Aave Companies, the firm behind the eponymously-named lending and borrowing protocol, are launching its native stablecoin GHO on the Ethereum Goerli testnet.
Pronounced “GO,” the stablecoin is fully decentralized and over-collateralized. Its design ensures the GHO oracle price is always fixed one-to-one with the U.S. dollar, as minting will be through assets supplied as collateral in the Aave Protocol.
Aave is a decentralized lending and borrowing platform that uses over-collateralization as a mechanism for ensuring the safety of deposited funds.
gm: Aave Founder Stani Talks Stablecoins and Next Era of DeFi
Aave founder Stani Kulechov joined Dan Roberts and Stacy Elliott to talk about his vision for the next iteration of DeFi, Aave V3 and Lens Protocol, the Web3 company he wishes he had founded, and why now is the right time for the $5B lending protocol to launch its GHO stablecoin. Watch and make sure to subscribe to the gm podcast on Apple or Spotify.
In this system, borrowers must pledge more collateral than the amount they borrow, which acts as a security for the lender in case the borrower is unable to repay the loan.
This creates a capital-efficient way to mint stablecoins while maintaining over-collateralized backing by a diversified set of cryptocurrencies supplied by those who deposit on Aave.
Founder and CEO of Aave Companies Stani Kulechov said, “With the support and management of the Aave community, GHO’s decentralized stablecoin can power a payment layer that can easily, securely, and efficiently transfer value across DeFi and TradFi ecosystems.”
Aave DAO takes over
The GHO codebase is now available on Github for developers to examine and test before its expected release on the Ethereum mainnet.
However, the actual launch is dependent on the approval of the Aave DAO, the governing body of both the Aave Protocol and GHO.
Aave DAO Approves Creating GHO Stablecoin
An overwhelming majority of Aave DAO voters have approved creating a new stablecoin. The proposal, submitted by Aave Companies, was backed by 99.9% of voters, who pledged half a million AAVE in approving the measure to create GHO, a stablecoin that will be backed by collateral consisting of other cryptocurrencies. Aave is a decentralized, non-custodial market protocol that enables users to borrow and lend cryptocurrencies. While providing liquidity to the cryptocurrency market, users can earn pa...
As the stablecoin will be managed by the Aave DAO, anyone who holds AAVE, the platform’s governance token, will have a voice in determining GHO’s supply, interest rate, and risk parameters.
The Aave DAO will also be responsible for approving facilitators that can mint and burn GHO tokens. The Aave Companies recommended the Ethereum V3 market to be the first facilitator due to its extensive risk-mitigation features.
Unlike other attempts at a decentralized stablecoin, the interest repaid by borrowers will go to the Aave DAO treasury rather than the asset suppliers—as the asset suppliers are already earning interest on their supplied collateral.
Per the press release, the stablecoin has already been audited by Open Zeppelin, SigmaPrime, and ABDK, and it is currently under audit by Certora. The code repository is also part of Aave’s bug bounty program, rewarding those who find and report any vulnerabilities.
