Aave DAO Approves The Creation Of GHO, Its New Decentralized Stablecoin

✍️ 2 August, 2022 - 10:23 👤 Editor: Jakub Motyka

• The Aave DAO has approved the creation of GOH, a decentralized and overcollateralized stablecoin.
• The credibility of stablecoins has not been recovered at all since the fall of LUNA and UST.
• The announcement of the new token has had a positive impact on the price of the AAVE token.

Recently, Aave announced via its Twitter account that the creation of its new stablecoin, GHO, has been approved. According to DAO voting data, a total of 501,000.99% of voters, 9900 votes , have stated that they are in favor of the genesis parameters of the stablecoin.

In the proposal presented at the Aave DAO, the GHO stablecoin will be backed by a pool of various cryptocurrencies owned by users, “while borrowers continue to earn interest on their underlying collateral.” The GHO stablecoin will be developed on the ETH mainnet, so users must provide collateral to be able to mint GHO. At the moment of paying the loan position (or being liquidated) the protocol will burn the user's GHO.

What Advantages Will The GHO Stablecoin Bring To Aave?

The Aave stablecoin will use the same mechanisms as any other asset in the protocol. According to the proposal, “a specific GHO a Token and a specific GHO Debt Token will be implemented. These can be registered, upon proposal approval, for the GHO token on the Aave Ethereum market.” In addition, it will allow the interest rate to be adapted according to market conditions through the DAO.

In this way, the monetary policy of the GHO stablecoin would be controlled in a decentralized manner by the governance of Aave. With this, the loans of this token and the interest rate strategies of the community will make Aave a more competitive protocol. Despite mistrust surrounding decentralized stablecoins, stemming from the debacle of Terra (LUNA) and other algorithmic currencies, GHO has been well received by users. After the announcement of Aave, its native token (AAVE) has had an increase of more than 10%, reaching 107 US dollars.

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