On Sunday, the non-custodial market protocol Aave announced that the Aave DAO has approved a new stablecoin for the ecosystem called “GHO.” Aave Companies proposed the stablecoin during the first week of July and the collateral-backed stablecoin will be pegged to the U.S. dollar’s value.
GHO will also join stablecoin crypto assets that leverage collateral assets and some that leverage the method of over-collateralization. Makerdao’s DAI stablecoin is over-collateralized and Tron’s USDD is also over-collateralized, which means there’s more collateral than necessary to cover the stablecoin’s backing during times of extreme market volatility.
“As a decentralized stablecoin on the Ethereum mainnet, GHO will be created by users (or borrowers),” Aave Companies’ blog post about the subject explains. The blog post further adds:
Correspondingly, when a user repays a borrow position (or is liquidated), the GHO protocol burns that user’s GHO. All the interest payments accrued by minters of GHO would be directly transferred to the Aave DAO treasury; rather than the standard reserve factor collected when users borrow other assets.
As far as the GHO stablecoin is concerned, Aave Companies said that the community was “very engaged with the GHO proposal, providing incredibly helpful and informative feedback.” Aave detailed some of the things mentioned by the community the team will focus on which includes DAO-set interest rate vulnerabilities, supply caps, a peg stability module, and the “necessity for properly vetting potential facilitators.” For now, the community will have to participate in voting on the stablecoin’s genesis parameters before the crypto token is issued.
What do you think about the upcoming Aave stablecoin project called GHO? Let us know what you think about this subject in the comments section below.