Flux Finance Launches Lending Token Collateralized by U.S. Treasurys

Flux Finance invests in Ondo’s Short-Term U.S. Government Bond Fund (OUSG) a tokenized version of a Blackrock Treasury Bond ETF.

AccessTimeIconFeb 9, 2023 at 8:16 a.m. UTC
Updated Feb 9, 2023 at 3:53 p.m. UTC
10 Years of Decentralizing the Future
May 29-31, 2024 - Austin, TexasThe biggest and most established global hub for everything crypto, blockchain and Web3.Register Now

What’s the latest trend in decentralized finance (DeFi)? Yield farming backed by U.S. government debt.

Following the recent launch of Ondo Finance’s U.S. Treasury-backed Government Bond Fund (OUSG), Flux Finance has launched a decentralized lending protocol that allows users to deposit USDC or DAI into Flux’s protocol, which is backed by OUSG, and, in turn, receive fUSDC or fDAI, two derivative tokens representing the USDC and DAI on Flux.

Flux is a fork of the popular lending and borrowing protocol Compound, which holds billions of dollars in locked tokens as of Thursday.

DeFi protocols like Flux rely on smart contracts instead of intermediaries to provide financial services – such as lending and borrowing – to users. On the other hand, yield farming refers to users getting rewarded with a project’s tokens for providing liquidity to that project.

The fUSDC and fDAI tokens can then be used as collateral at lending and derivatives protocols. All this is similar to how liquid staking protocols like Lido issue tokens such as stETH, which represent ether staked on their platforms at a 1:1 ratio, and can be used for yield farming.

The interest in yield from tokenized U.S. Treasurys comes as lending rates for major DeFi platforms struggle after 2022’s chaotic crypto market, and the Federal Reserve continues to raise interest rates, making conventional assets potentially more alluring than DeFi.

According to DeFi Prime, the average rate for USDC lending is 1.68%. But conventional savings accounts at traditional finance (TradFi) entities are paying more, up to 4%, in this rising rate environment. For instance, CapitalOne offers 3.4% and Discover pays 3.3%. And those TradFi accounts are protected by Federal Deposit Insurance Corp. (FDIC) insurance.

Disclosure

Please note that our privacy policy, terms of use, cookies, and do not sell my personal information has been updated.

CoinDesk is an award-winning media outlet that covers the cryptocurrency industry. Its journalists abide by a strict set of editorial policies. In November 2023, CoinDesk was acquired by the Bullish group, owner of Bullish, a regulated, digital assets exchange. The Bullish group is majority-owned by Block.one; both companies have interests in a variety of blockchain and digital asset businesses and significant holdings of digital assets, including bitcoin. CoinDesk operates as an independent subsidiary with an editorial committee to protect journalistic independence. CoinDesk employees, including journalists, may receive options in the Bullish group as part of their compensation.


Learn more about Consensus 2024, CoinDesk's longest-running and most influential event that brings together all sides of crypto, blockchain and Web3. Head to consensus.coindesk.com to register and buy your pass now.