Aave the Decentralised finance (DeFi)giant has exposed plans to launch an overcollateralized stablecoin called GHO, subject to the community decentralized independent organization’s (DAO’s) approval. GHO would permit users to derive the stablecoin while still learning the yield on their locked assets on Aave. Though, the proposal is just seeking a response at this stage.
The announcement was made by Aave Companies — the centralized entity supporting the Aave protocol — on its Twitter page on Thursday.
As the governance proposal shared on Thursday stated, GHO would be an Ethereum-based and decentralized stablecoin pegged to the U.S. dollar that could be collateralized with multiple assets of the user’s choice.
To acquire GHO, users would need to mint the stablecoin against their deposited collateral. Though, the list of supported collateralized assets and the collateral ratio has yet to be comprehensive.
As users are fundamentally borrowing the stablecoin against their holdings, the position will need to be overcollateralized as per any normal Aave loan.
“With community support, GHO can be launched on the Aave Protocol, allowing users to mint GHO against their supplied collaterals. GHO would be backed by a diversified set of crypto-assets chosen at the users’ discretion, while borrowers continue earning interest on their underlying collateral.”
The offer notes that 100% of the interest payments accumulated by GHO minters would be “directly transferred to the AaveDAO treasury; rather than the standard reserve factor collected when users borrow other assets.”
Holders of the staked AAVE token (stkAAVE) would also assistance from the stablecoin’s adoption, as Aave Companies has projected that they would also be able to mint and borrow GHO at a discounted rate.
“If the community votes positively for the deployment of the protocol creating the ability for users to mint GHO, a recommended starting interest rate and discount rate will be proposed,” the team specified, adding that an audit would happen over the next few weeks if all goes to plan.
Stani Kulechov, the Aave founder stated via Twitter that the team has a wider vision of the USD-pegged asset:
“While GHO would be secured by the assets on the Ethereum market, the main vision for GHO is to pursue organic adoption via L2s to solve real-life payment opportunities across the internet and on-ground.”
Aave is an automated DeFi protocol that allows users to lend and borrow digital assets without requiring to go through or obtain approval from a centralized intermediary. The newest suggestion to the DAO has accorded with Aave (AAVE), Aave’s native token gaining 15.04% over the past 24 hours to sit at $72.31 at the time of writing.
Conferring to data from DefiLlama, Aave is the second-largest DeFi platform in terms of total value locked (TVL) at $6.76 billion. The ecosystem is based on Ethereum which supports multiple ayer 2sincluding Polygon, Optimism, and Arbitrum.
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