Home Finance Aave DAO approves the creation of the GHO stablecoin

Aave DAO approves the creation of the GHO stablecoin

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Aavein addition to its lending protocol, will also have a stablecoin the GHO. A governance vote of the DAO approved its creation almost unanimously.

Is having your own stablecoin the future of major DeFi protocols? This is the opinion ofAave Companiesthe creator of the Aave lending protocol. Early last month, it proposed to the DAO to decide on the creation of the GHO.

The protocol community has made its verdict. And it is without appeal. The members of the DAO pronounce overwhelmingly in favor the launch of the future stable token of the DeFi ecosystem.

A stablecoin with collateral (offset by yield)

At the end of a vote of three days, nearly 100% of voters approved the issuance of the GHO. Let us clarify that the token will be backed by the dollar and issued on the Ethereum blockchain. It will have two main features.

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It will be natively decentralized and (over)collateralized. The GHO issuance mechanism relies on the actions of Aave users, lenders or borrowers.

As with all borrowing on the Aave protocol, a user must provide collateral (at a specific collateral ratio) in order to mine the GHO.”

Thus, they will need to provide a counterparty to issue GHO. This guarantee will be in the form of one of the crypto-currencies accepted by Aave as collateral. Note that this collateral will generate a return in return.

As for the protocol itself, it will charge interest on loans in GHO stablecoins taken out by borrowers. The over-collateralization of the token gives it an obvious commonality with another DeFi stablecoin, the DAI from MakerDAO.

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After the governance vote, the next step of the project will be to implement an update of the protocol, an Aave improvement protocol (AIP). The administration of the future token will be the responsibility of the DAO.

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