Aave launches oversized stablecoin called GHO

GHO would allow users to borrow the stablecoin while learning the performance of their Aave-locked assets, but the proposal only asks for comment at this point.

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Decentralized finance (DeFi) giant Aave has unveiled plans to launch a supersized stablecoin called GHO, subject to DAO community approval.

The announcement was made by Aave Companies, the centralized entity supporting the Aave protocol on its Twitter page on July 7, stating:

"We have created an ARC for a new decentralized, collateral-backed stablecoin native to the Aave ecosystem, known as GHO."

According to Thursday's shared governance proposal, GHO would be an Ethereum-based, decentralized U.S. dollar (USD)-pegged stablecoin that could be backed by multiple assets of the user's choice.

To get GHO, users will need to mint the stablecoin against their deposited collateral, however, the list of supported collateral assets and collateral ratio are yet to be detailed.

Since users are essentially borrowing the stablecoin against their holdings, the position will need to be overcollateralized as with any normal Aave loan.

“With community support, GHO can launch on the Aave protocol, allowing users to mint GHO against their provided collateral. GHO would be backed by a diverse set of crypto-assets chosen at the users discretion, while that borrowers would continue to earn interest on their underlying collateral.”

The proposal notes that 100% of interest payments accrued by GHO coiners would be “transferred directly to the AaveDAO treasury; rather than the standard reserve factor collected when users borrow other assets.”< /p>

Holders of the staked AAVE token (stkAAVE) would also benefit from adopting the stablecoin, as Aave Companies proposed 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 allowing users to mint GHO, a recommended starting interest rate and discount rate will be offered,” the team said, adding that an audit would take place over the next few weeks if all goes as planned.