We’ve been getting a lot of questions recently about the future of the ONDO token– particularly about when it might start trading– so we wanted to provide you with an update.
As a reminder, ONDO tokens govern the Ondo DAO, which was launched on January 12, 2023. The objective for the Ondo DAO has always been to support and govern institutional-grade on-chain protocols that we believe will provide critical long-term functionality to the financial ecosystem. We believe that the merging of DeFi and TradFi is inevitable, and that protocols that effectively bring the best of these two worlds together are important catalysts for facilitating this process.
A prime example of this is Flux Finance, which the Ondo DAO governs. Flux is a first-of-its-kind lending protocol that supports both permissionless and permissioned assets. Permissioned assets are ones where the holders must be known at all times, which is a requirement for most tokenized securities. The first such asset supported by Flux is Ondo Finance’s OUSG token, which offers exposure to U.S. Treasuries. Flux allows OUSG holders to pledge their OUSG as collateral to borrow stablecoins. Conversely, and more importantly, this also allows anyone to lend into the protocol and get yield close to that on short-term U.S. Treasuries while also being over-collateralized by them.
Even with OUSG alone, Flux is off to a strong start with over $70 million in supplied assets: this makes it the seventh largest lending protocol on Ethereum and the largest in the “real world asset” space. Its tokenized loans, known as fTokens, present a uniquely attractive low risk permissionless on-chain yield, and are in the process of being adopted as collateral elsewhere in DeFi. For instance, the Aave DAO recently passed a temperature check to support fUSDC (i.e. what you get when you lend USDC into Flux) as collateral in Aave v3. Flux is starting to serve as a bridge between on-chain and off-chain yields for the rest of DeFi.
It should be noted that while $70 million is a great start, we believe that the market for Treasury collateralized lending and borrowing can get much bigger. As a point of comparison, the overnight reverse repo market - a traditional financial market where Treasuries are effectively borrowed and lent overnight - sees about $2.28 trillion in transaction volume a day as of our writing this.
The CoinList Sale and ONDO Lock-Ups
In May 2022, the ONDO token was distributed through CoinList to over 18,000 purchasers, with two types of lock-ups implemented:
Individual lock-ups: These lock-ups are specific to the tokens distributed, with the vast majority of tokens sold through CoinList gradually releasing from their respective lock-ups over a six-month period starting from June 1, 2023. This approach ensures a measured release of tokens, supporting long-term commitment and stability.
Global lock-up: All ONDO tokens, irrespective of distribution, are subject to the global lock-up. The release of the global lock-up requires a majority vote by ONDO token holders through a valid proposal, following Ondo DAO procedures.
In order to be transferable, ONDO tokens must be free from both their individual lock-up and the global lock-up.
Please note that the foregoing is a summary of the lock-ups applicable to ONDO tokens, and is qualified in all respects by, and in no way modifies, any agreements to which you are party regarding the issuance, purchase, grant, distribution or delivery of ONDO tokens to you. Please refer to those agreements to understand the restrictions applicable to your ONDO tokens.
Purpose of the Global Lock-Up
The global lock-up serves as a crucial mechanism to safeguard the interests of all ONDO token holders. Its primary objective is to foster stability, encourage long-term commitment, and discourage speculative trading. This measure reflects our dedication to creating a sustainable ecosystem that withstands market volatility and delivers lasting value.
Token unlocks represent a powerful opportunity for a project to garner public attention, and to open the door to new participants in the Ondo DAO community. A token unlock is also an event that should be timed thoughtfully given the impact of these benefits is arguably most pronounced in the period around the unlock itself, and given these benefits come with obvious tradeoffs. The global lock-up gives the Ondo DAO community the ability to collectively decide on when the right time is for a token unlock for the community as a whole, rather than presupposing that date far in advance.
Considerations for Token Unlock Timing
Given the above, the obvious question is when and how to best unlock the ONDO tokens to best achieve the community’s objectives. We believe there are several considerations that make now a less-than-ideal time to release the global lock-up.
The first is general macro conditions. It is no secret that the current macro conditions are highly challenging for all crypto projects. To ensure the most favorable outcome, we believe it is in the community’s best interest to wait for improved general macro conditions.
The second is the breadth and maturity of the DAO-governed product suite. We believe significantly more can be done to both bolster the utilization of the existing Flux protocol as well as expand the set of protocols governed by the DAO and that much of the last year has been laying the groundwork for more rapid growth over the next. We think it is prudent to time the global lock-up release when the Ondo DAO’s product suite is more mature, enabling the community to better engage with increased attention.
The third is the strategic dynamics around token unlocks in general. Token unlocks represent an opportunity to more easily allow for new DAO members and for the DAO to potentially take advantage of token rewards. We think these are better utilized in improved market conditions and for a more mature product suite.
For these reasons, we believe that it is in the community’s interest to wait to release the global lock-up. Of course, this should be part of an ongoing evaluation that can and should be revisited on a regular basis.
Community Engagement and Input
These are our views, but we value the opinions and perspectives of the broader ONDO community and encourage your active participation in the decision-making process.
To facilitate open discussion, we invite you to join us on Monday, May 29 at 10 am ET in the Ondo DAO Discord. Your input is crucial in shaping the future of the project and ensuring that decisions align with the community’s interests.
Finally, we want to extend our heartfelt appreciation for your continued support and patience. We are thrilled to see nearly 10,000 ONDO holders who have claimed their tokens, making it one of the largest DAOs on Ethereum. Despite its young age, only seven DAOs on Ethereum have more holders on Tally including Aave, Compound, Uniswap, Gitcoin, and ENS.
We are committed to making informed decisions that maximize the potential of ONDO and create a thriving community of token holders. Together, we will navigate the market landscape and lay the foundation for the future of DeFi.
Thank you for being an integral part of the ONDO community.
– Flux Finance Inc.