The Real-World Asset (RWA) Implementation: Ondo Finance's On-Chain Bond Experiment and Institutional Innovation

The Paradigm Evolution and Real Structure of RWA

1.1 The Three-Stage Evolution of RWA

The evolution of RWA is actually a slow transformation driven by the interplay of the blockchain capability stack, financial market demand, and regulatory environment. A brief review of three stages:

Phase One: STO Experimental Period (2015–2020) Before the rise of Ethereum, many early attempts involved “tokenizing” assets such as stocks, bonds, and real estate rights into security tokens (STO). Traditional securities were mapped onto the blockchain through legal contracts. Unfortunately, the dilemma of this phase was that the on-chain liquidity infrastructure was not yet mature, Oracle awareness was weak, cross-chain mechanisms were lacking, and secondary markets were difficult to match. As a result, more assets ultimately traded in traditional markets, with on-chain representation being merely a formality.

Phase Two: Yield-Generating Stablecoins / Tokenized Government Bonds Phase (2020–2023) The DeFi ecosystem matures, and stablecoins become the primary entry point for capital into the blockchain. As the credit crisis in the crypto industry unfolds, more and more capital seeks stable, low-risk returns. U.S. Treasury / government bond-like assets are viewed as ideal targets for credit backing and are gradually being tokenized, either incorporated into the asset side of stablecoins or as independent yield-generating tokens. In this phase, the mainstream expression of RWA is no longer a direct mapping to equity-type STOs, but rather, utilizing U.S. Treasury reserves, bringing low-risk returns into the blockchain ecosystem in the form of stablecoins or dedicated tokens.

Stage Three (Current and Future): Structured Credit + High-Performance Chains and Cross-Chain Liquidity. By 2023-2025, driven by several factors, RWA begins to enter a more complex phase. The tokenization scale of US Treasury bonds expands rapidly, and new challenges arise regarding how to support credit-type assets, how to circulate efficiently across multiple chains, how to reduce cross-chain friction, and how to provide infrastructure support with high-performance public chains. In this stage, RWA is not only about assets being on-chain but also a combination of “liquid assets + structured products + composable financial primitives.”

This paradigm shift means that blockchain is no longer just a simple ledger carrier, but has the potential to become mainstream financial infrastructure.

1.2 Current Asset Distribution Pattern of RWA

As of October 2025, according to CoinGecko's “RWA Report 2024” and data from the RWA.xyz platform, the current asset end of RWA is concentrated on a few standardized and highly liquid asset types. Here are several key categories:

Private Credit / Private Placement Bonds: This is the largest segment in the current RWA ecosystem, with a total scale of about $17.4 billion, accounting for over 50%. This category includes institutional credit pools, corporate receivables, structured debt products, etc., with on-chain yields typically ranging from 8% to 15% [1].

US Treasury / Government Bond Tokenization / Yield-bearing Stablecoin: Government bonds remain the most trusted and compliant type of RWA asset, with a total scale of approximately 8.3 billion dollars. The core logic in this field is “supporting on-chain interest rates with government bonds,” with typical representatives including Ondo's OUSG and USDY[2], Franklin Templeton's BENJI fund, BlackRock's BUIDL fund, etc.

Commodities / Gold Tokenization: Approximately $3.1 billion in scale, mainly focusing on gold tokens PAXG and XAUT, serving as uncorrelated hedging assets in a cryptocurrency portfolio. Given that gold has a natural value anchoring and a global pricing system, this type of asset performs robustly during market downturns.

Institutional Alternative Funds / Private Fund Tokenization: Approximately $2.8 billion in scale, representing institutional funds being brought on-chain through SPV structures, such as the JAAA fund managed by Janus Henderson and the BCAP fund managed by Blockchain Capital, among others. Such products enhance the transparency and liquidity of private funds, serving as an important bridge for traditional asset management institutions to enter DeFi.

Non-US Government Debt: Approximately 1 billion USD in scale, mainly involving tokenized short-term government bonds or notes in Europe and emerging markets, still in the pilot stage. Related products are mostly issued by TradFi funds through qualified investor channels.

Tokenization of traditional stocks / ETFs: approximately $680 million scale, currently in the exploratory phase. Companies like Ondo, Securitize, and Backed Finance have launched corresponding tokenized products for US stocks or ETFs, opening a new channel for “equity-type assets” in the on-chain capital market. However, due to constraints related to compliance, liquidity, and valuation synchronization, the current scale remains relatively small.

Typical Case of U.S. Fixed Income RWA: In-Depth Deconstruction of Ondo Finance

In the US Treasury RWA sector, Ondo Finance is one of the most representative and thoroughly implemented cases.

2.1 Product Logic: Why Can National Bonds be “Alive” on the Blockchain

First, let's see how Ondo builds a Treasury Tokenize product that combines low risk and liquidity.

2.1.1 Asset Allocation and Portfolio Strategy

Ondo currently offers tokenized financial products including the tokenized US Treasury fund Short-Term US Government Treasuries ($OUSG) and the interest-bearing stablecoin Ondo US Dollar Yield Token ($USDY).

Unlike USDY, OUSG's portfolio is primarily composed of government bonds/money market funds managed by multiple institutions, such as BlackRock's BUIDL, Franklin's FOBXX, WisdomTree's WTGXX, FundBridge's ULTRA, Fidelity's FYHXX, and some cash/USDC as a liquidity buffer. This diversified allocation reduces dependence risk on a single fund/manager. This strategy means that OUSG does not directly hold native government bonds but invests in institutionally managed, bond-based funds.

The underlying assets of USDY are primarily composed of short-term U.S. Treasury bonds and bank deposits. The bond portion is held through blockchain-based treasury tools, while the bank deposits are kept in accounts at regulated financial institutions, with an equity subordination structure set up as a risk buffer. Unlike OUSG, which indirectly holds treasury bonds through fund shares, USDY is designed to directly connect to the underlying assets in the form of interest-bearing debt, with its yield dynamically adjusted by Ondo Finance based on market interest rates.

2.1.2 Token Architecture Design: Accumulation + Rebasing + Instant Minting and Redemption

In terms of token design, both OUSG and USDY adopt two versions:

Accumulating OUSG/USDY: The net asset value of each token (NAV) increases as the earnings roll up;

Rebasing type rOUSG/rUSDY: The price is fixed at $1.00, but the system mints more tokens for holders daily based on earnings, thereby achieving profit distribution.

This dual-version design provides users (especially institutions) with more flexibility, and the official documentation clearly states that the two versions can be exchanged 1:1.

Meanwhile, these fixed-income notes support 24/7 instant minting and redemption, allowing users to instantly exchange OUSG/USDY using USDC or PYUSD. However, instant transactions have a limit, and exceeding this limit or large redemptions may trigger non-instant processing.

2.1.3 Multi-chain Deployment + Cross-chain Bridge Strategy

In order to enable OUSG to circulate across multiple ecosystems (such as Ethereum, Solana, Polygon, XRPL), Ondo has launched a cross-chain deployment and bridging solution. For example, earlier this year, Ondo collaborated with Ripple to deploy OUSG into XRPL, allowing the use of RLUSD stablecoin as a settlement asset for minting/redeeming operations [3][4]. This cross-chain layout enhances liquidity and expands the user base while providing a low-friction path for capital entry from different chains.

2.1.4 Cost Model and Revenue Distribution

Ondo sets the management fee at an annual rate of 0.15% (this is relatively conservative). The distribution of earnings (whether accumulated or Rebasing) is based on the net interest of the underlying portfolio minus costs. Minting/redeeming itself may incur very small transaction fees or slippage compensation, but the official claim states that some operations are zero-fee (such as certain minting and redeeming operations).

In summary, the key to Ondo's product logic is: using a stable, verifiable treasury bond portfolio + flexible token architecture + cross-chain supply + low fee design, to transform the traditionally safest assets into tools that can be utilized on-chain.

2.1.5 Current Actual Performance

As of October 2025, the total asset value of OUSG is approximately $792 million, with a net asset value (NAV) of about $113 per token. In the last 30 days, its secondary market monthly transfer volume is approximately $32.85 million, with a circulating supply of about 7,011,494 tokens, only about 79 holders, and approximately 12 active addresses. From this data, OUSG has already demonstrated scale effects and a compliant structure. However, at the same time, its secondary market activity is relatively low, with active addresses and the number of holders far below that of general digital asset products, reflecting that its liquidity is still primarily concentrated among a few large holders or institutions.

In contrast, USDY's performance shows a more significant expansion capability in terms of user coverage and on-chain participation. Its total asset value is approximately $691 million. The token's net value is about $1.11 per coin, with an APY of around 4.00%. More importantly, it has approximately 15,959 holders, with about 1,124 monthly active addresses and a monthly transfer volume of approximately $22.66 million. These figures clearly indicate that USDY has a broader user base and higher on-chain activity.

2.2 Technical Architecture: On-chain System and Trusted Interfaces

The product logic is just the foundation; whether it can be successfully implemented also depends on whether the technology can reliably connect off-chain assets, cross-chain mechanisms, and on-chain contracts.

2.2.1 Contract System and Permission Control

OUSG deploys standard ERC-20 or compatible security token contracts on the main chain (e.g., Ethereum), providing functions such as minting, redemption, price inquiries, and rebasing. Contract design must introduce permission controls (such as administrators, pause, minting whitelists, redemption limit management, etc.) to prevent accidental operations or abuse. To reduce risks, the contract has undergone multiple security audits, including static analysis and fuzz testing. In public information, Ondo has indicated that its contracts have audit endorsements.

2.2.2 Net Asset Value / Valuation Oracle and Transparency Mechanism

To synchronize the value of on-chain tokens with off-chain assets, a reliable and tamper-proof net value Oracle mechanism is required. Ondo delegates third-party fund administrators to access underlying asset accounts, calculate daily net values, asset portfolio situations, etc., and uploads this data on-chain through off-chain to on-chain interfaces by Oracle (mainly Pyth Network and Chainlink).

In terms of transparency, Ondo provides investors with detailed asset portfolios, daily reports, audit reports, and disclosures from asset custodians. The RWA.xyz platform shows key indicators such as the asset portfolios, number of holders, and net value of OUSG and USDY clearly and transparently.

2.2.3 Cross-chain Bridging and Arbitrage Synchronization

The market value change trend of RWA products related to government bonds on different public chains.

Source: RWA.xyz

Ondo's cross-chain design requires a bridging mechanism (locking + minting / unlocking + burning) and an arbitrage mechanism to achieve price consistency and convertibility between OUSG and USDY across chains. When the price of OUSG on a certain chain deviates from its net value, arbitrageurs can perform cross-chain redemption, transfer, and minting/redemption operations to pull back the price difference.

Cross-chain bridges are inherently high-risk areas. Therefore, Ondo has implemented multiple protective measures in practice, including multi-signature controls, exit buffers, and asset isolation. The deployment of XRPL is a representative attempt, as it achieves cross-chain minting and redemption by hosting OUSG on XRPL and using the RLUSD stablecoin as a settlement channel. This cross-chain cooperation is a core strategy for Ondo to expand its ecosystem.

2.2.4 Building Composability / Lending Integration

In order for OUSG and USDY to be truly useful in the DeFi ecosystem, Ondo has launched supporting protocols such as Flux, which allows OUSG to be used as collateral for loans to participate in liquidity mining, asset composition strategies, etc. (similar to using OUSG as a foundational asset in DeFi). This composability design allows OUSG to be more than just a “holding yield tool”; it can also participate in more complex financial operations.

In addition, Ondo announced the launch of its own base chain (Ondo Chain) in February 2025 to accommodate large-scale RWA operations.

2.3 Risk Control Mechanism: From Trust Building to Anomaly Response

Even if the product and technology are built reasonably well, if the risk control system is not sound, institutional capital will still find it difficult to enter the market. The design of Ondo in terms of risk deserves in-depth understanding.

2.3.1 Compliance, Legal Structure, and Asset Isolation

Ondo places OUSG under a regulated trust / SPV structure and regards its tokens as products compliant with U.S. securities laws, offering them to qualified investors under Reg D rules. By setting investor qualification thresholds and implementing KYC / AML checks and an address whitelist system, Ondo achieves compliance access management on-chain. The underlying assets (such as government bonds and fund shares) are held by independent custodians, and the related contracts and fund agreements clarify asset ownership and the legal rights relationship of investors, ensuring that in the event of technical or operational risks on the platform, investors can still assert their ownership of the assets and receive retroactive protection.

Traditional DeFi protocols mainly rely on smart contracts to execute fund management and profit distribution, often lacking clear legal entities and asset ownership definitions. Users have very limited recourse in the event of contract vulnerabilities, liquidation risks, or hacker attacks. This combination of “law + compliance + custody” is the biggest difference between Ondo and pure DeFi projects.

2.3.2 Transparency / Audit / Disclosure Mechanism

Ondo entrusts a third-party fund administrator to calculate the net value daily, disclose the asset portfolio details, and provide net value reports; at the same time, it hires an annual audit firm to audit the custodial assets, cash flows, reporting processes, and so on.

On the blockchain level, its contracts can publicly view mint/redeem records, token circulation data, holder address structure, etc. Platforms like RWA.xyz also display key metrics of OUSG, such as asset size, number of holders, net value changes, etc. This “dual on-chain + off-chain” transparency mechanism is the foundation for building trust [5].

OUSG Current Market Data Overview

Source: RWA.xyz

2.3.3 Redemption / Liquidity Risk Control

To avoid the impact of a run on the bank, Ondo Finance has introduced a three-layer mixed redemption design of “instant redemption limit + buffer cash pool + redemption queuing mechanism” in its on-chain treasury bond products. Regular users can operate instantly within the limit, while those exceeding the limit enter the non-instant redemption process [6].

Specifically, the Buffer Pool consists of part cash and highly liquid assets, used to meet daily redemption and sudden liquidity needs, avoiding forced sales of government bonds during market fluctuations; secondly, the “Instant Redemption Limit” mechanism is combined with the buffer pool. Users are limited to an amount that can be processed instantly for each daily or per redemption transaction. When the redemption request does not exceed this limit, the system can directly meet the exchange demand from the buffer pool or daily liquidity; if it exceeds the limit, the redemption request enters the “Non-Instant Redemption Process,” which may require waiting for the pool to reset, underlying assets to be liquidated, or queuing through the redemption queue for processing; the redemption queuing mechanism is activated when the redemption volume exceeds the limit, executing through queuing and periodic capital replenishment, balancing user experience and asset safety. This layered redemption system balances liquidity and robustness, allowing the product to maintain 24/7 minting and redemption functionality while preventing systemic risks caused by large-scale redemptions.

2.4 Institutional Participation Path: Who, How, Why

After the successful establishment of products and technologies, the most critical step is to attract institutional capital. The table below organizes the participation paths of institutional investors in the fixed income RWA sector for readers' reference.

2.4.1 Encrypted Native Institutions / DAO / Protocol Parties

This group of users is usually the first to test the waters. They hold a large amount of stablecoins but lack secure income channels. Through OUSG and USDY, users can obtain an annual compound interest yield (APY) of about 4-5%, corresponding to the short-term U.S. Treasury yield level.

DAOs, project teams, and crypto funds are willing to trust on-chain mechanisms, are familiar with contract systems, and are willing to bear the risks of smart contracts, making them the natural primary user group of Ondo.

2.4.2 Traditional Finance / Asset Management Companies / Banks

Such institutions have very high requirements for legal structure, compliance, asset custody, and operational efficiency. Ondo's path is as follows:

Reduce legal and trust barriers through an auditable, legal SPV/trust structure + KYC/compliance thresholds + compliance disclosures;

Provide API / hosting docking / batch operation and other professional service interfaces, allowing institutions to enter in a way they are familiar with;

The rates, liquidity, and leverage arbitrage costs must be sufficiently favorable (to ensure capital efficiency).

In April 2025, Ondo established a custody partnership with Copper Markets, which stated that users, including institutions, could custody OUSG and USDY through the institution. Although the specific names of the institutional users are not publicly disclosed at this time, as long as Ondo successfully attracts a few institutional users, it can create a demonstration effect and lower the “psychological barrier” for other institutions.

2.4.3 Family Office / High Net Worth / Trust / Foundation

Although this type of users is not as large as major institutions, they have the characteristics of being highly flexible, having a low risk appetite, and focusing on stable returns. They are willing to invest a portion of their capital in OUSG or USDY to obtain safe returns [7].

For this type of user, the key factors are product usability, transparent reporting, customer support, legal protection, and other detailed experiences. If Ondo can excel in these areas, it can attract these customers to become long-term holders.

2.4.4 Market Makers / Liquidity Providers / Arbitrageurs / DeFi Protocols

These capital often serve as lubricants for the market.

Market makers and arbitrageurs maintain the price peg of OUSG by taking advantage of price differences across multiple chains and trading pairs.

Liquidity providers offer OUSG / USDC pairs (or other pairings) on DEX to earn fees;

DeFi protocols will integrate OUSG into collateral / lending / strategy portfolios, expanding the use of OUSG.

To attract these ecosystem players, Ondo must ensure sufficient liquidity of OUSG, good contract compatibility, and low cross-chain costs. These participants effectively expand the composability and ecological influence of OUSG.

2.4.5 Achievements and Scale Performance

By mid-2025, Ondo's OUSG and USDY have been reported as the top three tokenized products of U.S. Treasury bonds, with token asset scales in the billion-dollar range. Its deployment on XRPL even leverages Ripple's liquidity commitment to enhance market activity [8].

Ondo has also been incorporated into the Mastercard Multi-Token Network (MTN), becoming the first integrated RWA provider to promote the use of tokens within traditional payment/financial networks. These initiatives indicate that Ondo is transitioning from the margins of DeFi to mainstream financial infrastructure link [9].

Comparative Analysis and Trend Observation: Maple, Centrifuge and Future Directions

After understanding the successful path of Ondo, we broaden our perspective to compare the strategies and risks of credit/structured RWA projects such as Maple and Centrifuge, and point out potential pathways that Ondo may learn from as well as future development trends.

3.1 Credit Buffer and Structuring: What’s Next for Ondo?

The emergence of Ondo Finance marks the stage of “standardization and institutionalization” for fixed income RWA.

However, to make RWA truly a mainstream financial infrastructure, a single type of government bond asset is not sufficient to support the depth and diversity of the market. In order to further improve the credit expansion and yield layering mechanism, Ondo must draw on the experiences of other mature RWA projects, among which the most representative are Maple Finance and Centrifuge. The former provides a reference for on-chain credit lending and risk buffering mechanisms, while the latter demonstrates the path of structured securitization and multi-layer yield distribution [12][14].

From the development logic of Maple, the core experience that Ondo can learn from is “institutional risk buffering under credit expansion.” Maple Finance's business model centers around institutional credit loans, which involves three key roles: borrowers, fund providers, and liquidity pool representatives (Pool Delegate). Borrowers are mostly crypto-native institutions, such as market makers or hedge funds, who usually obtain credit loans through under-collateralization (collateral ratio of 0-50%); fund providers deposit capital into the liquidity pool to earn interest, but the principal can only be redeemed after the loan period ends. Pool representatives act as fund managers, responsible for evaluating borrower credit and setting loan terms, and they need to pledge a certain proportion of capital (usually not less than $100,000 in USDC-MPL LP positions) to provide compensation to fund providers in case of default. This design establishes an on-chain credit guarantee logic of “interest alignment + risk sharing,” creating a dynamic balance between loan security and incentive mechanisms.

The experience of Centrifuge provides Ondo with a reference direction for a structured and composable asset securitization framework. Centrifuge's Tinlake system is based on real assets such as accounts receivable, with layered yield tokens (different risk levels), allowing investors to choose according to their risk preferences. This layering mechanism makes RWA products more flexible in risk management and allows on-chain capital to participate in asset pools of different risk levels in a modular way [11][13]. If Ondo adopts this model, it could build a structured asset module on top of the low-risk yield layer formed by OUSG and USDY. For example, in the future, products such as “OND Yield+” or “OND Structured” could be launched, using OUSG as the safety underlying, combined with layers of credit bonds or high-yield bonds to achieve multi-layer risk-return matching. This would meet the differentiated needs of institutional and retail users while also releasing higher yield potential under the premise of maintaining underlying stability [15].

Tinlake asset securitization and tokenization process diagram.

Source: Centrifuge

3.2 Trend Observation and Future Path

Based on the above comparisons and case experiences, the author summarizes the possible development paths and trends of fixed income RWA in the next 2-3 years:

Tokenization of government bonds has entered a mature stage: in the next 1-2 years, U.S. Treasury RWA will continue to expand, potentially integrating deeply with stablecoin businesses and institutional cash management, becoming one of the mainstream asset classes.

Credit expansion is steadily progressing: credit assets (high-quality notes, high-rated corporate bonds, microloans, accounts receivable, etc.) will gradually be included in the RWA system, but the expansion must be accompanied by credit buffers, insurance mechanisms, credit ratings & data introduction, and enhanced legal contracts.

Cross-chain / high-performance chains become the focus of infrastructure: As the scale of RWA grows, the demands for performance, cost, and cross-chain efficiency become higher. High-performance L1 / L2 (supporting fast confirmation, state parallelism, lightweight execution) is the next bud of industry infrastructure.

The evolution of bridging and cross-chain security mechanisms: Cross-chain bridging is an essential path for the expansion of RWA, and its security has always been a core challenge. Safer multi-signature/exit mechanisms, buffer mechanisms, and cross-chain insurance will become standard configurations.

Standardized Compliance and Industry Infrastructure Development: RWA Standard Token Specifications (such as Security Token Standards, Compliance KYC Whitelist Interfaces), Asset Custody / Auditing / Rating / Credit Reporting / Legal Services Platformization will become necessary public facilities.

Capital stratification + modular architecture: Future platforms are more likely to launch “multi-layer risk / multi-layer return” modules (security layer, credit layer, leverage layer, etc.), allowing capital with different risk preferences to find an entry point, rather than just a single risk point.

Integration of Regulatory Policies and Financial Infrastructure: In regions such as the United States, the European Union, and Hong Kong, the changing attitude of regulators towards RWA will play a decisive role. Policies such as the U.S. stablecoin bill, amendments to securities laws, and asset custody regulations will directly impact the implementation boundaries of RWA.

Conclusion

The significance of fixed income RWA goes far beyond simply “putting a traditional asset on the chain.” The practices of Ondo Finance demonstrate that true systemic significance for on-chain assetization can only be achieved when the financial rationality of product design, the security and controllability of smart contracts, the transparency and robustness of the risk framework, and the trust logic of institutional investors form a closed loop.

However, Ondo's success is just a starting point. As the tokenization of U.S. Treasury bonds matures, the core competition of RWA will shift from “whether it can be put on-chain” to “whether new liquidity structures and capital orders can be constructed after going on-chain.” Credit expansion, structured securitization, cross-chain interoperability, asset bundling, and regulatory co-construction will become the main axis of the next stage. Projects that can find a balance between technological efficiency, financial innovation, and institutional trust will have the opportunity to truly define the future financial infrastructure.