Aave has voted to approve creating its own stablecoin. The decentralised liquidity market, offering lending, borrowing, and passive income opportunities to DeFi users may be done sitting on the stablecoin sidelines. Since being deployed on the Ethereum network in January of 2020, Aave has offered yield on a variety of pegged coins and tokens.
The fully collateralized stablecoin, GHO, will be native to Aave, and debut with availability on the Ethereum network.
GHO will be minted against any qualifying assets provided as collateral on Aave. When users repay borrowed positions or get liquidated, the GHO which was minted against the collateral will be burned.
Aave will rely on “facilitators” to onramp use of GHO. Facilitators (like other protocols) will be able to mint and burn GHO tokens. All facilitators will be approved by Aave’s governance.
Judging from the proposal, Aave’s stablecoin will operate similarly to MakerDAO’s DAI stablecoin. This overcollateralised model is gaining traction amongst decentralised stablecoin projects, with Aave and (potentially) Curve joining the ranks amid smaller capped projects in the near future.
As the market continues to demonstrate demand for alternatives to fiat-backed stablecoins like USDC and USDT, it looks like DeFi might be more than willing to provide them.
