Aave DAO to Vote on Deployment of GHO Stablecoin on Ethereum Blockchain

Aave DAO to Vote on Deployment of GHO Stablecoin on Ethereum Blockchain

Gho, a U.S. dollar-pegged stablecoin, has been successfully operating on the Goerli testnet of the Ethereum blockchain since February, without encountering any significant issues.

The Aave DAO community is now poised to vote on whether to deploy GHO on the Ethereum blockchain, as revealed by an Aave Improvement Proposal (AIP). Aave is a lending and borrowing platform that enables users to earn yields on their pledged tokens. Gho, an algorithmic stablecoin, can be minted by users against a diversified portfolio of cryptocurrencies. GHO holders will continue to earn interest on the collateral they provide, similar to other lending transactions on the Aave platform. Interestingly, “Gho” translates to “ghost” in Finnish.

The proposal outlines the introduction of GHO through “facilitators,” which would enable users of Aave version 3 (V3) to mint GHO by supplying tokens to the platform. If approved, the deployment of GHO is expected to enhance the competitiveness of stablecoin borrowing on the Aave Protocol and generate additional revenue for the Aave DAO. The proposal suggests that 100% of the interest payments made on GHO borrows would be directed to the DAO treasury.

GHO has already undergone thorough testing on the Goerli testnet, and its deployment on the Ethereum mainnet is the next step. In a governance post published in early June, Aave Companies proposed the V3 Ethereum Facilitator, which would enable GHO lending against collateral deposits, and the FlashMinter Facilitator, a variant that allows flash loans issued without any collateral.

These facilitators, which can be protocols or entities, possess the capability to generate and burn GHO tokens up to a predetermined limit. This functionality would enable depositors to borrow GHO against their collateral deposited in Aave V3’s Ethereum mainnet pool.

Once launched, Aave users will be able to mint GHO tokens by leveraging their supplied collateral. GHO will be backed by a basket of cryptocurrencies chosen at the discretion of the users. Borrowers, on the other hand, will continue to earn interest on their underlying collateral.

GHO will operate similarly to other algorithmic stablecoins, minting tokens worth exactly $1 when users provide $1 worth of cryptocurrency. To mint GHO, users must provide collateral at a specific collateral ratio. When a user repays their borrow position or faces liquidation, the GHO protocol will burn the user’s GHO tokens, as outlined in the proposal.