Ondo Finance To Launch Tokenized Product On Layer 2 Polygon Network

Key Points:

• Ondo Finance, which already provides tokenized US Treasurys on the Ethereum blockchain, has extended its offering to the Polygon network.
• The OUSG token, a tokenized version of BlackRock’s short-term US government bond ETF, has been launched.
• Investors are increasingly interested in tokenized versions of classic financial products like US Treasury bills.

With the assistance of Polygon Labs, Ondo Finance, an Ethereum-based asset management, is expanding its market in order to foster more acceptance of tokenized financial products inside DeFi.

By expanding to Polygon, Ondo hopes to make its first foray outside of the Ethereum mainnet after being the first company to tokenize US Treasury bonds in February. As the Ethereum foundation layer approaches capacity, transaction fees rise, and Ondo claims that this recent change would reduce those costs.

According to a news statement released Thursday, the company has launched its OUSG token, a tokenized version of BlackRock‘s short-term US government bond exchange-traded fund (ETF), natively on Polygon as part of a “strategic relationship.”

Ondo President and Chief Operational Officer Justin Schmidt stated in an interview that the company aims to introduce its future yield-generating stablecoin alternative, OMMF, as well as the Ondo-developed decentralized lending marketplace Flux Finance, to Polygon pending governance clearance.

The development coincides with an increase in investor interest in tokenized versions of conventional financial products like US Treasurys since bond yields have outpaced rates in decentralized finance (DeFi) lending markets.

The Federal Reserve and other central banks have been raising interest rates to combat inflation for more than a year. This has also lifted Treasury rates, with yields on short-term bonds such as the 2-year note jumping from 1.9% when the rate rises began in March of last year to over 5% today.

A tokenized asset is a blockchain-based proof of ownership with the same underlying features as the real-world counterpart, such as yield. A stablecoin, on the other hand, is a fully digital token that derives its value from its peg to a fiat currency or commodity in order to keep its volatility under control.

According to Dune Analytics, Ondo now has the biggest market share of tokenized securities, with over $138.65 million in market value. Others, such as Franklin Templeton and JP Morgan, have also taken holdings in this market.

Since its launch in January, Ondo Finance’s OUSG token has claimed a large piece of the $600 million market for tokenized Treasurys. Flux Finance, created by Ondo’s team and administered by a decentralized autonomous organization (DAO) based on community votes, allows investors to borrow money by offering OUSG as collateral. According to DefiLlama, the platform has a total worth of $44 million.

After launching its tokenized Franklin OnChain U.S. Government Money Fund (FOBXX) on Stellar in 2021, asset management firm Franklin Templeton made it accessible on Polygon.

Polygon is an Ethereum layer-2 scaling network that lets users transact more cheaply and quickly than on the mainnet, which might clog during periods of heavy blockchain activity while still depending on Ethereum’s security.

On June 15, the world’s biggest asset management, BlackRock, applied to establish a Bitcoin spot market exchange-traded fund. More applications followed, including those from Fidelity, Valkyrie, and Invesco, among others. BlackRock CEO Larry Fink recently compared Bitcoin to “digitalizing gold,” a dramatic change from his previously negative views.

Ondo, which invests in BlackRock-managed Treasury ETFs, looks to be going against the mainstream. A Bitcoin ETF is a company that takes a new technology like Bitcoin and wraps it in a more conventional wrapper that is recognizable to the industry. In Ondo’s example, the process is reversed, with a conventional asset transformed into a modern tokenized version.

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