Tiger Research: From Zero to $2.6 Billion – The Buyers of BlackRock's BUIDL Are Not Wall Street

This report is written by Tiger Research.BlackRock's BUIDL has become an indispensable asset in the digital asset space. However, its largest buyers are not traditional institutions, but DeFi (Decentralized Finance).

Key Takeaways

• The on-chain significance of BUIDL is not that BlackRock issued a token, but that Ethena, Ondo, Frax, and Spark used BUIDL as a building block for their dollar-denominated products, transforming an institutional fund into a foundational asset within the DeFi supply chain.
• Protocols chose BUIDL not for its yield, but because it simultaneously met three conditions: clear legal claims, on-chain composability, and existing regulatory compliance. No other asset provides all three.
• The supply chain doesn't stop at the first layer. As BUIDL is processed into USDtb and further transformed into ecosystem-specific dollar products, demand for the underlying asset grows with each new ecosystem that emerges.
• BUIDL reveals a entirely new distribution channel for tokenized assets. Its customers were not discovered through traditional sales channels, but through DeFi protocols—a customer base that doesn't exist in traditional finance. Without recognizing this channel, the next BUIDL will not emerge.

1. From Institutional Product to Protocol Infrastructure

BUIDL was initially designed for institutions: offering exposure to cash and US Treasuries, limited to qualified investors, with a minimum subscription of $5 million.

However, the first movers were DeFi protocols, not traditional institutions. They purchased it not purely for yield, but based on three reasons:

1. Legal Clarity: Issued under Rule 506(c), investor rights are protected by US securities laws. Protocols can clearly explain asset attributes and redemption processes in legal terms.
2. Lower Compliance Costs: After the GENIUS Act, reserve design became very complex. BUIDL already meets institutional-grade collateral standards. The compliance burden is transferred, avoiding the need to build from scratch. This advantage becomes more pronounced as regulation tightens.
3. On-chain Composability: Usable as protocol reserves, exchange collateral, or the underlying layer for ecosystem dollar products.

Since no other asset met all three conditions simultaneously at the time, BUIDL became the default foundational asset.

2. How DeFi Protocols Use BUIDL

The key isn't that protocols hold BUIDL, but the specific role BUIDL plays within each protocol's architecture.

2.1. Ethena (USDtb): Funding Rate Buffer

Ethena's flagship products are the synthetic dollar USDe and its staked version, sUSDe.

The yield sources for USDe include:

• Staking rewards from the collateral assets
• Funding rates from perpetual contracts (via Delta-neutral strategy)

The second yield source, funding rates, comes from the Delta-neutral strategy. USDe holds a short futures position equal to the size of the collateral to offset price risk. When long demand dominates, longs pay funding fees to shorts. As the short side, Ethena directly collects this income.

Risk appears when funding rates turn negative. In a bear market, short demand may exceed long demand, causing short position holders to pay funding fees. For Ethena, income turns into cost. If this persists, the insurance fund will be depleted, and USDe's dollar peg will face pressure.

Ethena needed an asset capable of absorbing this pressure. USDtb fills this role, with its core reserves being BUIDL and USDC. Its purpose is not to enhance yield, but to act as a defensive buffer, ensuring the overall structural stability of Ethena during periods of negative funding rates.

2.2. Ondo (OUSG): BUIDL as an Intermediate Input

OUSG (Ondo US Treasury Fund) is a tokenized fund bringing institutional-grade US Treasury exposure on-chain. Direct access to institutional money market funds like BlackRock BUIDL or Franklin Templeton FOBXX typically requires millions in minimums and qualified investor status. OUSG lowers this barrier, acting as an on-chain intermediary to make these assets available to DeFi users.

BUIDL is a core component of OUSG's reserve composition, alongside Franklin Templeton's FOBXX and WisdomTree's WTGXX. OUSG repackages institutional assets, otherwise inaccessible to retail investors, into an on-chain intermediate product.

2.3. Frax (frxUSD): Minting and Redemption Reserve

frxUSD is a new type of US dollar stablecoin designed by the Frax Protocol, aiming to maintain a stable value of $1 like USDC or USDT. Its uniqueness lies in its reserve structure.

Existing stablecoins typically hold their reserves in cash or treasuries in off-chain bank accounts. Frax replaces this with BUIDL (an on-chain tokenized treasury). The mechanism is a direct 1:1 exchange: deposit BUIDL to mint frxUSD, return frxUSD to redeem BUIDL.

End users do not interact directly with this structure. They use frxUSD as a stablecoin for payments or in DeFi, while BUIDL operates in the background, supporting every mint and redemption.

2.4. Spark's Tokenized Grand Prix (TGP) Allocation and the Common Thread of BUIDL

Spark's "Tokenized Grand Prix (TGP)" allocated $500 million of its $1 billion facility to BUIDL, with the remainder going to Superstate's USTB and Centrifuge's JTRSY. Instead of choosing a single reserve asset, Spark constructed a portfolio.

Traditional asset managers do the same, blending treasuries, money market funds, and credit instruments. The difference is that this portfolio operates on-chain, redeployed as collateral and liquidity through DeFi rails.

In the four cases above, BUIDL played different roles: reserve asset, intermediate input, minting and redemption backing, and portfolio component. But a common pattern exists: in every case, BUIDL is not the final product. Protocols buy BUIDL to populate their own systems. This demand structure is already operating at scale.

3. BUIDL's Reprocessing: A Compound Demand Structure

As mentioned, protocols have directly adopted BUIDL as a reserve asset. But the chain doesn't stop there. Products built on BUIDL are becoming reserves for new products, creating an expanding layer of derivative structures.

MegaETH's USDm is the clearest example. USDm is an ecosystem-specific stablecoin developed by MegaETH in collaboration with Ethena. Its reserve is USDtb, and USDtb's reserve is BUIDL. As demand for USDm grows within MegaETH, demand for BUIDL rises correspondingly.

Each new ecosystem entering this structure adds a "customer," not a "competitor." In on-chain finance, speed of adoption is also a key differentiator. Building an equivalent derivative structure in traditional finance requires months of regulatory review, legal contract signing, and custodial arrangements. On-chain, this process is significantly compressed. Within regulatory frameworks, the range of eligible foundational assets is virtually unlimited.

In summary, BUIDL is unlocking compound demand by anchoring an expanding network of on-chain structures to a secure Real World Asset foundation.

4. What Comes After BUIDL?

BlackRock built an institutional fund; Ethena, Ondo, Frax, and Spark adopted it as a foundational asset; MegaETH layered an ecosystem-specific dollar on top. All this happened in less than two years since BUIDL's launch in March 2024.

This speed wasn't driven solely by the BlackRock brand. Legal clarity, on-chain composability, and regulatory compliance: BUIDL was the only asset that provided all three at the time. This first-mover advantage is immense and compounds as more DeFi protocols integrate BUIDL into their reserves.

For teams designing the next tokenized asset, the question is how to enter this market. Most take one of two paths: either assume that tokenization itself generates demand, or replicate traditional finance distribution models through sales teams, broker networks, and existing channels.

BUIDL took a third path. DeFi protocols including Ethena, Ondo, Frax, and Spark were the first adopters. Exchanges and institutions like Deribit, Binance, and OKX followed. BUIDL found a customer segment that doesn't exist in traditional finance.

These customers buy the asset and build their own products on top, which in turn become the foundation for the next protocol. They are customers acquired not through sales, but through "design." Without identifying this customer segment, the next BUIDL will not emerge.