DeFi
Bridging traditional finance and DeFi
The following is a guest post from Vincent Maliepaard, Marketing Director at IntoTheBlock
What is the BlackRock BUIDL fund?
The BUIDL fund, formerly known as BlackRock USD Institutional Digital Liquidity Fund, represents black rockventures into tokenized assets on a public blockchain. Using the Ethereum network, BUIDL invests in cash, short-term debt securities and US Treasury bills.
The launch of BlackRock’s BUIDL fund has excited many in the industry as it shows how traditional financial instruments can integrate with the innovative capabilities of DeFi.
However, BlackRock is not the first to explore this technology. Other notable companies have also made significant progress in this area. For example, Abrdn, a major UK asset manager, launched a tokenized version of its £15 billion Lux Sterling money market fund on the Hedera Hashgraph DLT in June 2023 (Ledger information).
Similarly, Hamilton Lane, another investment manager, opened a tokenized feeder fund on the Polygon blockchain in early 2023. This fund allows individual investors to access private equity with significantly reduced minimum investment requirements compared to to traditional versions (markets.businessinsider.com).
Many examples from the blockchain industry have contributed to the growth of a niche ecosystem within the broader blockchain industry called “real world assets” or RWA.
Real-world assets in crypto
Real World Assets (RWA) have become one of the most important areas of focus in the blockchain industry this year. Projects in this space aim to channel returns and assets from the traditional economy into the digital space. This integration leverages the inherent interoperability of DeFi, enabling new forms of asset utilization and yield generation.
RWA TVL protocols – Source: In the block
In 2023, significant progress has been made in this sector, marked by the successful integration of US Treasury bond yields into DeFi via protocols like Mountain Protocol. As a result, the total value locked (TVL) in RWA protocols soared to over $2.9 billion. Major protocols in the RWA ecosystem now have over 194,000 RWA protocol token holders, reflecting its rapid adoption and growing influence.
Development and growth of the BUIDL Fund
BlackRock’s BUIDL fund structure is designed to appeal to institutional investors, requiring a minimum investment of $5 million per entity. The bottom has 14 holders and has shown gradual but notable growth since its launch.
Although the number of holders may increase gradually, each new investor significantly increases the fund’s total holdings. Current data shows that there are 462,542,901 tokens in circulation, each worth approximately $1, bringing the total fund value to $462 million.
The Future of BlackRock’s BUIDL Fund and RWA in DeFi
As the DeFi sector continues to attract the attention of traditional financial players, the integration of RWAs such as those of the BUIDL fund should accelerate. This trend is driven by the inherent benefits of tokenization, including greater transparency, liquidity, and access to a wider range of investors. This development extends beyond the blockchain sector and paves the way for a more interconnected and efficient global financial system.