Aave Labs proposes integrating GHO stability module with BlackRock’s BUIDL

Aave Labs has introduced a temperature check proposal to update the GHO Stability Module (GSM) to manage its stablecoin system more efficiently by integrating BUIDL, the tokenized fund from BlackRock that represents traditional assets like cash and U.S. Treasury bills. 

This contract enables the conversion of two tokens at a predetermined ratio. “Aave Labs proposes to build a new instance of GSM that supports external integrations and related control mechanisms, specifically supporting BlackRock’s BUIDL,” the team wrote on the proposal. GSM exists to secure Aave’s native stablecoin GHO’s 1:1 convertibility with another asset, Aave explained. 

The proposal aims to enable the GSM 1:1 fixed-ratio swaps between USD Coin (USDC) and GHO and utilize the leftover USDC from users to mint BUIDL shares, which are also USD-equivalent. 

This may give users monthly dividends in BUIDL, while swap fees will be designed to be accumulated in the GHO stablecoin.

“With this implementation, GSM can be more capital efficient while maintaining the high standards of backing as USDC is backing the GHO,” Aave Labs said.

Aave forecasted that the BUIDL integration with the GSM may also open up Aave DAO’s options to expand yield sources into real-world assets and future partnership opportunities with BlackRock, the world’s leading financial institution.

This proposal is currently in the temperature check stage, which means it still receives feedback from Aave governance members before the plan is put to vote. If the community provides positive feedback, AAVE token holders can vote on its implementation.

Meanwhile, BlackRock’s tokenized fund BUIDL has accumulated over $509 million at the time of publication, according to data from Etherscan. Its issuer, Securitize Markets, said last month that BUIDL became the highest-valued tokenized treasury fund in the world upon crossing the $500 million mark.

Earlier this year, DeFi protocols, including Mountain and Ondo, leveraged BUIDL for their derivative products.