The giant of decentralized finance (DeFi) Aave has revealed its plans to launch an overcollateralized stablecoin called GHO, subject to approval by the community’s decentralized autonomous organization (DAO)..
The announcement was made by Aave Companies – the centralized entity that supports the Aave protocol – on its Twitter page. on Thursday, stating:
“We have created a DAO for a new collateral-backed decentralized stablecoin native to the Aave ecosystem, known as GHO.”
Under the shared governance proposal on Thursday, GHO would be a decentralized Ethereum-based stablecoin pegged to the US dollar that could be collateralized with multiple assets of the user’s choosing..
To obtain GHO, users would have to mint the stablecoin against their escrowed collateral. Neverthelessthe list of guaranteed assets and the proportion of the guarantee have not yet been detailed.
As users are borrowing the stablecoin against their holdings, the position will have to be overcollateralized like any normal Aave loan..
“With the support of the community, GHO can be launched on the Aave Protocol, allowing users to mint GHO against their supplied collateral. GHO would be backed by a diversified pool of crypto assets chosen at the discretion of users, while borrowers continue to earn interest. on its underlying collateral.”
The proposal states that 100% of the interest payments earned by GHO miners would be “transferred directly to the AaveDAO treasury; instead of the standard reserve factor charged when users borrow other assets”.
Holders of the staked AAVE token (stkAAVE) would also benefit from stablecoin adoptionas the Aave Companies have proposed that they can also mint and borrow GHO at a discount rate.
“If the community votes positively for the deployment of the protocol that creates the ability for users to mint GHO, a recommended initial interest rate and a discount rate will be proposed,” the team stated.adding that an audit would take place in the coming weeks if all goes according to plan.
Aave founder Stani Kulechov stated via Twitter that the team takes a broader view of the dollar-valued asset.:
“While GHO would be secured by assets in the Ethereum market, the main vision for GHO is to seek organic adoption through L2 to solve real-life payment opportunities across the internet and on the ground.”
BREAKING: The @AaveAave team submitted ARC to launch a self-sovereign overcollateralized stablecoin GHO backed by the Aave Protocol collaterals https://t.co/YHpLmipLjl
— stani.lens (,) (@StaniKulechov) July 7, 2022
Breaking Moment: The @AaveAave team filed ARC to launch a self-supporting, over-collateralized stablecoin backed by Aave Protocol collaterals, GHO. https://t.co/YHpLmipLjl
Aave is an automated DeFi protocol that allows users to lend and borrow digital assets without going through a centralized broker or getting their approval. The latest DAO proposal has coincided with the native Aave token (AAVE) gaining 15.04% in the last 24 hours to stand at $72.31 at the time of writing.
According to data from DefiLlama, Aave is the second largest DeFi platform in terms of Total Value Locked (TVL), at $6.76 billion. The ecosystem is based on Ethereum and also supports multiple layer 2s such as Polygon, Optimism, and Arbitrum..
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