Ondo Finance, a protocol aiming to accelerate the adoption of decentralized finance (DeFi) among mainstream investors by mitigating risk, has raised $20 million in a Series A round co-led by Peter Thiel’s Founders Fund and crypto firm Pantera Capital.
Ondo Finance software finds investments across traditional and decentralized finance and packages them into more investor-friendly risk/reward balanced offerings for institutional and retail investors.
Structured products are a common part of traditional finance that’s well suited for the lower-cost execution of decentralized finance, Ondo Finance founder and CEO Nathan Allman told CoinDesk in an interview.
DeFi “lets us open up access to these sorts of instruments that are otherwise very expensive to administer to the smaller retail investors,” said Allman, who co-founded Ondo with fellow Goldman Sachs (GS) trading veteran Pinku Surana.
How it works
The first Ondo Finance offering was decentralized structured products, investment vaults split evenly between two tokens where one represents a lower risk fixed investment position and the other a variable position with more risks but the chance for higher rewards. The funded vault is invested into a liquidity pool on an automated market maker like Uniswap or SushiSwap for a fixed period of time.
Once the vault expires, fixed investors are paid their investment plus a fixed percentage yield and variable investors get whatever is left of the excess return.
For example, a recent vault paired BOND, the native token of the DeFi risk protocol BarnBridge, for fixed investors with the USDC stablecoin for variable investors. The vault was listed on Uniswap and expired on April 18. Fixed investors received a 35.12% yield and variable investors had a 283% yield.
The vault idea was then expanded to include a liquidity-as-a-service solution that matches decentralized autonomous organizations (DAO) with underwriters to supply liquidity to the DAO’s native token, allowing users to trade the token in decentralized exchanges. Ondo said it has partnered with more than 10 DAOs includingTerra, Frax and Fei, and had more than $200 million in liquidity deposited into the protocol.
DAO PlansOndo Finance is also planning its own decentralized autonomous organization and native ONDO token.
The token will provide voting rights in the DAO, which will include the ability to control components of the smart contracts and to dictate some strategic decisions like partnerships with chains and stablecoins. The tokens will initially be globally non-transferrable, meaning the tokens can’t be sold in a secondary market, Allman told CoinDesk, partly to give Ondo time to set up liquidity mining to drive adoption.
“Token holders themselves will get to vote on when trading [of the token] should start,” said Allman.
Founders Fund and Pantera Capital have about $11 billion and $6 billion in assets under management, respectively.
Strategic investors joining the Ondo Finance funding round included Coinbase Ventures and Tiger Global. The capital will help Ondo expand its current 17-person team with hires across engineering, marketing and product development.
Ondo is working to launch a second version of the vaults, which provide more structural flexibility. The vaults are in test deployments on Curve and Convex to earn yield from algorithm-backed stablecoins. Ondo bundles multiple assets into each vault to offset the higher risks of the algorithmic stablecoins.
The funding will also help drive Ondo’s multichain expansion, which would involve bridging liquidity from multiple blockchains into a single vault. Ondo would use the bridges for the users, mitigating the risks of exploits that have become a common problem for bridge protocols.
“Multichain is a pretty huge part of our mission and value proposition,” Allman said.
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