On Sunday, non-custodial market protocol Aave announced that the Aave DAO has approved a new stablecoin for the ecosystem called “GHO”. Aave Companies offered the stablecoin in the first week of July and the collateral-backed stablecoin will be pegged to the value of the US dollar.
New Collateral-Backed Stablecoin Designed by Aave Companies to Launch After Aave DAO Votes on Genesis Parameters
Aave Explain Sunday that the Decentralized Autonomous Organization (DAO) of Aave approved a proposal to create a stable token called “GHO”. “The community has given the green light for GHO”, the official Twitter account of Aave detailed. “The next step is to vote on the GHO genesis parameters, expect a proposal next week on the governance forum.”
The GHO introduction blog post, published on July 7, 2022, states that the stablecoin will be “backed by a diverse set of crypto-assets chosen at the discretion of users, while borrowers will continue to earn interest on their underlying collateral.” The governance proposal was approved by a large majority of Aave DAO voters, as more than 99% of voting participants voted in favor of launching GHO.
The governance proposal approval snapshot says that GHO will “provide benefits to the community through the Aave DAO by sending 100% interest payments on GHO’s borrowings to the DAO” and that GHO will be “administered by the governance of Aave”. Aave’s stablecoin will join the stablecoin economy, which is currently valued at $153 billion. Tether (USDT) leads the stablecoin pack and usd coin (USDC) follows behind USDTin terms of overall market capitalization.
GHO will also join stablecoin crypto assets that leverage collateral assets and some that leverage the overcollateralization method. Makerdao’s DAI stablecoin is over-collateralized and Tron’s USDD is also over-collateralized, meaning there is more collateral than needed to cover the stablecoin’s support during times of extreme market volatility.
“As a decentralized stablecoin on the Ethereum mainnet, GHO will be created by users (or borrowers),” explains Aave Companies’ blog post on the subject. The blog post further adds:
Similarly, when a user repays a borrowed position (or is liquidated), the GHO protocol burns that user’s GHO. All interest payments accrued by GHO coiners would be transferred directly to the Aave DAO treasury; rather than the standard reserve factor collected when users borrow other assets.
Aave Companies says community was very engaged in GHO’s governance proposal
Aave also has a native token that is ranked 45 out of over 13,000 crypto assets today. The digital asset has a market valuation of approximately $1.46 billion and aave (AAVE) increased by 84.7% in the last month. The open-source decentralized lending protocol is the third-largest decentralized finance (defi) protocol by total value locked. Data from defillama.com says Aave has $6.59 billion locked up as of July 31. In mid-May, Aave spear a web3 social media platform based on smart contracts called Lens Protocol. The Lens platform has over 50 apps built on the Polygon (MATIC) network.
Regarding the GHO stablecoin, Aave Companies said the community was “very engaged with the GHO proposal, providing incredibly helpful and informative feedback.” Aave detailed some of the things mentioned by the community that the team will be focusing on, including DAO-defined interest rate vulnerabilities, supply caps, an ankle stability module, and the “need to control the potential facilitators correctly”. For now, the community will have to participate in voting on the stablecoin’s genesis parameters before the crypto token is issued.
What do you think of the upcoming Aave stablecoin project called GHO? Let us know what you think about this topic in the comments section below.
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