Aave proposes launching the decentralized stablecoin GHO

Aave proposes a decentralized, collateral-backed stablecoin, GHO.

Developers at Aave proposed to the community the launch of GHO, a multi-collateral stablecoin native to the DeFi ecosystem, pegged to the US dollar.

1/ Calling all GHOsts 👻

We have created an ARC for a new decentralized, collateral-backed stablecoin, native to the Aave ecosystem, known as GHO.

Read more below and discuss your thoughts for the snapshot (coming soon)!👇https://t.co/P7tHl9LbBe

— Aave (@AaveAave) July 7, 2022

“As a decentralized stablecoin on the Ethereum network, GHO will be minted by users. As with all borrowings in the Aave protocol, collateral must be provided (at a certain ratio) to mint GHO,” the team explained.

As collateral, GHO will be secured by a “diversified set of crypto assets” supported by the protocol. Users will continue to earn interest on the tokens they put up as collateral.

All decisions regarding GHO, including interest rates, collateral levels, and more, will be made by DAO, the team noted.

“If approved, the deployment of GHO would make borrowing in stablecoins within the Aave protocol more competitive, provide more opportunities for users and give additional income to the Aave DAO by directing 100% of interest payments on GHO loans to the DAO treasury,” the statement said.

The developers also proposed offering a discount on issuing the stablecoin to AAVE token holders in staking. In their view, this would spur stkAAVE volumes, increasing protocol security.

It is envisaged that the emission and burning of GHO would be controlled by community-approved “facilitators” with an established issuance cap.

“The use of stablecoins is set to grow as crypto assets are further integrated with a user base that remains less committed to digital assets. Decentralized “stablecoins” provide a censorship-resistant fiat-denominated currency on the blockchain,” the Aave team stressed.

If approved by the community, the stablecoin proposal would undergo audits by OpenZeppelin and PeckShield. Deploying GHO on the protocol and other networks would require a new vote.

According to DeFi Llama, Aave ranks second by total value locked (TVL) among DeFi protocols, with $6.11 billion. The project trails MakerDAO ($7.68 billion), which oversees the most popular decentralized stablecoin DAI with a capitalization of nearly $6.5 billion (CoinGecko).

In July, MakerDAO disabled Aave from the direct-deposit module, depriving users of the protocol’s ability to borrow DAI.

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