Aave protocol states that it created an ARC for a new decentralized, collateral-backed stablecoin, native to the Aave ecosystem, known as GHO. Where its role as a decentralized stablecoin will be an integral part of web3.
What is GHO?
GHO will be a decentralized multi-collateral stablecoin, fully backed by the Aave Protocol and pegged to USD. Users will be able to generate GHO after supplying collateral, and then burn GHO when reclaiming collateral.
GHO will be decentralized, over-collateralized by assets that continue to earn yield and backed by multiple types of collateral available on the Aave Protocol.
How will GHO be created?
As a decentralized stablecoin on the Ethereum Mainnet, GHO will be created by users/ borrowers. Where they must supply collateral (crypto-assets) to be able to mint GHO. When a user repays a borrowed position or is liquidated, the GHO protocol burns that user’s GHO. All the interest payments accrued by minters of GHO would be directly transferred to the AaveDAO treasury.
Aave expects the Aave DAO to receive a substantial amount of revenue in the form of fees. This increase in revenue can be used to innovate, support contributors in the ecosystem, bolster the treasury during market downturns or anything else the DAO decides.
What is the interest rates of GHO?
Borrow interest rates for GHO will be determined by the AaveDAO, with a stable rate that may be adapted depending on market conditions. The DAO will also be able to decide GHO’s native interest rate and change it over time through a governance process.
Where to buy GHO outside of AAVE?
Because the stablecoin is not yet launched, it is not possible to buy and use GHO. When GHO will be launched, , Aave envisions mainstream adoption both inside and outside of the crypto-native community. Given the growing adoption of stablecoins, there could be opportunity for GHO to have widespread usage on L2s and a use cases for a growing mainstream audience.
Community voting
A Snapshot will determine whether the community wants to move forward with the plans of stablecoin GHO. Also, any deployments of GHO on the Aave Protocol on other chains will require governance approval. Voting will be possible here.
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