Home - DeFi News - Ondo Finance Introduces Yield Generating Stablecoin-How Does it Work?

James Carter

April 26, 2023

Ondo Finance Introduces Yield Generating Stablecoin-How Does it Work?

Ondo Finance, a supplier of decentralized financial infrastructure (DeFi), has unveiled a novel kind of yield-generating stablecoin, which provides institutions with a mechanism to profit from the return of US money market funds on-chain.

Ondo Finance Introduces Yield Generating Stablecoin

According to an update that was provided by Ondo Finance on Thursday, the new stablecoin will be known as OMMF and will be a tokenized form of money market funds offered by the United States government. OMMF will be tradeable on the blockchain around the clock.

The company that focuses on DeFi stated that OMMF would take both stablecoin and fiat subscriptions and redemptions, and that interest gained would be handed to token holders on a daily basis in the form of new tokens. Additionally, the company stated that OMMF would accept subscriptions and redemptions in stablecoins.

In a tweet announcing the new launch, Ondo Finance made the following guarantee regarding the capabilities of its new token: “Our new token will do for money market funds what stablecoins have done for cash:

Ondo Finance Introduces Yield-Generating Stablecoin Alternative for Institutions – How Does it Work?

According to a statement made by Ondo’s President and CEO, Justin Schmidt, to Bloomberg, the original generation of stablecoins “were created when interest rates were near zero, so designing them to be able to pass on yield was not a focus.” This statement was made in an attempt to explain the motivation behind the company’s creation of the new yield-generating stablecoin.

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He added:

“By tokenizing money-market funds, we are able to deliver the price stability and on-chain utility of stablecoins, while also providing superior investor protections and passing yield on to holders.”

Follows US Tresury-tied stable coin

Following the launch of OUSG, a stablecoin that was related to the so-called risk-free rate exactly two months ago, the same company has now introduced a new sort of stablecoin.

According to Ondo, the currency has demonstrated “strong early organic growth,” with more than $70 million in assets under management (AUM) and $27 million in OUSG collateral. The coin is offered as a mechanism for holders of risk-averse stablecoins to access the return that may be obtained from US Treasuries.

However, the company claims that due to the new OMMF stablecoin’s price stability, it can more readily be utilized as a replacement for fiat or other stablecoins in settlements and as collateral, “particularly in the OTC trading and lending space.”

“Additionally, given its focus on enabling these new use cases, and given the predictability of its $1 price, OMMF will hold small stablecoin reserves on-chain and allow for instant 24/7 subscriptions and redemptions,” Ondo Finance noted in its statement. “Given its focus on enabling these new use cases, and given the predictability of its $1 price.”

However, regular cryptocurrency users can still benefit indirectly from the new stablecoin by lending against it on Ondo’s distributed finance platform Flux. This is because the new stablecoin will only be offered to institutions and so-called authorized investors due to regulatory considerations.