Aave plans to launch over-collateralized stablecoin GHO

Decentralized finance (DeFi) giant Aave has unveiled plans to launch an over-collateralized stablecoin, GHO, subject to community DAO approval.

The announcement was made by Aave Companies on its Twitter page on July 7. Aave Companies, the centralized entity behind the Aave protocol, states:

“We have created an ARC for a new decentralized, collateralized stablecoin, native to the Aave ecosystem, called GHO.”

Under the governance proposal shared Thursday, GHO will be a decentralized ethereum-based stablecoin pegged to the U.S. dollar (USD) that can be collateralized with a variety of assets of the user's choice.

To acquire GHO, users need to mint the stablecoin with their deposited collateral, however, the list of supported collateral assets and collateral ratios have not yet been detailed.

Since users are essentially borrowing stablecoins to collateralize their holdings, positions need to be overcollateralized as with any normal Aave loan.

“With community support, GHO can be launched on the Aave protocol, allowing users to mint GHO using the collateral they provide. GHO will be backed by a diverse range of crypto assets of the user’s choice, while borrowers will continue to borrow from their underlying collateral earn interest."

The proposal states that 100% of the accrued interest on GHO minters would be "transferred directly to the AaveDAO treasury; rather than the standard reserve that users are charged when borrowing other assets."

Holders of staked AAVE tokens (stkAAVE) will also benefit from the adoption of the stablecoin, as the Aave company suggests they can also mint and borrow GHO at a discounted rate.

“If the community votes in favor of the deployment of the protocol, creating the ability for users to mint GHO, a suggested starting interest rate and discount rate will be proposed,” the team said, adding that if all goes according to plan, the GHO will be released in the next few months. Weekly audit.

Aave founder Stani Kulechov said on Twitter that the team has a broader view on USD-pegged assets:

“While GHO will be secured by assets on the Ethereum market, GHO’s main vision is to seek organic adoption through L2 to address real-world payment opportunities on the Internet and on the ground.”

Aave is an automated DeFi protocol that enables users to lend and borrow digital assets without going through or getting approval from a centralized intermediary. Concurrent with the latest proposal from The DAO, Aave’s native token, AAVE, is up 15.04% over the past 24 hours, hitting $72.31 at the time of writing.

According to DeFi Llama, Aave is the second-largest DeFi platform in terms of total value locked (TVL), at $6.76 billion. Based on Ethereum, the ecosystem also supports multiple Layer 2s, including Polygon, Optimism, and Arbitrum.