Aave DAO Gives Approval For GHO Stablecoin

The non-custodial Aave protocol announced on Sunday that a new stablecoin for the system named ‘GHO’ had received approval from the market protocol’s DAO.

The proposal for the stablecoin had first been put forward by Aave Companies in July’s first week, which will be backed by collateral, and pegged to the value of the US dollar.

GHO gets approved

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On Sunday, Aave disclosed that the Aave decentralized autonomous organization (DAO) had given the green light for the ‘GHO’ stablecoin token.

The official Aave Twitter account said that they would now vote on the GHO’s genesis parameters and a proposal was likely to hit the governance forum next week.

The GHO stablecoin had first been introduced on July 7th, which highlighted that the stablecoin would be backed by a number of crypto-assets that would be selected at the discretion of the users.

Meanwhile, it also said that the underlying collateral would allow borrowers to continue earning interest.

The majority of the Aave DAO voters gave their approval for the governance proposal, as almost 99% of those who participated were in favor of the stablecoin.

According to the governance proposal, the stablecoin will provide the community with benefits, as 100% of the interest would be sent to GHO borrowers and Aave governance would administer the stablecoin.

The stablecoin economy

The current market value of the stablecoin economy is about $153 billion and GHO will become a part of it. The leading stablecoin in the market is Tether (USDT) with USD Coin (USDC) taking the second spot in terms of market capitalization.

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In addition, GHO will also join the list of stablecoins that use collateral assets and some that use the over-collateralization method.

The DAI stablecoin of Makerdao is one as is the USDD by Tron, which means that the coin has more collateral than required for backing in when the market is highly volatile.

How it works

The blog post from Aave Companies said that borrowers or users will create the GHO stablecoin, as it is a decentralized one that exists on the Ethereum mainnet.

The user’s GHO would burn when their position is liquidated, or they repay a borrow position. Those who mint the GHO stablecoin will have their interest payment transferred to the Aave DAO Treasury directly.

They also said that the entire community had become quite engaged with the GHO stablecoin and had given informative and helpful feedback.

The community had highlighted some of the aspects that the team needs to focus on, such as supply caps, the vulnerabilities in the DAO-set interest rate, a module for peg stability, and vetting potential facilitators.

But, before the crypto token is issued, the community will have to vote on the genesis parameters of the stablecoin first, which is expected to happen next week.

Other than the GHO stablecoin, Aave also boasts a native token, which holds the 45th spot out of 13,000 assets.

The market valuation of aave (AAVE) has surged by 84.7% in the previous month and the protocol is the third-largest Defi protocol because of its TVL (total-value locked).