Aave is brewing the launch of a decentralized stablecoin GHO to expand its DeFi landscape.

Aave plans to launch a new type of decentralized stablecoin GHO

The Aave community recently proposed a new initiative aimed at introducing a decentralized stablecoin GHO pegged to the US dollar. This native stablecoin will be backed by various crypto assets as collateral and governed by the Aave community.

The design concept of GHO is to provide users with a decentralized, transparent, and censorship-resistant stablecoin option. It will allow users to mint GHO based on the collateral they provide, while still earning interest on the collateral. It is worth noting that all decisions related to GHO will be governed by the Aave governance mechanism.

If the proposal is approved, the introduction of GHO will make stablecoin lending on the Aave protocol more competitive, providing users with more options. At the same time, the interest generated from GHO lending will flow entirely into the Aave DAO, bringing additional revenue.

Aave is also launching a stablecoin, understand the Decentralization dollar stablecoin GHO proposal

The Working Mechanism of GHO

As a decentralized stablecoin on the Ethereum mainnet, GHO will be created by users. Users need to provide collateral at a specific collateralization ratio to mint GHO. When users repay their loans or are liquidated, the protocol will burn the corresponding GHO.

GHO introduces the concept of "facilitators", entities that can generate and destroy GHO tokens in a trustless manner. Each facilitator needs to be approved by the Aave governance body and is assigned a specific "bucket" that represents its GHO generation limit.

Integration of Aave and GHO

The Aave-GHO integration will adopt the same mechanism as other assets in the Aave protocol, namely the deployment of specific GHO aTokens and GHO debt tokens. The borrowing rate for GHO will be determined by the Aave DAO, remaining stable but adjustable based on market conditions.

In addition, GHO will also introduce a discount model. The initial deployment will allow participants in the security module (stkAAVE holders) to receive discounts on GHO borrowing rates, with the specific discount levels controlled by the Aave governance department.

The Synergy between Aave V3 and GHO

Aave V3's isolation mode will allow users to generate GHO using multiple assets while reducing risk through collateral backing. The E-Mode feature can play a stabilizing role during market fluctuations, while the Portal feature provides an ideal pathway for the expansion of GHO in a multi-chain world.

Governance and Market Applications

The introduction of GHO will bring new sources of revenue and governance power to the Aave DAO. The DAO will be able to determine the native interest rate of GHO and make adjustments through the governance process. This means that the monetary policy of GHO will be controlled in a Decentralization manner by the Aave governance body.

It is expected that GHO can not only be applied in the native crypto community but also expand to a wider range of scenarios, especially on Layer 2 networks. In the future, there may be incentives through cash rewards and hackathons to encourage the development and integration of GHO payment methods to attract more mainstream users.

Overall, the launch of GHO aims to provide users with a secure, decentralized stablecoin option, while leveraging the growth potential of Layer 2 to develop more application scenarios for the growing mainstream user base.

Aave is also launching a stablecoin, understand the Decentralization dollar stablecoin GHO proposal

View Original
This page may contain third-party content, which is provided for information purposes only (not representations/warranties) and should not be considered as an endorsement of its views by Gate, nor as financial or professional advice. See Disclaimer for details.
  • Reward
  • 6
  • Share
Comment
0/400
ImpermanentLossEnjoyervip
· 07-13 22:45
There is another pitfall for stablecoins.
View OriginalReply0
MoonMathMagicvip
· 07-12 13:22
Is this stablecoin reliable?
View OriginalReply0
TokenBeginner'sGuidevip
· 07-10 23:41
Stability leads to longevity; rational decision-making is essential.
View OriginalReply0
AirdropATMvip
· 07-10 23:25
Still support higher stability.
View OriginalReply0
P2ENotWorkingvip
· 07-10 23:24
Witness the birth of a new coin
View OriginalReply0
CountdownToBrokevip
· 07-10 23:23
This coin is really worth investing in.
View OriginalReply0
Trade Crypto Anywhere Anytime
qrCode
Scan to download Gate app
Community
English
  • 简体中文
  • English
  • Tiếng Việt
  • 繁體中文
  • Español
  • Русский
  • Français (Afrique)
  • Português (Portugal)
  • Bahasa Indonesia
  • 日本語
  • بالعربية
  • Українська
  • Português (Brasil)