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Ondo us dollar yield

Ondo US Dollar Yield (USDY)

Ondo US Dollar Yield (USDY) is a stablecoin developed by Ondo Finance, designed to provide users with yield on assets while maintaining parity with the US dollar. Unlike traditional stablecoins that primarily serve as a store of value or medium of exchange, USDY integrates a yield component. This yield is generated through a diversified portfolio of decentralized finance (DeFi) strategies, allowing holders to earn passive returns while the token maintains its value relative to the US dollar.

Ondo Finance emphasizes transparency, security, and accessibility in developing USDY, targeting both individual investors seeking stable returns and institutional entities looking for yield-generating digital assets.

Mechanics and yield generation

USDY generates yield by engaging with various DeFi protocols. Ondo Finance employs a diversified strategy to optimize yield, allocating USDY’s underlying assets across multiple DeFi platforms. Key strategies include:

Ticker USDY
Category Stablecoins
Website https://ondo.finance/
Twitter @ondofinance
Contract Addresses
ethereum 0x96...5cCopied!
noble ausdy
arbitrum-one 0x35...9dCopied!
mantle 0x5b...a6Copied!
sui 0x96...DYCopied!
solana A1...o6Copied!
aptos 0xcf...ccCopied!
  • Lending platforms: Assets are lent on decentralized platforms such as Aave or Compound, where borrowers pay interest that is distributed to USDY holders.
  • Liquidity pools: A portion of USDY assets is allocated to liquidity pools on decentralized exchanges (DEXs) like Uniswap, generating fees that contribute to the yield.
  • Yield farming: USDY’s backing assets are invested in yield farming opportunities, involving liquidity provision or staking in various DeFi protocols.
  • Stable DeFi strategies: Lower-risk strategies involving stable assets ensure the stability and security of USDY while still generating returns.

The yield generated is automatically distributed to USDY holders, allowing them to earn returns without actively managing their investments.

Tokenomics

USDY’s tokenomics are structured to balance stability, yield generation, and accessibility. Key components include:

  • Pegging and stability: USDY maintains a 1:1 peg to the US dollar through collateralization and smart contract mechanisms, using stable assets and yield-generating instruments.
  • Issuance and redemption: USDY can be issued and redeemed via Ondo Finance’s platform. Users deposit US dollars or equivalent assets to mint USDY tokens, which can be redeemed by returning the tokens to the contract.
  • Yield distribution: Yield generated by USDY’s underlying assets is proportionally distributed to all holders through automated smart contracts.
  • Inflation and deflation controls: Mechanisms are in place to regulate the supply of USDY, such as minting or burning tokens based on market demand and collateral levels.

Use cases

USDY is designed to fulfill various roles within the cryptocurrency ecosystem for both individual and institutional users. Primary use cases include:

  • Yield farming: USDY can be used in DeFi yield farming strategies to earn additional returns by staking or providing liquidity.
  • Stable store of value: USDY offers a stable store of value, mitigating cryptocurrency volatility while earning yield.
  • Integration with DeFi protocols: USDY can be integrated into various DeFi protocols for lending, borrowing, or leveraging holdings.
  • Remittances and payments: Its stability and yield features make USDY suitable for cross-border remittances or as a payment method.
  • Institutional adoption: Institutions may adopt USDY as a stable, yield-bearing asset for portfolio diversification and financial strategies.

Security and risk management

Security is a crucial aspect of USDY, with comprehensive measures designed to protect users and assets. These include:

  • Smart contract audits: Regular audits by reputable third-party firms ensure the smart contracts governing USDY are secure.
  • Risk management strategies: A multi-layered approach reduces exposure to risks by diversifying yield-generating activities.
  • Collateralization and asset management: Assets backing USDY prioritize safety and liquidity, primarily investing in lower-risk DeFi protocols.
  • Transparency and governance: Ondo Finance publishes reports on USDY’s performance, with governance mechanisms allowing holder participation in decision-making.

USDY integration with Arbitrum

In August 2024, Ondo Finance extended USDY to the Arbitrum network, an Ethereum Layer 2 scaling solution. This integration allows participants within the Arbitrum ecosystem to access USDY's yield-generating features, supported by real-world assets such as US Treasuries. The deployment followed a decision by the Arbitrum DAO’s STEP Committee to include USDY in its treasury portfolio, encouraging the adoption of real-world assets within the network.

Utilization within the Arbitrum ecosystem

  • Camelot: As the primary DEX for USDY on Arbitrum, Camelot facilitates exchanges between USDY and other Arbitrum-native tokens.
  • Dolomite: Offers a money market and margin trading platform for USDY, enabling lending and borrowing activities.

USDY on Arbitrum leverages the network's security and scalability through Optimistic Rollup technology, with management possible through compatible wallets like Blocto and Capsule.

Oracle integration

Pyth provides price feeds for USDY on Arbitrum to ensure pricing accuracy and support various DeFi applications. These feeds include primary market prices for minting and redeeming USDY and secondary market prices for trading across platforms.