Frax DAO Votes on Using BlackRock’s BUIDL as Stablecoin Collateral

by

As a seasoned crypto investor with over a decade of experience navigating the ever-evolving landscape of digital assets, I find the recent developments at Frax Finance and Ethena Labs particularly intriguing. The integration of traditional finance giants like BlackRock into the decentralized finance (DeFi) ecosystem is a significant stride towards bridging the gap between these two worlds.

Starting on Thursday, December 26th, members of the Frax Finance community commenced voting to decide if BlackRock’s BUIDL, a tokenized U.S Treasury product, should be incorporated into the reserves as collateral for the upcoming Frax USD stablecoin.

The new fund, initiated in March, provides a unique blockchain-centric investment opportunity for both decentralized entities and institutional backers. It serves as an innovative method to support stablecoin ventures.

Frax Community Votes in Support of the Proposal

Earlier this month, Securitize’s initial proposal has garnered supportive responses from the community, with several individuals encouraging its implementation. To date, a grand total of 42 votes have been cast, all of which endorse the proposal.

The voting period will remain open until December 31, 2024. If approved, the integration of BlackRock’s BUIDL is expected to bring several advantages, such as improved yield generation, reduced counterparty risk, and streamlined asset transfers through partnerships with industry leaders like BlackRock, Securitize, and Bank of New York Mellon.

In conversations prior to the voting process, community participants emphasized the far-reaching effects of incorporating tokenized real-world assets (RWAs) within the Frax system.

As a crypto investor, I’ve come to realize that tokenized Real Asset Warrants (RAWs) serve as a vital link between conventional finance and the world of decentralized finance. These RAWs allow for the smooth on-chain migration of institutional-grade investments, making it easier for such investments to adapt and thrive in the digital financial landscape.

Over the last nine months, significant players like DAOs and decentralized protocols have issued substantial requests for proposals (RFPs) in public, aiming to find the best strategies to strengthen their funds or secure their stablecoins using Reserve Warrants Assets (RWAs). This was highlighted by achaffee during the community forum on December 22nd.

Not the First

Simultaneously, as Frax Finance considers using BlackRock’s BUIDL as collateral for their stablecoin, Ethena Labs has previously employed the blockchain fund to secure its recently introduced stablecoin, USDtb.

Last week, Ethena Labs declared that they have chosen to integrate BlackRock’s BUIDL platform for their stablecoin. This move aims to offer users an alternate product, differentiating it from the USDe stablecoin in terms of risk profile.

Given the fast-growing interest in various types of stablecoins, we recognized a chance to introduce a fresh product that presents users with a unique risk level distinct from USDe, all within the security of our established platform,” stated Ethena’s founder, Guy Young.

The newly introduced digital currency, USDb, was created to match the value of one U.S. dollar, keeping 90% of its funds in BUIDL. Ethena Labs explained that they collaborated with Securitize during the development process. USDb was first introduced on December 16 and has already amassed a total value of $89 million, as reported by DefiLlama data.

Read More

2024-12-27 16:27