Key Takeaways
- Aave’s DAO will adjust interest rates, set mint caps, and govern who is eligible to mint GHO based on predetermined conditions.
- GHO is backed by a multitude of digital assets, ETH and AAVE
- Minting of GHO is made possible through collateral supplied into the Aave Protocol V3 Ethereum market.
Aave Companies, a prominent player in the decentralized finance (DeFi) space, is gearing up to launch its latest innovation, a new decentralized stablecoin called “GHO,” native to its Aave Protocol, on the Ethereum mainnet. This move is set to bring increased transparency and flexibility for users within the Aave ecosystem.
The GHO stablecoin is designed to draw its value from a peg to various collateral assets held by users across the Aave Protocol. Unlike some stablecoin peers, such as MakerDAO’s DAI, which require separate vaults for each asset used for minting, GHO allows different types of collateral to be deposited in a single transaction, offering a more efficient and user-friendly approach.
Aave’s decentralized autonomous organization (DAO) will take charge of adjusting interest rates, setting mint caps, and governing who is eligible to mint GHO based on predetermined conditions. This decentralization aligns with the principles of DeFi, granting the community greater control over the stablecoin’s operations.
The launch of GHO on the Ethereum mainnet follows a successful proposal to the Aave DAO in June 2022. After receiving the community’s approval, the stablecoin was deployed on the Ethereum Testnet in February, allowing developers to fine-tune the protocol before its official release.
GHO is backed by a multitude of digital assets, including Ether (ETH), Ethereum’s native currency, and Aave’s native token, AAVE, which enhances its stability and robustness. The decentralized nature of GHO transactions ensures that all operations are executed through self-executing smart contracts and transaction data is accessible and auditable on the blockchain.
The recent community governance vote saw nearly 100% of participating addresses voting in favor of the new stablecoin, further cementing its acceptance and enthusiasm within the Aave community.
Minting of GHO is made possible through collateral supplied into the Aave Protocol V3 Ethereum market. This over-collateralization ensures the stability and security of GHO, making it a reliable asset for users across the DeFi landscape.
To facilitate the minting process, Aave has established a group of users known as “facilitators.” These individuals must undergo an approval process from the Aave DAO to gain this status, and depending on their class, they can mint up to a certain amount of GHO or enable redemptions between GHO and other assets.
The launch of GHO adds to the growing repertoire of DeFi-native algorithmic stablecoins. DeFi protocol Curve launched its flagship algorithmic stablecoin, crvUSD, on May 4. CrvUSD is an over-collateralized stablecoin backed by assets such as USDC, and Ethereum, liquid staking derivatives like Frax’s sfrxETH, and liquidity provision tokens of stablecoin pools.
