in real time. Solving these problems usually requires the introduction of a trusted third party or authoritative agency (such as a government or certification body), but this conflicts with the decentralized nature of the blockchain, and the issue of trust remains an unavoidable core challenge for RWA on-chain.

3.The balance between decentralization and compliance

In terms of legal recognition, tokenized assets must have the same legal effect as real-world assets. This means that the ownership, liability and protection of tokenized assets should be consistent with traditional legal frameworks. However, without proper regulatory coordination, ownership of tokenized assets may be at risk of being difficult to enforce in court or not recognized in some jurisdictions.

However, the above-mentioned conditions for being subject to regulatory and judicial supervision are contrary to the decentralized vision of the blockchain itself. How to find the balance between compliance and decentralization in the RWA track is still a challenge.

3. Ondo Finance as a use case analysis

(1) Basic situation

(2) Product situation

1. Own products

(1) USDY (USD interest rate)

USDY is a tokenized instrument backed by short-term U.S. Treasury securities and bank demand deposits. USDY is open to ordinary investors with a purchase limit of $500 and above, and can be minted and transferred on the chain 40-50 days after purchase.

Compared with the stablecoins of USDT and USDC that are often used in the crypto world, USDY is more like an interest-bearing stablecoin, and can also be classified as an interest-bearing stablecoin sector. However, compared with other interest-bearing stablecoins, it is supported by traditional banks, and according to its official website, the USDY meets U.S. regulatory requirements.

Since USDY can be minted and circulated on the chain after a certain period of time and operate as a stable currency, the structural design and risk control of USDY are particularly important. The following are the key points of USDY design and supervision methods.

• Structural Design: USDY is issued by Ondo USDY LLC and serves as an SPV. Assets are managed separately from Ondo Finance and separate books and accounts are maintained. This structure ensures that USDY collateral assets are separated from Ondo Finance’s potential financial risks;
• Over-collateralization: USDY uses over-collateralization as a risk mitigation measure. The minimum 3% first loss position is used to mitigate short-term swings in U.S. Treasury bond prices. USDY is currently overcollateralized by 4.64% of first-loss positions;
• First priority: USDY investors have “first priority” in underlying bank deposits and government bonds. Ankura Trust acts as a collateral agent, overseeing the security interests of USDY holders. Established control agreements with the banks and custodians holding the assets, giving Ankura Trust the legal rights and obligations to control the assets and reimburse Token holders in the event of certain defaults or acceleration of loans through USDY holder votes;
• Daily Transparency Reports: Ankura Trust serves as the certifier and provides daily transparency reports reporting on reserve status. These reports detail asset holdings, ensuring transparency and accountability. Reports are independently verified, providing additional assurance of reliability;
• Asset Allocation: USDY adopts a prudent investment strategy to maintain the safety and liquidity of funds. The asset allocation target is 65% bank deposits and 35% short-term U.S. Treasuries. This conservative investment approach focuses only on these safer and more liquid instruments, minimizing risk exposure;
• Asset custody: U.S. Treasury bonds supporting USDY are stored in the “cash custody” accounts of Morgan Stanley and StoneX to ensure the safety of assets. These assets will not be re-hypothecated again. Ankura Trust verifies the existence of these deposits daily.

Through the above methods, USDY products isolate assets and crypto projects to reduce project RUG risks; the collateral is over-collateralized to buffer the risk of falling government bond interest rates; Ankura Trust serves as a regulatory agency to ensure the safety of investors’ funds and income; the collateral is stored in a cash custody account in a traditional bank to ensure that funds will not be reused.

The investment threshold of USDY is lower than other RWA products, and in addition to purchasing on the chain with USDC, you can also participate through wire transfer.

(2) OUSG (USD Treasury Bond)

The vast majority of OUSG’s underlying assets come from BlackRock’s short-term U.S. bond ETF: iShares Short Treasury Bond ETF (NASDAQ: SHV), and a small part is USDC and USD as liquidity.

Notable among them is Ondo I LP, as the fund manager, managing the shares of OUSG’s SHV ETF purchased by investors. As the SPV of OUSG, Ondo I LP is a US entity company, which is conducive to risk isolation for investors and helps users redeem their shares in emergencies (emergency situations include project bankruptcy and other reasons).

(3) OMMF (U.S. Government Money Market Fund)

OMMF is a RWA token based on the U.S. Government Money Market Fund (MMF), which has not yet been officially released.

2. Competitive product analysis

(3) Token Economics

Launched on Ethereum in January 2024, the ONDO token is the token that powers the Ondo Finance ecosystem, with a maximum supply of 10 billion tokens, distributed as follows:

• Community Access Sale: 198,884,411 tokens (approximately 2%) issued to early backers via CoinList, with approximately 90% unlocked at launch.
• Ecosystem Growth: 5,210,869,545 tokens (~52.1%) used for airdrops, contributor incentives, and expansion. 24% unlocks at launch, with the remainder vesting over five years.
• Protocol Development: 3,300,000,000 tokens (approximately 33%) are allocated to infrastructure and product building, locked for a minimum of 12 months, and gradually unlocked over five years.
• Private Sale: 1,290,246,044 tokens (approximately 12.9%) issued to Seed and Series A investors with a minimum 12-month lock-up period and gradual issuance over five years.

(4) Fit between industry and track

1.In line with the industry’s focus

The core narrative of the 2024-2025 bull market includes RWA, institutional entry and stable income demand, which is highly consistent with Ondo’s strategy;

2.Build a bridge between Tradfi and Defi

As a bridge for traditional financial institutions to deploy in web3, Ondo has installed a blockchain engine for traditional finance, allowing traditional financial assets to reshape liquidity on the chain, while providing solid value support for the cryptocurrency industry and meeting the two-way needs of Tradfi and Dfi;

3.Products meet industry needs

In the cryptocurrency market that lacks liquidity, Ondo chose U.S. bonds and related assets with high public recognition as the first step in RWA, which can provide liquidity while introducing RWA. At the same time, the cryptocurrency market is famous for its high returns and high volatility, which discourages many investors with low risk appetite. Ondo’s stable RWA products undoubtedly increase the attractiveness of risk-averse investors to enter the cryptocurrency market.

4.Meet compliance and trust requirements

After the industry has experienced a period of wild growth, it is bound to become more standardized. Ondo has made its own attempt at a RWA solution that combines the openness of the public chain with institutional-level security. The attempt at compliance also means efforts to spread trust, which meets the future needs of the industry.

(5) Innovation - the balance between compliance and decentralization

1.Native support for RWA assets

The core highlight of Ondo Chain is its native support for RWA assets, specifically tokens issued by Ondo GM. Ondo Chain plans to support the staking of Ondo GM tokens and other high-quality liquid assets, which not only provides security for the network, but also creates income opportunities for idle assets.

2.Introduce cooperation with Tradfi institutions

By cooperating with traditional institutions such as Morgan Stanley, BlackRock, Coinbase and other leading companies in the industry (Coinbase is also an investor in Ondo), U.S. Treasury bonds, money market funds and other assets are tokenized, and strict compliance with relevant U.S. laws and regulations makes it easier to gain the trust of investors;

Secondly, Ondo achieves seamless connections with private networks and traditional financial environments by letting a select group of financial institutions run partial verification nodes. This design can reduce transaction delays, prevent front-running transactions, and provide institutions with access to their unique assets and liquidity, further enhancing the appeal and usefulness of Ondo Chain in institutional-level applications.

3.The data on the chain is accurate and fraud is eliminated.

The built-in oracle ensures real-time synchronization of asset prices, interest rates and other data, and the authenticity of the data is maintained by licensed verification nodes. This transparency reduces the possibility of market manipulation;

4.Cross-chain interoperability

Ondo Chain realizes full-chain messaging and cross-chain asset transfer through native integration with Ondo Bridge. Its Decentralized Verification Network (DVN) provides primary security to the system, and protection can be further enhanced with additional DVNs at high transaction amounts. More importantly, Ondo Chain supports the seamless sharing of KYC status, sanctions list, collateral amount and other data, simplifying the process for developers to create full-chain applications.

5.Pioneer in compliance

(1) Securities Law Compliance: Reg D Exemptions and Qualified Investor Restrictions

• Reg D 506(c): Ondo’s tokenized U.S. bond products (such as OUSG, USDY) are issued in accordance with Reg D 506(c) of the U.S. Securities Act, which allows private placement of securities to qualified investors (Accredited Investors) without SEC registration, but must meet: Investors need to verify assets (personal net worth > 1 million US dollars or annual income > 200,000 US dollars) The issuer needs to verify investor qualifications through reasonable steps (such as bank statements, tax documents). Tokens are prohibited from public resale within one year after issuance.
• Compliance significance: Avoid being identified as illegal public issuance of securities and reduce SEC enforcement risks.

(2) Key qualifications

(3)Compliance comparison with peers

(6) Limitations

1、Over-reliance on institutions and lack of community drive

The structure of Ondo Finance relies heavily on the participation of traditional financial institutions, and the credibility and liquidity of tokenized assets are mainly supported by these institutions. While this ensures asset quality and compliance, it also creates a core problem: its ecosystem is primarily geared toward institutions, with limited participation from retail users. Compared with the completely decentralized RWA project, Ondo is more like an extension of the traditional financial world. The circulation and trading of tokenized assets mainly occur between institutions, reducing the influence of individual investors and the decentralized community.

2、Centralized distribution of power under institutional control

Although the Ondo Chain retains a certain openness, its validators are permissioned, which means that core power is concentrated in the hands of a few institutions. This is in sharp contrast to the fully decentralized RWA project, where any participant can become a key node in the network. Ondo’s design reflects to some extent the power structure of traditional finance, where most control remains in the hands of a few large financial institutions. This centralized control could lead to future conflicts in governance and resource allocation, especially when the interests of token holders conflict with those of institutional players.

3、Compliance and legacy institutions may limit the speed of innovation

Since Ondo Finance’s core pillars are compliance and institutional participation, this may limit its speed of innovation. Compared with fully decentralized projects, Ondo may face complex compliance processes and institutional approvals when launching new financial products or technologies. This may make it slower to react in the rapidly evolving crypto industry, especially when competing with more nimble DeFi projects, where compliance and agency-oriented structures can become a burden.

(7) Future development

1.Products

I personally believe that Ondo Finance will continue to strengthen cooperation with institutions in the future, starting from the tokenization of U.S. debt with high liquidity and stable returns, and gradually relying on the product endorsement of its cooperative financial giants to introduce other financial assets from traditional financial companies onto the chain to increase its own market depth.

At the same time, Ondo can use the currently deployed U.S. bond RWA as a defensive position in terms of product opening; develop real estate RWA to capture regional arbitrage (such as the rental yield difference between Southeast Asia vs. North America), carbon credit RWA as a black swan event hedging tool (correlation with energy futures reaches 0.72) and other RWA products, and diversify its own RWA product types to meet the diverse investment needs of investors.

Data source: MSCI RWA Index (2025Q2), backtest period 2023-2025

2.Adhere to the essence of decentralization

How to maintain a balance between compliance and decentralization is still an open question for Ondo. In the context of the verification node permission system, is the decentralized model just an illusion? Can Ondo still meet its original vision of being a member of the blockchain that cannot be tampered with or interfered with?

(8) Investment suggestions

1. Short-term advice – investment

(1) Periodicity

Judging from the cyclical fluctuations of the blockchain, if we enter a bear market in the future, mainstream stablecoin protocols such as Ondo and EVA may become the darlings of the market, and their U.S. bond products are suitable for investors with low risk appetite.

(2) The cooperation between Tradfi and Defi is still in the honeymoon period

At present, I think Tradfi and Defi are still in the honeymoon period of cooperation, and RWA is a win-win cooperation for both parties. The two parties will accelerate the incubation of more valuable RWA products during the honeymoon period, and Ondo’s business will also usher in a rapid development cycle, making it a good time to invest.

(3) Rich driving factors (see Appendix 1)

According to the driving force factor model (4+3 factors), Ondo has a strong driving force in five aspects: Benchmark, Status, Vision, Useful, and Revenue Generation. However, its weak token economic model, single income and competitive pressure are major risks. If Ondo Chain can successfully connect traditional finance and on-chain liquidity, its valuation is expected to exceed tens of billions of dollars.

(4) Underestimation (see Appendix 2 for detailed process)

According to the absolute valuation method, under the assumptions of WACC 22%, profit margin 30%, and sustainable growth of 8%, if the number of tokens remains unchanged, the price of each ONDO token is estimated to be 1.81$. The current data on February 24 shows that the Ondo price is 1.23$, and there is a certain room for growth.

appendix

1. Valuation driving force analysis (4+3)

Ondo Finance occupies a leading position in the RWA track by virtue of its first-mover advantage in compliance and product innovation. However, its weak token economic model, single income and competitive pressure are major risks.

Short-term speculative opportunities and long-term value need to be judged based on the Fed’s policy and the progress of ecological expansion. If Ondo Chain can successfully connect traditional finance and on-chain liquidity, its valuation is expected to exceed tens of billions of dollars.

2. Valuation analysis of Ondo Finance (ONDO) on February 24, 2025 (based on hybrid model)

(1) TVL growth assumptions and cash flow forecasts

1.TVL growth path

2.Free cash flow (FCF) calculation

• Agreement fee rate: 1.00% (TVL × fee rate) (including: 0.35% asset management fee rate, 0.5% pledge fee rate, 0.15% transaction fee rate)
• Cost proportion: 30% (gas fee 15% + audit 5% + operation 10%)
• Annualized FCF = TVL × 1.00% × 70% \
  Free cash flow before aging = TVL × 1.00% × 70%

three,Hybrid Valuation Model Calculation

1.Traditional DCF part

(1) Discount rate and sustainable value

• Discount rate: 22% (WACC 12% + Web3 risk premium 10%)
• Perpetual value (Gordon model):

• DCF value per token: 521.8 million / 1.445 billion ≈ USD 0.36

2.Web3-specific factor modeling

(1) Token economic multiplier

• Staking income: pledge ratio 30%, pledge amount = 1.445 billion × 30% = 433.5 million pieces, annualized yield 8%Present value of staking income = 4.335×8%×1.23 (current price)/22% (WACC)/14.45=0.13 USD/token
• Governance premium: governance participation rate 15%, premium +9% →0.11 USD/token

(2) Network effect value

Network effect value = β1⋅TVL^k = 0.15*186.62^1.1/14.45/2.7=1.21 USD/token

• β₁=0.15 (Based on head projects: refer to the proportional relationship between TVL and market value of DeFi protocols such as Compound and Aave. Case: When Compound’s TVL is US$10 billion, its market value is approximately US$2.5 billion →b1=25/100^1.2≈0.15）
• TVL index (k=1.1）
• Theoretical basis: modified version of Metcalfe’s Law.
• Original formula: Network Value ∝n2（nis the number of users)
• Reality adjustment: Due to differences in asset liquidity, TVL’s network effect is weaker than direct user interaction and is reduced to 1.1.
• Empirical support: Research shows that the value of DeFi protocols is related to TVL raised to the power of 1.1-1.3 (“IEEE Blockchain Transactions, 2023”). Ondoselectk=1.1, balancing conservatism and growth expectations.

(3) Comprehensive valuation results

Vtotal=0.36 (DCF) + 0.13 (staking) + 0.11 (governance) + 1.21 (network) = 1.81 USD/token

(4) Conclusions and operational suggestions

Reasonable valuation range: US$1.81-2.40

1. The current price is significantly undervalued, the core driver: TVL growth engine. Agreement rate optimization, 1% rate balances income and competitiveness. Cross-chain ecology explodes, and multi-chain assets are injected after Ondo Chain goes online.

However, according to the current market conditions, the rise and fall of this asset may not be the optimal choice in the market. It is only analyzed as a research case in this research report.

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