On Sunday, the non-custodial market protocol Aave announced that the Aave DAO has approved a new stablecoin for the ecosystem called “GHO.” Aave Companies proposed the stablecoin during the first week of July and the collateral-backed stablecoin will be pegged to the U.S. dollar’s value.
Aave Companies will launch a new collateral-backed stablecoin after they vote on Genesis Parameters
Aave explained on Sunday that the Aave decentralized autonomous organization (DAO) approved a proposal to create a stablecoin token called “GHO.” “The community has given the green light for GHO,” the official Aave Twitter account detailed. “The next step is voting on the genesis parameters of GHO, look out for a proposal next week on the governance forum.”
The GHO introductory blog post, published on July 7, 2022, says the stablecoin will be “backed by a diversified set of crypto-assets chosen at the users’ discretion, while borrowers continue earning interest on their underlying collateral.” The governance proposal was approved by a great majority of Aave DAO voters, as more than 99% of voting participants voted in favor of launching GHO.
The governance proposal’s approval snapshot says GHO will “provide benefits for the community via the Aave DAO by sending 100% of interest payments on GHO borrows to the DAO” and GHO will be “administered by Aave governance.” Aave’s stablecoin will join the stablecoin economy, which is currently valued at $153 billion. The stablecoin pack is led by Tether (USDT) and the usd coin(USDC) are second (in terms of total market capitalization).
GHO will also join stablecoin crypto assets that leverage collateral assets and some that leverage the method of over-collateralization. Makerdao’s DAI stablecoin is over-collateralized and Tron’s USDD is also over-collateralized, which means there’s more collateral than necessary to cover the stablecoin’s backing during times of extreme market volatility.
“As a decentralized stablecoin on the Ethereum mainnet, GHO will be created by users (or borrowers),” Aave Companies’ blog post about the subject explains. This blog entry adds further:
Correspondingly, when a user repays a borrow position (or is liquidated), the GHO protocol burns that user’s GHO. Instead of the reserve factor that users collect when they borrow assets, all interest payments earned by minters would directly transfer to the Aave DAO Treasury.
The GHO Governance Proposal was well received by the community, according to Aave Businesses
Aave has also a native token that is currently ranked 45 among more than 13,000 cryptocurrency assets. Market valuation for the digital asset is around $1.46 Billion. AAVE (AAVE), has seen an 84.7% increase in value over the past month. In terms of total locked value, the open-source decentralized lending program is third. According to data from defillama.com, Aave had $6.59 million locked as of July 31, 2013. In mid-May, Aave launched a Web3, smart-contracts-based social media platform called the Lens Protocol. More than 50 apps are available on the Lens platform, which is built upon top of Polygon (MATIC).
As far as the GHO stablecoin is concerned, Aave Companies said that 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 the team will focus on which includes DAO-set interest rate vulnerabilities, supply caps, a peg stability module, and the “necessity for properly vetting potential facilitators.” For now, the community will have to participate in voting on the stablecoin’s genesis parameters before the crypto token is issued.
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