Ondo Finance has opened access to tokenized stocks and exchange-traded fund (ETF) collateral for all users of Ondo Perps, except those in restricted jurisdictions. This upgrade allows traders to use their tokenized assets, such as SPYon and QQAon, as leverage for trading perpetual contracts linked to equities, indices, and commodities, rather than selling their current holdings.
Direct on-chain hedging and improved structure
The integration enables users to manage their positions and perpetual contracts within a single wallet, eliminating the need to use multiple brokerages for hedging. This advancement streamlines the process for both retail and institutional participants, including liquidity venues and market making firms, all of which interact through Ondo Finance’s platform, a blockchain-based protocol specializing in tokenized real-world assets.
Previously, trading equity perpetuals involved a structural inefficiency for market makers. To hedge a short position, such as on NVDA perpetuals, participants had to deposit stablecoins as margin on the platform while maintaining equivalent cash or stock positions at a traditional brokerage. This dual requirement effectively resulted in market makers funding the same exposure twice.
By allowing tokenized stocks and ETFs to be used as trading collateral, Ondo Finance seeks to consolidate risk management and collateral requirements into a single pool, optimizing capital deployment across its platform.
Mini dictionary: Ondo Finance is a blockchain platform focused on tokenizing real-world assets, including stocks, ETFs, and bonds, enabling both retail and institutional investors to gain blockchain-based exposure to traditional markets.
| Previous Hedging Model | Ondo Perps Model |
|---|---|
| Margin with stablecoins on crypto platform and cash/shares at external brokerage (dual funding) | Tokenized stocks and ETFs held as collateral and for hedging within one platform (single pool) |
| Higher capital locked, less efficient | Lower capital requirements, more efficient |
Industry shift to real-world asset tokenization
Institutional and retail demand for accessing traditional derivatives through blockchain-based platforms has led to a rise in the adoption of tokenized real-world assets (RWAs). By turning stocks and ETFs into tokens, Ondo Finance aims to increase capital efficiency and create new trading incentives for both professionals and individual investors.
Ondo Finance reported that, with the adoption of tokenized stocks as collateral, capital requirements for market makers could be reduced by approximately half. This change supports tighter spread pricing and higher returns for liquidity providers, potentially strengthening overall market efficiency on the platform.
Using tokenized equities as collateral, Ondo Finance aims to bring perpetuals markets closer to traditional derivatives venues and foster broader participation in equity-based trading.
Growth and liquidity impact
The platform’s tokenized stocks surpassed $1 billion in total value locked (TVL) within eight months of their launch. Ondo Finance stated that maintaining low trading costs may create a new liquidity dynamic that could make equity perpetuals more accessible and efficient, thus bridging the gap between decentralized and traditional markets.
As tokenization of traditional assets gains traction in institutional circles, the upgraded model may serve as a blueprint for future developments in blockchain-based derivatives trading.
