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 value of the US dollar.
A new guarantee-backed Stablecoin made by Aave companies is expected to be launched after Aave DAO votes on Genesis parameters
Ave explained Sunday that Aave’s decentralized autonomous organization (DAO) approved a proposal to create a stablecoin token called “GHO”. “The community has given the green light to GHO,” Aave’s official Twitter account detailed. “The next step is to vote on GHO’s genesis parameters, look for a proposal next week on the governance forum.”
The introductory blog post from GHO, published on July 7, 2022, states that the stablecoin will be “backed by a diversified set of cryptocurrencies chosen at the user’s discretion, while borrowers will continue to earn interest on their underlying collateral.” The governance proposal was approved by the large majority of Aave DAO voters, as over 99% of the voters voted in favor of the launch of GHO.
The approval snapshot of the governance proposal states that GHO will “provide community benefits through the Aave DAO by sending 100% of the interest payments on the GHO loans to the DAO” and GHO will be “administered by Aave governance.” Aave’s stablecoin will join the stablecoin economy, which is currently worth $ 153 billion. Tether (USDT) leads the stablecoin package and usd coin (USDC) follows behind USDT, in terms of overall market capitalization.
GHO will also join stablecoin cryptocurrencies that take advantage of collateral assets and some that take advantage of the over-collateralization 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 stablecoin support during times of extreme market volatility.
“As a decentralized stablecoin on Ethereum’s core network, GHO will be created by users (or borrowers),” explains Aave Companies’ blog post on the subject. The blog post also adds:
As a result, when a user pays off a loaned position (or is liquidated), the GHO protocol burns that user’s GHO. All interest payments accrued by the GHO coiners would be passed directly to the Aave DAO treasury; rather than the standard reserve factor collected when users borrow other assets.
The Aave companies say the community has been very involved with GHO’s governance proposal
Aave also has a native token which is ranked 45 out of over 13,000 cryptocurrencies today. The digital asset has a market valuation of around $ 1.46 billion and aave (AAVE) has increased 84.7% in the past month. The Open Source Decentralized Lending Protocol is the third largest decentralized finance protocol (defi) in terms of total locked-in value. Data from defillama.com indicates that Aave blocked $ 6.59 billion on July 31st. In mid-May, Aave launched a Web3 smart contract-based social media platform called Lens Protocol. The Lens platform has more than 50 applications based on the Polygon Network (MATIC).
Regarding the GHO stablecoin, Aave Companies said the community was “very involved with the GHO proposal, providing incredibly useful and informative feedback.” Aave detailed some of the things mentioned by the community that the team will focus on, including DAO-established interest rate vulnerabilities, bid limits, a peg stability module, and the “need to properly assess potential facilitators “. For now, the community will have to participate in the vote on the stablecoin genesis parameters before the cryptographic token is issued.
What do you think of Aave’s next stablecoin project called GHO? Let us know what you think about this topic in the comments section below.
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