Aave Protocol’s GHO Stablecoin Now Available on Arbitrum

Author: Vince Quill, CoinTelegraph; Compiler: Baishui, Golden Finance

After a vote by the Aave Decentralized Autonomous Organization (DAO), the GHO stablecoin has been deployed on the Arbitrum network.

Aave's DAO also plans to launch the GHO stablecoin on multiple networks over time, but chose to deploy GHO on Arbitrum to take advantage of the low transaction costs and higher throughput of the Layer 2 network.

The decision to promote the stablecoin to other networks in stages was based on security and risk management factors. This allows the DAO to test the waters before expanding GHO's presence to other blockchain ecosystems.

Chainlink's CCIP makes multi-chain GHO possible

Chainlink's CCIP protocol is the interoperability layer that allows Aave DAO to migrate the GHO stablecoin originally launched on the Ethereum network to Arbitrum and other networks in the future.

A high-level view of the operation of Chainlink's CCIP interoperability protocol. Source: Chainlink

The interoperability of stablecoins is achieved through two mechanisms, namely the destruction and minting model and the lock and release function, which locks or destroys GHO tokens on the initial source chain and then releases them on the new chain.

If the GHO stablecoin is bridged from the Ethereum network to a different blockchain, the GHO tokens will be locked in a smart contract on Ethereum (called the "Vault Contract") and then minted by the service provider on the target blockchain.

When GHO is bridged from another blockchain network to the Ethereum network, the GHO tokens on the alternative chain will be burned and an equal amount will be released from the Vault contract on the Ethereum blockchain network.

If neither chain is Ethereum, the service provider will destroy the GHO tokens on the first chain and mint new tokens on the second chain.

Chainlink and Arbitrum: An Evolving Partnership

The relationship between Chainlink and Arbitrum began in 2020 and evolved into a partnership to facilitate cross-chain development of decentralized applications.

Since then, Chainlink has become one of the leading blockchain interoperability and oracle networks, running experimental pilot programs with global institutions such as the SWIFT interbank messaging system to transfer value across blockchains.

Building on this momentum, Chainlink’s CCIP usage and adoption will continue to increase in 2024, with cumulative network fee revenue climbing to $377,724 in March, driven primarily by activity on Arbitrum.