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Aave DAO Approves Creating GHO Stablecoin

Aave DAO Approves Creating GHO Stablecoin

An overwhelming majority of Aave DAO voters have approved creating a new stablecoin.

The proposal, submitted by Aave Companies, was backed by 99.9% of voters, who pledged half a million AAVE in approving the measure to create GHO, a stablecoin that will be backed by collateral consisting of other cryptocurrencies.

Aave is a decentralized, non-custodial market protocol that enables users to borrow and lend cryptocurrencies. While providing liquidity to the cryptocurrency market, users can earn passive income on digital assets allocated to a smart contract. It is open-source and boasts $9.8 billion in liquidity, according to Aave’s website.

The community has given the greenlight 🟢 for GHO 👻 The next step is voting on the genesis parameters of GHO, look out for a proposal next week on the governance forum https://t.co/ba4oK50Wb8

— Aave (@AaveAave) July 31, 2022

Users looking to mint GHO first will deposit cryptocurrencies accepted by Aave. People who borrow GHO against crypto assets will still earn interest on the underlying collateral used to mint the stablecoin. The lending protocol will also charge interest on loans taken out in GHO, with payments going back to the Aave DAO.

The deposits users allocate in order to mint GHO will have to be greater than the value of GHO they receive, meaning that the loans will be over-collateralized. When users repay a borrowing position or are liquidated, the GHO lent will be burned from the protocol.

Even though the measure was approved, GHO’s introduction will take time as it’s implemented through an Aave improvement protocol (AIP), with the Aave DAO in charge of supervising the stablecoin’s distribution once its creation has been vetted.

The vote spanned a total of three days, and the price of AAVE—the coin native to the lending platform—spiked immediately following the proposal’s approval, to around $108 from $95.40. At time of publication, AAVE was valued at $102.50, up 4.5% in the past 24 hours.

As of now, the market capitalization of all stablecoins is over $153 billion, according to CoinMarketCap, and primarily composed of Tether’s USDT and Circle’s USDC. Legislation in the U.S. regarding the regulation of the digital asset class has recently been pushed back.

GHO will be pegged to the U.S. dollar and the stablecoin will be backed by a mix of cryptocurrencies that users can already deposit on the platform. The native interest rate of the stablecoin will be determined by the Aave DAO, according to an introduction of GHO on Aave’s website.

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Source: https://decrypt.co/106325/aave-dao-approves-creating-gho-stablecoin

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