Aave DAO Endorses Creation of GHO Stablecoin

An overwhelming majority of Aave DAO voters approved the creation of a new stablecoin.

The proposalsubmitted by Aave Companies, was backed by 99.9% of voters, who pledged half a million AAVE by approving the measure to create GHO, a stablecoin that will be backed by collateral made up of other cryptocurrencies .

Aave is a decentralized, noncustodial marketplace protocol that allows users to borrow and lend cryptocurrencies. While providing liquidity to the cryptocurrency market, users can earn passive income on digital assets allocated to a smart contract. It’s open-source and has $9.8 billion in cash, according to Aave’s website.

Users looking to mint GHO first will deposit cryptocurrencies accepted by Aave. People who borrow GHO against crypto assets will still earn interest on the underlying collateral used to mint the stablecoin. The loan protocol will also charge interest on loans taken out in the GHO, with payments going to the Aave DAO.

The deposits users allocate to hit the GHO will need to be greater than the value of the GHO they receive, which means the loans will be over-collateralized. When users repay a borrowed position or are liquidated, the loaned GHO will be burned from the protocol.

Even though the measure has been approved, the introduction of GHO will take time as it is implemented through an Aave Improvement Protocol (AIP), with the Aave DAO responsible for overseeing the distribution of the stablecoin once its creation is approved. .

Voting took a total of three days and the price of AAVE – the lending platform’s native coin –dope immediately after approval of the proposal, to about $108 from $95.40. At press time, AAVE was valued at $102.50, up 4.5% in the last 24 hours.

Right now, the market capitalization of all stablecoins is over $153 billion, according to CoinMarketCap, and primarily comprised of Tether’s USDT and Circle’s USDC. US legislation regarding the regulation of the digital asset class has recently been pushed back.

GHO will be pegged to the US dollar and the stablecoin will be backed by a mix of cryptocurrencies that users can already deposit on the platform. The native interest rate of the stablecoin will be determined by the Aave DAO, according to a introduction from GHO on the Aave website.

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