DeFi protocol AAVE offers a plan to develop GHO, a native stablecoin backed by collateral and pegged to the USD. The company behind this Defi protocol, Aave Companies, put out a proposal for its decentralized stablecoin. AAVE published the announcement on its most recent blog.
AAVE to allow users to mint GHO against collateral
According to AAVE, the community of users might choose from a variety of cryptocurrency assets to back the stablecoin. Users of the community can mint stablecoins using the assets they have pledged as collateral. While being held as collateral, the assets will also produce yields.
On the Ethereum mainnet, GHO, a decentralized stablecoin, will be introduced. Users must offer collateral at a specific ratio to mint GHO in order to borrow it. The protocol will burn the user’s GHO once they have paid back the borrowed position.
All interest payments generated by GHO minters would be instantly transferred to the AaveDAO treasury instead of the typical reserve component that is taken into consideration when users borrow other assets.
The proposal also introduces the idea of “facilitators.” If accepted, this proposal will provide the secure creation and burning of GHO tokens. The interest rates for GHO’s borrowing will be set by AaveDAAO. It will be determined by the state of the market.
The token team hopes that GHO will be more widely used both inside and outside of the crypto industry. The team has claimed that GHO will also have reasonable transaction costs for L2s.
In a word, GHO will be over-collateralized by a variety of assets and decentralized. It will be supported by a variety of collateral options that will be supported by the token’s protocol.
A snapshot that decides the fate of the GHO and whether to proceed with the GHO will be used to select the proposal.
The DeFi protocol introduced version 3 in March 2022, which has a component named Portal. The protocol can now run stably across all blockchains thanks to Portal. That implies you may now take part in lending or borrowing procedures on chains like Solana or Avalanche utilizing the DeFi protocol.