How is the development status of on-chain treasury bonds? We studied 5 protocols

Take stock of the development of Ondo, Matrixdock, Maple, OpenEden, MakerDAO’s on-chain treasury bonds.

Written by: Jiang Haibo

On Thursday, MakerDAO voted through a nominal survey to establish a Real World Assets (RWA) Vault called BlockTower Andromeda, which is managed by BlockTower Capital and is expected to invest up to $1.28 billion in short-term U.S. Treasury bonds.

The yield of U.S. Treasury bonds is usually regarded as a risk-free rate by the capital market. As U.S. short-term interest rates continue to rise and DeFi interest rates fall, the demand for on-chain stablecoins to obtain income through the off-chain market increases. Since the beginning of this year, this direction has indeed ushered in rapid development. Below, PANews will take stock of the development status of several major on-chain treasury bond projects.

Ondo Finance

Ondo Finance announced the launch of tokenized funds in January this year, bringing risk-free interest rates to the chain, allowing holders of stablecoins to invest in bonds and US Treasury bonds. Ondo’s TVL was $100 million as of June 1, according to DeFiLlama, which is also down recently from $138 million in late May.

Ondo currently offers four bond funds, namely: U.S. Money Market Fund (OMMF), Short-Term U.S. Treasury Bond Fund (OUSG), Short-Term Investment Grade Bond Fund (OSTB) and High Yield Corporate Bond Fund (OHYG). Investors invest in USDC, Ondo charges 0.15% fund management fee, up to 0.15% intermediary fee and up to 0.48% ETF management fee.

The fund with the most investors is OUSG. According to the description, the fund holds the most is iShares Short Tearsury Bond ETF. The trading code on Nasdaq is SHV, and the 30-day average annualized rate of return is about 4.92%. After investing in OUSG, investors can also mortgage OUSG through Flux Finance and borrow USDC, DAI and other stable coins. As of June 1, total deposits in Flux were $67.49 million and total borrowings were $25.92 million.

Ondo’s funds are only open to qualified buyers. If a fund has only qualified buyers, it can be exempted from the US Investment Company Act of 1940 and does not need to be registered as an investment company with the US SEC. It should be noted that the concepts of Qualified Purchaser and Accredited Investor are different, and the threshold for the former is higher. For individuals, for example, qualifying buyers need to have investments of $5 million or more as long as annual income exceeds $200,000 or net worth exceeds $1 million excluding primary residence.

Related reading: Can stablecoins also buy government bonds? Ondo Finance is the first to launch the Tokenized Fund of U.S. Treasury Bonds and Bonds

Matrixdock and Tprotocol

Matrixdock is an on-chain bond platform launched by the asset management company Matrixport. It also launched treasury bond-related business in late January this year. Matrixdock currently has a TVL of $72.44M according to Dune@hankofdefi’s dashboard.

Matrixdock’s first product is STBT. Investors deposit stable coins such as USDC, USDT or DAI from the whitelist address to the Matrixdock address to mint STBT. Only qualified investors who have passed KYC can invest in Matrixdock’s products, and STBT can only be transferred between whitelist users.

For this reason, another project TProtocol was born, which can be understood as a license-free package version of Matrixdock, allowing retail investors to access the product. Although the official website indicates that the United States or other sanctioned regions cannot be used, KYC is not required for actual use. Users can mint TBT with USDC in TProtocol, and the underlying layer is Matrixdock’s STBT. TBT is a rebase token that can always be redeemed for $1 in USDC, and the proceeds are distributed through rebase. TBT can be encapsulated into an interest-earning asset wTBT. In the case of obtaining bond income, it can participate in various DeFi activities, and can conduct liquidity mining on DEXs such as Optimism’s Velodrome and zkSync’s veSync. The current TVL of TProtocol is $5.3 million.

TProtocol is in the process of launching a period of 6 Epochs, and each Epoch is 14 days. Holders of TBT or wTBT can participate. At the end, a total of 2% of the governance token TPS will be allocated to these users for airdrops.

OpenEden

OpenEden, founded by former Gemini employees, launched tokenized U.S. Treasury bonds in April. Holders of stablecoins can mint TBILL through the OpenEden TBILL Vault to obtain risk-free returns on U.S. Treasury bonds.

The investment manager of OpenEden TBILL Vault is OpenEden Pte Ltd, which is regulated by the Monetary Authority of Singapore and publishes daily reserve reports. The issuer of TBILL tokens is Hill Lights International Ltd, a professional fund company that holds US Treasury bonds through special purpose vehicles.

Currently, there is $5.5 million in funds in the OpenEden TBILL VAULT, yielding approximately 5.32%. Participation in OpenEden TBILL Vault also requires the completion of KYC first. Only non-US professional investors and US qualified investors defined in accordance with the 2010 Securities and Investment Business Act of the British Virgin Islands can participate in the project after KYC.

Maple’s Cash Management Pool

Maple was originally a project focused on unsecured lending, but last year when important customers such as Alameda Research went bankrupt, a large number of bad debts were generated and funds were seriously fled.

In April of this year, Maple introduced a new type of liquidity pool - the Cash Management Pool. Crypto hedge fund and bond trading specialist Room40 Capital formed a separate special purpose vehicle (SPV) as the sole borrower for the cash management pool. All proceeds will be invested in U.S. Treasury bills. Maple and Room40 Capital receive a combined 0.5% management fee, with the remainder distributed to depositors. Only non-US qualified investors who have passed KYC can participate.

At present, the deposit in the cash management pool is 4.26 million US dollars, all of which are invested in 1-14 day short-term treasury bills and overnight reverse repurchase agreements, and the annualized rate of return for depositors is 5.17%.

MakerDAO’s RWA and DSR

In a recent update, MakerDAO plans to add a new parameter, the benchmark interest rate, which will be calculated based on the 3-month U.S. Treasury bill yield and the average yield of cash-based stablecoins.

Currently, MakerDAO has initiated discussions in the forum to change the parameters. According to the data on May 30, the U.S. 3-month treasury bill yield is 5.55%, and the cash stable currency yield is 0.47%. The calculated benchmark interest rate is 4.09%, and the DSR (DAI savings rate) will be 3.49%. If this is used as a benchmark, the interest rate for borrowing DAI with assets such as mortgage ETH and wstETH will also be significantly increased above the new DSR.

If the final vote is passed, MakerDAO may weaken its competitiveness in borrowing stablecoins as collateral for assets such as ETH, and the interest rate may be higher than that of lending agreements such as Aave. But for DAI holders, this could be a major boon. Previously, DSR was 1%. MakerDAO obtained income through RWA and other channels, and distributed part of the income to DSR. Users who hold DAI can deposit DAI into the DSR contract to obtain an annualized income of 1%. If DSR is directly increased from 1% to 3.49%, the attractiveness of DAI may be greatly improved, and users may be more willing to exchange other stablecoins for DAI through PSM and other channels to obtain the rate of return of DSR. MakerDAO can also have more funds to earn from RWA.

According to Dune@steakhouse’s dashboard, MakerDAO’s investment in RWA has exceeded 1.3 billion US dollars, most of which have been invested in bonds with good liquidity, and the proportion of income brought by RWA has also risen to 65.9%. This percentage is likely to continue to increase as new RWA Vaults continue to be introduced.

If the above proposal passes in the executive vote, MakerDAO will be getting closer and closer to a project that raises stablecoins on-chain, invests in bonds off-chain, and distributes the proceeds to DAI holders.

Summary

The above-mentioned representative projects that obtain off-chain income through U.S. Treasury bonds have all made great progress this year. Except for MakerDAO, they have only officially launched related businesses this year, indicating that this direction is developing rapidly.

In terms of compliance, only TProtocol and MakerDAO can participate without being verified as qualified investors, and the packaging method of TProtocol may also face greater legal risks.

MakerDAO, which has a larger volume and a longer development time, is more trustworthy. If the DSR is adjusted to 3.49%, it may greatly increase the attractiveness of DAI, but it will reduce its competitiveness in cryptocurrency mortgage lending.