Ondo (ONDO) tokenomics

Ondo Finance (ONDO) is a decentralized finance protocol focused on bringing institutional-grade financial products, such as tokenized U.S. Treasuries, onchain. The ONDO token serves as the primary governance mechanism for the Ondo DAO and Flux Finance.

Issuance Mechanism

The ONDO token was created on April 28, 2022, as an ERC-20 token on the Ethereum network. It has a maximum token supply of 10,000,000,000 (10 billion).

• Inflation Policy: There is no scheduled or planned inflation for the ONDO token.
• Minting: A "mint" function exists within the smart contract, but it is restricted. It can only be called by an address with the MINTER_ROLE, and it cannot be executed if the total supply exceeds the 10 billion cap.
• Security: The token relies on Ethereum's validator set for transaction security and state changes.

Allocation Mechanism

The initial distribution of ONDO was structured to support ecosystem growth, reward early contributors, and facilitate private and public fundraising.

Allocation Details

• Ecosystem Growth: Reserved for future distributions, including potential airdrops and rewards for developers, educators, and strategic contributors. As of late 2024, these tokens were not held in the Ondo DAO treasury.
• Protocol Development: Allocated to core contributors focused on building infrastructure and products for the Ondo ecosystem.
• Fundraising Rounds:
  • Seed Round (August 2021): Raised $4 million from investors including Pantera Capital and Genesis.
  • Series A: Raised $20 million in equity investment.
  • Community Access Sale (May 2022): Conducted via CoinList, raising over $10 million. It featured two tranches: a "Priority Queue" at $0.03 per token and a public access price of $0.055 per token.

Usage and Incentive Mechanism

The ONDO token is primarily used for governance and ecosystem participation.

Governance

Tokenholders govern Flux Finance via the Ondo DAO. Governance activities are facilitated through Tally and include:

• Listing new fTokens (adding support for lendable/borrowable assets).
• Updating interest rate models and managing DAO treasury assets.
• Requirements: A user must have at least 100 million ONDO delegated to them to submit a proposal. Proposals require a quorum and at least 1 million ONDO used in voting to pass.

Incentives and Rewards

• Ondo Points Program: Users earn points for various onchain activities, such as holding ONDO, lending on Flux, or minting/holding RWA tokens like USDY and OUSG.
• Diamond Hands: Participants in the CoinList sale who claimed their tokens by March 31, 2024, and did not sell them earned bonus points.
• Flux Finance: Users can lend stablecoins to earn yield or use OUSG as collateral to borrow assets.

Locking and Unlocking Mechanism

Until early 2024, ONDO tokens were subject to a "Global Lock-Up" that prevented transfers. This was lifted on January 18, 2024, following a DAO proposal (FIP-08).

Locking Tiers

• Core Team: Bound by a 5-year lock-up.
• Investors (Seed & Series A): Subject to a 1-year cliff from the public launch (Jan 18, 2024), followed by 3 years of yearly vesting.
• Coinlist Tranche 1: 1-year lock followed by an 18-month release.
• Coinlist Tranche 2: 1-year lock followed by a 6-month release.

Unlocking Schedule

The unlocking process is designed to be gradual to minimize market shocks. Based on historical and projected data, the cumulative unlock progress is as follows:

As of late 2024, the top 10 wallet addresses on Ethereum held approximately 83% of the maximum token supply, reflecting the large portions still held in vesting contracts or ecosystem reserves.