Author: 137Labs

I. The starting point of the problem: Why is stock PERP consistently performing poorly?

Looking back at the development path of DeFi over the past few years, a clear divergence emerges: the derivatives market for crypto-native assets (BTC, ETH) is quite mature, while derivatives related to real-world assets (RWA) remain in the "experimental stage."

Stock perpetual contracts are a typical example.

From the demand side, the market is very clear: global users want to participate in US stock trading with lower barriers to entry and higher efficiency, while using leverage, hedging, and other tools for risk management. However, from the supply side, neither early synthetic asset protocols (such as Synthetix) nor later on-chain orderbooks or AMM models have truly solved the core problem.

These attempts often provide price exposure in the early stages, but they are difficult to sustain continuous trading, eventually leading to a cycle of liquidity depletion, increased slippage, and user churn.

Meanwhile, tokenized stocks are rapidly developing as another avenue. According to mainstream media reports, these assets already offer the advantages of 24/7 trading and instant settlement, but their market size remains limited, and they are more of a "holding instrument" than part of the overall financial system.

Therefore, the key issue is not whether "anyone wants to trade stocks," but rather:

Why can't these assets form a self-sustaining, continuously expanding market structure?

In other words, what's truly missing isn't the products themselves, but the underlying mechanisms that support their operation.

II. Current Situation: Structural Defects of DeFi and Tokenized Stocks

If we further dissect the existing system, we can find that the problems are concentrated on two levels: the collateral structure and the liquidity structure.

First, in the DeFi derivatives system, collateral is highly limited. Almost all mainstream protocols rely on stablecoins as collateral, meaning all trading activities must be completed through stablecoins. Users holding other assets, whether ETH or tokenized stocks, must first convert them to stablecoins before participating in derivatives trading.

This design was reasonable in the early stages because stablecoins offer price stability and ease of settlement. However, as the variety of assets increased, it gradually became a structural constraint. The inability to directly establish relationships between assets led to a "siloed" characteristic of the entire system.

Secondly, while tokenized stocks have made progress in asset mapping, their financial functions remain extremely limited. They can be held, transferred, and even used for simple lending in some scenarios, but lack more complex uses, such as participating in derivatives trading as efficient collateral or playing a role in multi-asset portfolios.

A deeper problem lies in liquidity. Most tokenized stock projects attempt to “rebuild a market” on-chain, providing trading depth through AMMs or synthetic order books. However, this approach is inherently limited by on-chain capital and cannot compete with the liquidity of traditional exchanges, leading to issues such as price deviation, slippage, and transaction costs.

Therefore, the core flaws of the current system can be summarized as follows:

Assets have been tokenized, but they cannot form effective financial relationships, and the market lacks sufficient liquidity to support them.

III. What Ondo Perps did: Triple structural innovation

Against this backdrop, the emergence of Ondo Perps is not simply about providing a new trading platform, but rather an attempt to simultaneously restructure collateral logic, asset relationships, and liquidity sources.

First, it introduces a key change: allowing tokenized stocks to be used directly as margin. This change may seem like just a parameter adjustment, but it actually alters the entire system's cash flow. Users no longer need to convert assets into stablecoins; instead, they can directly leverage existing holdings for trading or hedging.

This mechanism brings not only increased efficiency, but more importantly, a change in the nature of assets. Stocks are no longer just "yield assets," but have become a "credit foundation" that can support other risk exposures. In a financial context, this means that assets begin to possess "collateral attributes."

Secondly, Ondo introduces the concept of cross-asset margin. Traditional DeFi protocols typically employ a segregated margin model, where each position calculates risk independently, while Ondo treats the entire asset portfolio as a whole. This design is closer to portfolio margin in traditional finance, allowing different assets to hedge and support each other.

The underlying change is structural: risk is no longer calculated on a single asset basis, but rather on a portfolio basis. The result is a significant increase in capital utilization, but also the introduction of more complex risk transmission pathways.

Third, and most importantly, is the change in the liquidity model. Ondo does not attempt to build liquidity from scratch on-chain. Instead, it connects the on-chain market with traditional exchanges through the issuance and redemption mechanism of tokenized stocks. This means that price discovery and liquidity depth can be directly inherited from Nasdaq and NYSE, rather than relying on limited on-chain liquidity pools.

If this mechanism can operate stably, then on-chain transactions will no longer be limited to TVL, but will be able to access a market worth trillions of dollars.

IV. Essence: What is it actually doing?

From a higher perspective, the significance of Ondo Perps lies not in "improving the trading experience," but in redefining the fundamental structure of the financial system.

Traditional DeFi is more like a "collection of trading tools," where users can switch between different protocols to perform operations such as lending, trading, and staking. However, these operations are independent of each other and lack a unified risk management and asset perspective.

Ondo's approach is closer to the prime brokerage system in traditional finance. In this system, users are not operating individual products, but rather managing a complete balance sheet. All assets and liabilities are incorporated into a unified risk framework and dynamically adjusted through portfolio margin.

Therefore, Ondo can be understood as a combination of three functions:

• A multi-asset mortgage system

• A combined risk management engine

• A clearing layer connecting on-chain and traditional markets

From this perspective, it is more like a "financial account system" than a single trading platform.

V. Why this is important: Three layers of influence

If this model can be implemented, its impact will not be limited to a single protocol, but may change the entire development path of DeFi.

First, there's the improvement in capital efficiency. Assets can participate in various financial activities without conversion, reducing intermediate steps and transaction costs while increasing the speed of capital turnover. This difference is further amplified in high-frequency trading and hedging scenarios.

Secondly, there's the disappearance of asset boundaries. Previously, cryptocurrencies, stocks, and bonds belonged to different systems, but in the Ondo model, they can coexist and interact within the same account. This integration will make asset allocation more flexible and may also give rise to new strategies and products.

Thirdly, there's a change in the user structure. As system complexity increases, ordinary users may find it difficult to fully utilize these features, while institutional investors and professional traders will become the main participants. This means that DeFi is gradually evolving towards "institutionalization," and its market behavior will become more similar to traditional finance.

VI. Risks and Uncertainties: The more complex the structure, the more hidden the risks.

Despite its promising prospects, this model also introduces a new dimension of risk.

The most critical uncertainty remains liquidity. If on-chain markets cannot reliably access liquidity from traditional exchanges, all mechanisms based on them will be affected, and price deviations and liquidation risks will amplify rapidly.

Secondly, there is the complexity of the liquidation mechanism. In a multi-asset, cross-market environment, the risk transmission path becomes more complex. Price fluctuations in one asset can affect another asset through collateral relationships, triggering a chain reaction. This systemic risk has not yet been fully verified in DeFi.

Finally, there's the issue of regulation. Tokenized stocks possess securities characteristics, and their compliance varies across different jurisdictions. Changes in the regulatory environment could directly impact the sustainability of asset issuance and trading.

Conclusion: Paradigm upgrade, or complex packaging?

In summary, Ondo Perps' core focus is not on launching a new type of derivative, but rather on attempting to build a new financial structure in which assets can support each other, price each other, and be cleared in a unified system.

The success of this attempt depends on two key factors: whether liquidity can truly connect to the real market, and whether the risk system can remain stable in a complex environment.

Therefore, a relatively clear judgment can be drawn:

If the liquidity model holds true and risk control can withstand market volatility, then Ondo has the potential to become an important part of on-chain financial infrastructure; conversely, if these prerequisites cannot be met, it may ultimately remain a derivatives platform with more complex functions but similar nature.

From a broader perspective, the significance of this attempt may lie in the fact that it raises a more fundamental question:

When different types of assets can be used as collateral for each other and participate in a unified market, does the traditional boundary between "money" and "assets" still exist?

This is perhaps the real issue that Ondo addresses.