DeFi lending platform Aave plans to launch its own stablecoin, GHO, issued on the Ethereum network, the company announced in a blog post.
GHO would be a US dollar-pegged stablecoin over-collateralised by a diversified set of cryptocurrencies of users’ choice against their collateral. The proposal was submitted to the Aave DAO (Decentralised Autonomous Organisation) last week.
Stani Kulechov, founder of Aave, said the community would have to “start from a conservative angle and expand the new facilitators as the strategies become proven and battle-tested in DeFi“:
Interest Payments to Aave DAO Treasury
Users would have to borrow the stablecoin against their crypto funds and over-collateralise it just like any other Aave loan. According to the proposal, all interest payments generated by GHO minters would be transferred to the Aave DAO treasury:
If approved, the introduction of GHO would make stablecoin borrowing on the Aave Protocol more competitive, provide optionality for stablecoin users, and generate additional revenue for the Aave DAO by sending 100 percent of interest payments on GHO borrows to the DAO.
Aave governance proposal
Aave is one of the largest DeFi lending platforms, currently boasting US$6.76 billion in total value locked (TVL). The idea of launching a crypto-backed stablecoin is just one of the safer approaches taken by other cryptocurrency platforms instead of launching algorithmic stablecoins.
One protocol that has decided to back its algorithmic stablecoin is Tron Network, which over-collateralised its USDD stablecoin to prevent a TerraUSD-like collapse.
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