Due to their significance in the industry, stablecoins are more than just another crypto token.
Digital assets are increasingly becoming more relevant to transactions and trading among individuals and businesses.
The GHO stablecoin is the latest to join the fray after an overwhelming vote from the DAO ecosystem members.
Accordingly, AAVE DAO, the network managing the Aave DeFi Protocol, has given the go-ahead to create the stablecoin.
All proposals submitted by the Aave subsidiaries have 99.9% backing from voters who contributed half a million AAVE tokens to create the new GHO coin.
Meanwhile, the stablecoin is pegged to the USD and backed by several cryptocurrencies, which will provide more collateral.
What is Aave, and How Can Users Mint GHO Stablecoin?
Aave is a fully decentralized and non-custodial protocol that allows users to borrow and lend crypto assets. Users can also earn passively on digital assets while providing liquidity to the general crypto market.
The platform is open source and has $9.8 billion in liquidity, as revealed by the network.
To mint GHO stablecoin, users must deposit digital tokens accepted by the Aave network. However, people can also earn interest if they borrow crypto assets that have collateral in minting the GHO token. In addition, lending also attracts interest on loans taken in GHO stablecoin. The network will move payment back to the Aave DAO protocol.
Furthermore, the deposits dumped must have a value greater than the GHO they will get. This implies that the deposits must be over-collateralized for a difference in the yields accrued on the transactions.
When a user repays the loan or the borrowed GHO is liquidated, the lent GHO is burnt from the protocol.
However, integrating the GHO will take time despite the DAO community approving the measures.
Aave DAO Development Protocol to Implement GHO Stablecoin
The implementation of the GHO is subject to time, which will be long, and will be carried out on the Aave Improvement Protocol (AIP). Moreover, the Aave DAO will oversee the distribution of the GHO stablecoin based on the community-vetted launch.
The new stablecoin is envisioned to serve as an over-collateralized stablecoin, as indicated by Stani Kulechov, Aave’s founder. In the coming months, the project will push for the adoption of the GHO stablecoin on Ethereum’s Layer 2 protocol.
According to CoinMarketCap, the market capitalization of the stablecoin space is more than $153 billion. USDT and USDC formed the bulk of the total value of the stablecoin market.
The stablecoin ecosystem is growing steadily despite the scare caused by the Terra UST stablecoin meltdown collapse. Following the collapse of Terra UST, other algorithmic stablecoins have been intensely scrutinized.
Attention has now shifted to stablecoins backed by other crypto assets as a solution to the previous market bloodbath. However, this does not mean there will be no more algorithmic stablecoins. But the focus will be on crypto-collateralized stablecoins.
Here, the token is heavily collateralized by multiple cryptocurrencies instead of just a fiat currency, the U.S. dollar.
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