Leading open-source, decentralized finance (DeFi) protocol, Aave has announced plans to introduce GHO, an overcollateralized stablecoin, subject to the approval of the community DAO.
On July 7, Aave Companies, the centralized organization that supports the Aave protocol, released the following announcement on its Twitter page:
“We have created an ARC for a new decentralized, collateral-backed stablecoin, native to the Aave ecosystem, known as GHO.”
GHO would be an Ethereum-based, decentralized stablecoin tied to the US dollar (USD), collateralized with a variety of assets of the user’s choice, according to the governance proposal revealed on Thursday.
1/ Calling all GHOsts đź‘»Â
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 Labs (@aave) July 7, 2022
Users would need to mint GHO against their deposited collateral in order to acquire it, although the list of supported collateralized assets and the collateral ratio has not yet been made public. The announcement reads:
“With community support, GHO can be launched on the Aave Protocol, allowing users to mint GHO against their supplied collaterals. GHO would be backed by a diversified set of crypto-assets chosen at the users’ discretion, while borrowers continue earning interest on their underlying collateral.”
The plan states that instead of the typical reserve component gathered when users borrow other assets, 100% of the interest payments accumulated by GHO minters will be immediately sent to the AaveDAO treasury.
Staked Aave holders would be in profit
The adoption of the stablecoin would also benefit holders of the staked AAVE token (stkAAVE), as Aave Companies has suggested that they would also be allowed to mint and borrow GHO at a discounted price. The team said that one could expect an audit to happen over the next few weeks and added:
“If the community votes positively for the deployment of the protocol creating the ability for users to mint GHO, a recommended starting interest rate and discount rate will be proposed.”
In March, the second-largest DeFi platform in terms of TVL at $6.76 billion brought Aave V3 liquidity pool after an anonymous governance vote.
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