sBUIDL Explained: How BlackRock’s Tokenized Fund Enters DeFi via Avalanche

Key Takeaways

• sBUIDL is a DeFi-compatible token backed 1:1 by BlackRock’s BUIDL fund.
• While BUIDL is for institutional cash management, sBUIDL enables users to interact with decentralized protocols without giving up exposure to BUIDL’s yield.
• sBUIDL’s debut on Euler allows it to be used as collateral for borrowing stablecoins like USDC or AUSD, marking one of the first real-world cases of an institutional fund entering DeFi.
• Tokenization of regulated assets like BUIDL opens the door to more practical, compliant and composable financial tools across blockchain ecosystems.

In a move that signals growing collaboration between traditional finance and decentralized finance (DeFi), BlackRock’s BUIDL fund has taken its first step into the DeFi ecosystem. This development came through an integration with the Euler Protocol, a lending platform designed to offer flexible and customizable financial products on-chain.

This article explains how BlackRock’s BUIDL fund is entering the DeFi space through its first on-chain integration with the Euler Protocol, a move that highlights the growing convergence between traditional finance and decentralized finance.

Let’s break it down.

What Is sBUIDL and How Is It Different from BUIDL?

sBUIDL is a new token that represents a 1-to-1 claim on BUIDL. It is created when an investor locks BUIDL into a digital vault managed by Securitize, a platform specializing in compliant tokenization of real-world assets.

Unlike BUIDL, which is designed primarily for holding and earning yield, sBUIDL is created specifically for use within DeFi platforms. It allows users to interact with decentralized applications while maintaining the ability to redeem the token for its underlying BUIDL value.

This distinction is important:

• BUIDL is the yield-bearing, asset-backed token intended for traditional holding.
• sBUIDL is the version designed for on-chain activity. It preserves the value of BUIDL while enabling DeFi interactions like lending, borrowing, and liquidity provision.
  

In short, sBUIDL makes BUIDL composable, a term used in DeFi to describe digital assets or applications that can easily integrate and work with others. Composability is one of the core benefits of blockchain technology, allowing developers to combine different protocols and tools like building blocks to create new financial products.

Is BUIDL a Tokenized Money Market Fund?

Yes, BUIDL is a tokenized money market fund launched by BlackRock in early 2024. A money market fund is a type of investment that focuses on low-risk, short-term debt instruments like U.S. Treasury bills and repurchase agreements. These instruments are known for their stability and liquidity, making them suitable for managing cash or earning modest yields with low volatility.

The innovation behind BUIDL lies in its tokenization. Instead of investors holding traditional fund shares through banks or brokers, BUIDL allows them to hold digital tokens on blockchain networks. Each BUIDL token is backed by one U.S. dollar worth of assets and pays out dividends daily. At present, BUIDL operates on several blockchain networks, including Ethereum, Solana, and Arbitrum, among others.

However, up until now, the use of BUIDL has been largely limited to holding and transferring the token in secure wallets. That has changed with the launch of sBUIDL.

Here’s a quick summary of the differences between BUIDL and sBUIDL:

How sBUIDL Works on Euler

The first major use case for sBUIDL comes via its integration with the Euler Protocol, a decentralized lending platform known for its modular and flexible design. 

Unlike many earlier DeFi lending platforms that follow fixed rules and offer limited customization, Euler is built to let developers, institutions, and users create tailored financial markets.

On Euler,

• Users can now deposit sBUIDL as collateral to borrow other stablecoins such as USDC or AUSD. 
• In doing so, they gain access to liquidity without having to sell their BUIDL-backed holdings. 

This is especially useful for institutions and investors who want to preserve their exposure to BUIDL’s yield while unlocking funds for other uses.

Borrowers who use sBUIDL as collateral can also earn rewards in AVAX, the native token of the Avalanche blockchain, the network on which this integration is currently active.

The addition of sBUIDL to Euler is more than just a technical deployment. It is one of the first real examples of a large, institution-backed fund being made usable in decentralized markets.

But why is this important?

This development represents a step toward greater synergy between traditional finance and DeFi. Until now, the two worlds have mostly operated in parallel, with institutions cautiously observing blockchain innovation from a distance. The inclusion of sBUIDL in a DeFi protocol signals that this gap is starting to close.

For DeFi, it brings much-needed credibility and access to stable, regulated financial products. For traditional finance, it offers new opportunities for liquidity and composability that are difficult or impossible to achieve in conventional markets.

It also helps answer a persistent question in crypto: how can blockchain move beyond speculation and into real financial utility? Tokenizing assets like BUIDL and integrating them into platforms like Euler shows how this can be done in a practical, regulated, and user-driven way.

How Euler Lets Users Build Custom Lending Markets?

Euler is often called a “lending super app” because it’s more than just a single lending platform. It acts like a toolkit that allows users to build and customize different types of lending markets.

Unlike many DeFi platforms that apply the same rules to everyone, Euler lets developers set their own rules. This includes how much collateral is needed, when liquidations happen, what interest rates apply, and who can use each market. This flexibility makes Euler useful for institutions that need more control over risk and compliance.

Euler also supports composability, which means different parts of the platform can easily work together. It follows open standards like ERC-4626, which helps various assets and vaults connect and share liquidity across the system.

With hundreds of millions of dollars already deposited, Euler is being used to build advanced financial tools like fixed-term loans, synthetic assets, and restricted-access markets. Its modular design is helping shape the next generation of decentralized lending.

Benefits and Risks of sBUIDL

Benefits

• On-chain utility: sBUIDL transforms a traditionally static asset (BUIDL) into a dynamic, blockchain-compatible token. It can be used in DeFi protocols like Euler for borrowing, collateralization, and liquidity access, without needing to sell the original investment.
• Composability: As an ERC-20 token, sBUIDL is interoperable with a wide range of DeFi applications. This composability allows developers and users to integrate it into various smart contracts, yield strategies and lending products.
• Capital Efficiency: By using sBUIDL as collateral, users can unlock liquidity (e.g., borrowing stablecoins like USDC or AUSD) while still retaining exposure to BUIDL’s underlying yield. This improves portfolio flexibility without sacrificing returns.
• Institutional-Grade Backing: Because sBUIDL is 1:1 backed by BUIDL, a fund managed by BlackRock and invested in U.S. Treasury assets. Thus, it inherits a high degree of stability and transparency, appealing to risk-conscious participants.

Risks

• Smart contract risk: sBUIDL operates through smart contracts, including those from Securitize and integrated DeFi protocols like Euler. Any bugs, exploits or failures in these contracts could impact fund access or cause unintended losses.
• Custodial dependence: Redemption of sBUIDL into BUIDL depends on the Securitize infrastructure and compliance framework. This introduces an element of centralized control, which differs from fully decentralized assets.
• Limited liquidity: Since sBUIDL is relatively new and primarily held by institutions, market liquidity may be limited in early stages. This could impact trading flexibility or increase slippage for large transactions.
• Regulatory and legal uncertainty: Because sBUIDL bridges regulated financial assets with decentralized protocols, it may be subject to evolving regulatory scrutiny. Changes in policy or classification could affect its availability or usage.

What Comes Next?

While sBUIDL is currently available on Avalanche through Euler, similar integrations will likely follow on other networks where BUIDL is already active, such as Ethereum and Arbitrum, among others. 

As more DeFi platforms adopt real-world asset tokens, users can expect increased options for yield generation, collateral management, and diversified portfolio strategies.

At the same time, the success of this integration may encourage more traditional funds to explore tokenization and DeFi participation. If institutional products like BUIDL can find real utility in decentralized markets, it could pave the way for a more blended financial system, one that retains the safeguards of traditional finance while embracing the flexibility and innovation of blockchain.

Conclusion

The integration of sBUIDL with Euler marks a turning point in the evolution of tokenized finance. It demonstrates how a traditionally structured fund like BUIDL can gain new functionality and composability when connected to DeFi infrastructure.

For users, this means access to safer and more diverse financial tools. For developers and institutions, it opens the door to building a new class of blockchain-based financial products grounded in real-world value.

The fusion of traditional and decentralized finance is no longer theoretical. With sBUIDL now live on Euler, it’s becoming part of the new financial reality.

FAQs