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The Frax Finance community has begun voting on a proposal to make the BUIDL token the reserve for their upcoming Frax USD stablecoin.
According to an official post on X, voting opened on December 26, 2024, and will continue until January 1, 2025. Reports from sources close to the voting indicate that by the time this story was filed, there was 100% support for the proposal to adopt the BUIDL token.
Vote Highlights the Expansion of the DeFi System
The Frax Finance community is voting on the proposal by Securitize Markets to integrate BlackRock’s US Dollar Institutional Digital Liquidity Fund (BUIDL) into its upcoming Frax USD stablecoin. Should the community approve the proposal, it will mean a potential expansion of the $549 million fund into the growing decentralized finance (DeFi) ecosystem. BUIDL is backed by at least $530 million invested in short-term US Treasury bills. The move by Securitize aims to lessen counterparty risk, improve liquidity, and offer yield opportunities.
Adopting BUIDL Token Brings Several Benefits
As per the proposal, the Frax USD stablecoin will re-launch as frxUSD and introduce a new mint-redeem system that will facilitate sending assets like the BUIDL token to designated on-chain smart contracts once approved by the community.
Commenting on the proposal, Frax USD stablecoin ecosystem founder Sam Kazemian observed that the system, dubbed “enshrined custodians,” would facilitate a one-to-one minting mechanism. Additionally, he said frxUSD would introduce a yield-bearing counterpart called the staked Frax USD (sfrxUSD). The proposal to adopt the BUIDL token has received overwhelming support from the community, with members calling it a step forward in shaping the future of finance.
The ongoing voting on the proposal to adopt the BUIDL token as collateral for the new shape of Frax USD stablecoin highlights the growing impact of BlackRock’s BUIDL into the world of cryptocurrencies. By integrating the BUIDL token as its collateral reserve, Securitize believes its community members will benefit from improved liquidity, better yield opportunities, lower counterparty risks, and streamlined transfer opportunities through its association with a leading global asset manager.
BUIDL is following up on Several Collaborations
This latest move comes as the concept of tokenized real-world assets is gaining popularity as a reserve asset for collateral-backed stablecoins. According to experts, factors such as cost efficiency, real-time transaction execution, and opportunities for yield generation are attracting the actors. BUIDL token is following up on several collaborations to cement its place within that stablecoin market.
In addition to their recently developed USDe synthetic dollar product, Ethena Labs announced last September it was integrating the BUIDL token into its new stablecoin called USDtb. The USDtb stablecoin was launched on December 16, 024, and built at least $65 million in total value locked (TVL) on its first trading day.
Compared to its predecessor, USDe, the USDtb stablecoin avoided the complicated delta-neutral trading technique and adopted a more direct approach by keeping a 1:1 ratio of cash and short-term US government securities kept within the BUILD token fund to overbalance the stablecoin.
Conclusion
The proposed integration of the BUIDL token with the Frax USD stablecoin marks a potential turning point for BUIDL. The proposal highlights the fund’s continued interest in US government securities and BlackRock’s potential to support the stablecoin ecosystem by enhancing its stability and efficiency.
The competition between BUIDL and other products shows the increasing relevance of integrating capabilities and yield-generating opportunities in deciding who the market leaders are. The outcome of the Frax USD stablecoin proposal could be a pointer to the changing dynamics of the asset tokenization landscape.
Frequently Asked Questions (FAQs)
What is Frax?
Frax is a decentralized, open-source stablecoin running on Ethereum or other networks. It is designed to remain stable using a fractional-algorithmic stability mechanism that the community wants to alter.
What is the governance token for Frax?
The Frax governance token is Frax Share (FXS). Holders of FXS can propose and vote on changes to the protocol. A good example is the current voting, which will continue until January 1, 2025, and voting weight depends on the number of tokens a user holds.
How can I buy and sell Frax?
Interested users can buy and sell Frax on different cryptocurrency platforms that support it, such as Binance, Kraken, and others.
