Aave Labs unveils plan to stabilize GHO with BlackRock’s BUIDL shares News ▸ US ▸ Aave ▸ Stablecoins
Aave Labs unveils plan to stabilize GHO with BlackRock’s BUIDL shares
The proposal, still in 'temperature check,' consists of adding a new stability mechanism using BUIDL's shares.
2 min read
Updated: Aug. 26, 2024 at 9:53 pm UTC
Cover art/illustration via CryptoSlate. Image includes combined content which may include AI-generated content.
Aave Labs proposed an update to its GHO Stability Module (GSM) on Aug. 26, which involves using BlackRock’s tokenized fund BUIDL’s shares to help maintain the dollar peg of its stablecoin.
According to the proposal, a new GSM would let Aave exchange users’ USD Coin (USDC) given to mint its ecosystem native dollar-backed stablecoin GHO for BUIDL shares. The tokens would be held in a smart contract until the user redeems its GHO for USDC.
BUIDL’s shares have a stable value of $1 per token and pay daily returns to its investors each month. The fund allocates its assets to cash, US Treasury bills, and repurchase agreements. According to RWA.xyz data, BUIDL has over $502 million in assets under management (AUM).
Boosting GHO’s market cap
The proposal noted that this new GSM expands yield sources from Aave DAO into the real-world assets (RWA) sector and increases partnership opportunities with BlackRock.
This is a much-needed boost for GHO, as the stablecoin has a market cap of roughly $120 million. Despite registering a 146% growth since May 1, the token is still far behind its prominent peers, such as PYUSD and First Digital USD, which boast market caps of $1 billion and $2.8 billion, respectively.
Notably, Aave Labs bets on BUIDL’s liquidity and integration with USDC to help maintain its stablecoin peg with the dollar, as shareholders from BlackRock’s tokenized fund can redeem them for USDC at any time with pre-approved holders.
This is the second such GSM implemented for GHO, after a January proposal introduced the creation of two smart contracts to facilitate the redeeming of GHO for USDC and Tether USD (USDT).
Moreover, USDC’s issuer Circle also provided a $100 million redemption fund that guarantees the conversion from BUIDL into USDC from GHO/USDC’s GSM. As of now, the fund has $74.7 million USDC available.
According to the proposal, swap fees will be accumulated in GHO, and dividends will be paid monthly in BUIDL. Additionally, the GSM may or may not integrate a USDC buffer to compensate for the gas redemption cost of BUIDL for small swaps, which will be further evaluated later.
The proposal is still in the “temp check” phase, which is commonly used to see how members of Aave governance react to the proposal. If the reactions are mainly positive, AAVE token holders will be able to vote on the new GSM proposal.
As of press time, only one user had commented, expressing generally positive feedback on the proposal.
Mentioned in this article
Author 
Gino Matos
Gino Matos is a law school graduate and a seasoned journalist with six years of experience in the crypto industry. His expertise primarily focuses on the Brazilian blockchain ecosystem and developments in decentralized finance (DeFi).
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In this article
Aave is an open source and non-custodial protocol enabling the creation of money markets.
GHO
$0.99753
GHO is a decentralized multi-collateral stablecoin that is fully backed, transparent and native to the Aave Protocol..
USD Coin
$0.99986
USD Coin (USDC) is a stablecoin fully backed by the US dollar and developed by the CENTRE consortium.
Tether
$1.00049
Launched in 2014, Tether is a blockchain-enabled platform designed to facilitate the use of fiat currencies in a digital manner.
BlackRock
BlackRock, synonymous with global asset management, is an American multinational investment management corporation based in New York City.
Tether Limited
Tether Limited is the company that introduced Tether (USD₮ or USDT), an asset-backed cryptocurrency stablecoin, in 2014.
Circle
Circle Internet Financial Ltd is a global internet finance company, built on blockchain technology and powered by crypto assets.