On Thursday, MakerDAO voted through a nominal survey to establish a real-world asset (RWA) vault called BlockTower Andromeda, which will be managed by BlockTower Capital and is expected to invest up to $1.28 billion in short-term U.S. Treasury bonds.
The U.S. Treasury yield is usually regarded as a risk-free interest rate by the capital market. As U.S. short-term interest rates continue to rise, DeFi interest rates fall, and the demand for on-chain stablecoins to obtain returns through off-chain markets increases. This year, this direction has indeed ushered in rapid development. Below, PANews will review the development status of several major on-chain treasury bond projects.
Ondo Finance
Ondo Finance announced the launch of a tokenized fund in January this year, bringing risk-free interest rates to the chain, allowing stablecoin holders to invest in bonds and U.S. Treasuries. According to DeFiLlama data, as of June 1, Ondo's TVL was $100 million, which has also declined recently compared to $138 million in late May.
Ondo currently offers four bond funds: 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, and Ondo charges a fund management fee of 0.15%, a brokerage fee of up to 0.15%, and an ETF management fee of up to 0.48%.
The fund with the most investors is OUSG. According to the description, the fund holds the most iShares Short Tearsury Bond ETF, which trades on the Nasdaq as SHV and has a 30-day average annualized return of about 4.92%. After investing in OUSG, investors can also borrow stablecoins such as USDC and DAI by pledging OUSG through Flux Finance. As of June 1, the total deposits in Flux were $67.49 million and the total borrowings were $25.92 million.
Ondo’s funds are only open to qualified purchasers. If a fund only has qualified purchasers, it can be exempted according to the Investment Company Act of 1940 in the United States and does not need to register as an investment company with the US SEC. It should be noted that the concepts of qualified purchaser and accredited investor are not the same, and the threshold for the former is higher. For example, for individuals, qualified purchasers need to have an investment of US$5 million or more, while the latter only need an annual income of more than US$200,000 or a net asset of more than US$1 million excluding the primary residence.
Related reading: Can stablecoins also buy government bonds? Ondo Finance launches the first tokenized fund for U.S. government bonds and treasuries
Matrixdock and Tprotocol
Matrixdock is an on-chain bond platform launched by asset management company Matrixport, which also launched treasury bond-related businesses in late January this year. According to the dashboard of Dune@hankofdefi, the current TVL of Matrixdock is 72.44 million US dollars.
Matrixdock’s first product is STBT. Investors deposit stablecoins such as USDC, USDT or DAI from the whitelist address into the Matrixdock address to mint STBT. Only qualified investors who have passed KYC can invest in Matrixdock’s products.
For this purpose, another project, TProtocol, was born. It can be understood as a permissionless packaged version of Matrixdock, allowing retail investors to access the product. Although the official website indicates that it cannot be used in the United States or other sanctioned regions, KYC is not required for actual use. Users can mint TBT with USDC in TProtocol, and the underlying is Matrixdock's STBT. TBT is a rebase token that can always be redeemed for $1 USDC, and the income is distributed through rebase. TBT can be packaged into an interest-bearing asset wTBT. While obtaining bond income, it can participate in various DeFi activities and can perform liquidity mining on DEXs such as Optimism's Velodrome and zkSync's veSync. Currently, TProtocol's TVL is $5.3 million.
TProtocol is currently in a 6-epoch launch period, each epoch is 14 days, and users who hold TBT or wTBT can participate. At the end of the period, a total of 2% of the total TPS governance tokens will be airdropped to these users.
OpenEden
OpenEden, founded by former Gemini employees, launched tokenized U.S. Treasuries in April this year. Stablecoin holders can mint TBILL through the OpenEden TBILL Vault to obtain risk-free returns on U.S. Treasuries.
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 professional fund company Hill Lights International Ltd, which holds US Treasury bonds through a special purpose company.
Currently, the funds in OpenEden TBILL VAULT are $5.5 million, with a yield of approximately 5.32%. Participation in OpenEden TBILL Vault also requires KYC to be completed first. Only non-US professional investors and US qualified investors defined under the Securities and Investment Business Act of 2010 of the British Virgin Islands can participate in the project after KYC.
Maple’s Cash Management Pool
Maple was originally a project focusing on unsecured lending, but after important clients such as Alameda Research went bankrupt last year, it generated a large amount of bad debts and suffered serious capital outflows.
In April this year, Maple introduced a new liquidity pool - the cash management pool. Crypto hedge fund and bond trading expert Room 40 Capital established an independent special purpose company (SPV) as the only borrower in the cash management pool. The proceeds will be invested entirely in US short-term Treasury bills. Maple and Room 40 Capital receive a total management fee of 0.5%, and the rest of the proceeds are distributed to depositors. Only non-US qualified investors who have passed KYC can participate.
The cash management pool currently has deposits of US$4.26 million, all of which are invested in short-term Treasury bills of 1-14 days and overnight reverse repurchase agreements, with depositors receiving an annualized rate of return of 5.17%.
MakerDAO’s RWA and DSR
MakerDAO plans to add a new parameter in the recent update - the benchmark interest rate, which will be calculated based on the 3-month U.S. Treasury bond yield and the average yield of cash-like stablecoins.
At present, MakerDAO has initiated a discussion on changing parameters in the forum. According to data on May 30, the yield on the US 3-month Treasury bill was 5.55%, and the yield on cash-based stablecoins was 0.47%. The base rate was calculated to be 4.09%, and the DSR (DAI savings rate) would be 3.49%. If this is used as a benchmark, the interest rate for borrowing DAI with assets such as ETH and wstETH will also be significantly increased to above the new DSR.
If the vote is finally passed, MakerDAO's competitiveness in borrowing stablecoins by pledging assets such as ETH may be weakened, and the interest rate may be higher than that of lending protocols such as Aave. But for DAI holders, this may be a major benefit. Previously, DSR was 1%. MakerDAO obtained income through RWA and other channels, and allocated part of the income to DSR. Users holding DAI can deposit DAI into the DSR contract and obtain an annualized return of 1%. If DSR is directly increased from 1% to 3.49%, it may greatly increase the attractiveness of DAI. Users may be more willing to exchange other stablecoins for DAI through PSM and other channels to obtain the yield of DSR. MakerDAO can also have more funds to obtain income from RWA.
According to the Dune@steakhouse dashboard, MakerDAO has invested more than $1.3 billion in RWA, most of which has been invested in liquid bonds, and the proportion of income from RWA has also risen to 65.9%. With the continuous introduction of new RWA Vaults, this proportion may continue to increase.
If the above proposal passes in an executive vote, MakerDAO will be getting 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 made great progress this year. Except for MakerDAO, they all started to officially launch related businesses this year, indicating that this direction is developing rapidly.
In terms of compliance, only TProtocol and MakerDAO do not require verification as qualified investors to participate. The packaging method of TProtocol may also face greater legal risks.
MakerDAO, which is larger and has a longer history, 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.
