Aave DAO votes for its own stablecoin
The lending platform is launching a stablecoin project and sees huge potential for decentralized payments.
The lending platform is launching a stablecoin project and sees huge potential for decentralized payments.
On July 31, 99 percent of the Aave community voted in favor of launching its own stablecoin GHO. This should now ensure that the lending platform will soon launch its decentralized stablecoin, even though the crypto sector had been under huge pressure following the Terra ecosystem collapse. In the wake of the crash, centralized stablecoins like USD Coin (USDC) and Binance USD (BUSD) gained ground.
In the DeFi podcast "Bankless,” Aave founder Stani Kulechov highlights the key features, and the stablecoin is described as the "first over-collateralised stablecoin where you still earn yield on your collateral."
This means that GHO will be centrally administered by users and will use overcollateralization to avoid a Terra-like scenario.
According to Kulechov, the stablecoin will be controlled by the Aave community and supported by various cryptocurrencies on the protocol. Yield generated by mining GHO will not go to liquidity providers but directly to the Aave DAO treasury.
How exactly the stablecoin will work in detail is laid out in the explanation of the motion on the Aave forum. In the coming week, more requests are expected to vote on access parameters, as announced by the head of the View post on X on Twitter.
Next steps
In the meantime, the token developers plan to reach out to an IT security firm to audit the smart contract code. Since Aave supports other blockchains besides Ethereum, it’s possible that GHO could appear on other smart contract platforms in the future.
GHO must be integrated especially into Layer 2 scaling platforms, like Polygon, Optimism, or Arbitrum, to enable global payments usage.
Kulechov sees potential in emerging markets hit by inflation, where payments with stablecoins can bypass the domestic currency. However, this is still largely happening through accounts on centralized crypto exchanges.
There’s interest in GHO in DeFi. Frax Protocol founder Sam Kazman suggested integrating GHO into the decentralized stablecoin exchange Curve Finance. This would provide liquidity at launch and quick adoption in the broader DeFi cosmos.
The degree to which investors and DeFi users embrace GHO will likely remain exciting, as decentralized stablecoins are under scrutiny. With $6.7 billion in committed capital, Aave is the second-largest DeFi platform. So there isn’t necessarily a lack of reach.
