Understanding Decentralized Investment Bank in One Article: Ondo Finance

The development of DeFi in recent years has made it possible to offer certain financial services to marginal investors almost for free. Rather than relying on intermediaries such as payment agents, transfer agents, and centralized clearing and settlement depositories, investors can rely on code to automate the execution of the terms and conditions of financial agreements.

Recently, the DeFi project Ondo Finance has once again gained the attention of investors and users.

On April 27, Ondo Finance announced that it has secured a $20 million Series A round led by Founders Fund, the venture capital firm founded by Peter Thiel, and Pantera Capital to accelerate the adoption of DeFi by mainstream investors. The funding will allow Ondo to build its team and support new product launches, including its multi-chain expansion. Strategic investors joining the round also include Coinbase Ventures, GoldenTree, Wintermute, Steel Perlot (Michelle Ritter / Eric Schmidt), Tiger Global and Flow Traders. Prior to this, Ondo Finance received a $4 million seed round led by Pantera Capital.

Ondo Finance is an open, permissionless, decentralized investment bank. Ondo’s core business is to serve and connect various stakeholders in the emerging DeFi ecosystem – including DAOs and a growing number of institutional and mainstream retail investors – through full-chain services.

Ondo’s business model is to intermediary and match the supply and demand of funds, much like a traditional investment bank. However, Ondo differs from traditional investment banks in several important ways:

  • Ondo creates financial products from DeFi building blocks, which means they execute on open source code rather than opaque prose legal agreements. This avoids the need for back-office personnel and countless intermediaries, and enables Ondo to provide its services with little marginal cost, making them accessible to even small investors.
  • Ondo’s products are interoperable with and often sit on top of existing DeFi products, enabling frictionless value transfer.
  • Ondo will be governed as a DAO and owned by a distributed set of participants, including many of its users. As a DAO, Ondo will have an incentive system that enables anyone to create a product or service or otherwise add value to the Ondo ecosystem and be rewarded. However, DAOs still curate products to protect users.
  • Ondo has no minimum investment. Retail can access the same products and services as institutions.

Specifically, Ondo Finance raises liquidity pair assets from users, and then takes the assets to Uniswap and Sushi to provide liquidity to earn income. Users can choose to deposit one of these assets to earn fixed income or variable income. Fixed shares provide liquidity with a stable yield with reduced downside risk, and variable shares provide liquidity providers with leveraged exposure to the returns and risks of the collateral invested. ‌

Currently, Ondo Finance has rapidly expanded into other use cases, such as its Liquidity-as-a-Service (LaaS) product, which matches the DAO with underwriters (currently stablecoin issuers) to provide liquidity to the DAO’s native token in order to Its users can easily trade their tokens on decentralized exchanges. Ondo has partnered with more than a dozen DAOs including Terra, Frax, and Fei, and has seen over $200 million in liquidity deposited into its protocol.

With its rapid organic community growth and product adoption, Ondo is ready to issue its upcoming ONDO token and associated DAO to begin distributed governance . In the coming months, Ondo also plans to launch several additional products designed to increase the breadth, usefulness and accessibility of its offerings. These include a vault for bundling the yields of algorithmic stablecoins, and a vault for aggregating yields from different blockchains (currently only Ethereum-based protocols are supported, and Layer2 networks and other public chains will be integrated in the future).

Also, to increase demand, Ondo is expanding the compatibility of its product with other protocols such as Curve and Convex. To expand the capital supply, Ondo seeks to make its product more accessible through integrations with cryptocurrency exchanges, web2 fintech companies and custodians.

Currently, Ondo has completed three audits by Quantstamp, Peckshield and Certik.

ONDO token

The initial total supply of ONDO is 10 billion. Most of the tokens will be held by the Ondo DAO itself. Teams and communities can experiment with various distribution mechanisms (e.g. sales, airdrops, liquidity mining) determined by DAO governance.

ONDO investor allocation:

Coinlist Part 1: ~1% (1 year lock + 18 month release)
Coinlist Part 2: ~4% (1 year lock + 6 month release)
Seed investors ($4M equity investment): <7 % (1 year lock + 24 months release)
Series A investors: <7% (1 year lock + 24 months release)
Ondo core team members and service providers are also subject to at least 1 year lock and subsequent 24 months release ( 3 years total lock-in).

Ondo Finance will start the sale of ONDO Tokens on CoinList at 1:00 on May 13th, Beijing time . The registration deadline is at 20:00 on May 9th, Beijing time. The sales supply is 400 million, the unit price is 0.055 US dollars, and the minimum participation is 100 USD, up to $2,000.

According to Coinlist, the main reasons for being excited about Ondo Finance are: the leader in promoting DEX liquidity:  Ondo is a pioneer in the field of liquidity as a service, having established real-time partnerships with more than 10 DAOs and obtained 4 stablecoins Commitments from issuers (FEI, FRAX, UST, and RAI) to $100 million+ in new liquidity and related incentives. By matching DAOs (capital demand) with underwriters (capital supply) to provide liquidity for their native tokens, users can easily trade these tokens on decentralized exchanges. Rapid organic growth:  Ondo has not established any liquidity mining activities or any other incentive program to stimulate liquidity in the protocol, making it one of the largest TVL protocols on Ethereum with no incentives. Bridging DeFi and Traditional Finance:  Ondo makes DeFi more accessible and valuable to traditional finance by aggregating traditional DeFi protocols and using traditional financial techniques to repackage their risks into risk/reward profiles.

How to use Ondo 

link wallet

Log in to the official website: https://ondo.finance/ , click Connect, select the wallet on the page to link, if the user does not have a wallet supported on the Ondo official website, please register by yourself

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Click on Eexplore Vaults to enter the vault

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Select Open in Markets (Open means the liquidity pair that is open for subscription), then select the liquidity trading pair to invest in, click Deposit, and choose to invest in fixed-income assets or variable-income assets.

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Risk Analysis

Fixed Income Returns :

Users who subscribe for fixed income have the priority to distribute the mature investment. In extreme cases, if the price of the assets on the variable income side drops sharply, the investment in fixed income may also suffer losses or even return to zero.

In fact, as long as there is no extreme situation where the price drops by 90%, the loss of fixed income is relatively small. When the asset price at the variable income end drops by 90%, the fixed income end investment will suffer a large loss, and in other cases, the fixed investment income agreed in advance can basically be obtained. In the official investment return table, fixed income depositors will receive a target return of 10% (relative to USD) unless fee + income income is low and ETH returns are very low.

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Variable income returns :

Investors with variable returns will suffer more severe losses with low fees + low yields and high negative ETH returns. When variable income investors contribute ETH, they are actually borrowing USD to gain leveraged exposure to LP tokens derived from 50% USD and 50% ETH, reducing losses relative to ETH in the event of a drop in ETH. As the price of ETH rises, at least half of the economic losses can usually be recovered.

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Posted by:CoinYuppie,Reprinted with attribution to:https://coinyuppie.com/understanding-decentralized-investment-bank-in-one-article-ondo-finance/
Coinyuppie is an open information publishing platform, all information provided is not related to the views and positions of coinyuppie, and does not constitute any investment and financial advice. Users are expected to carefully screen and prevent risks.

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