Aave plans to launch a native Decentralization stablecoin GHO

The Aave community recently released a proposal to launch a native decentralized stablecoin GHO that is pegged to the US dollar. This stablecoin will be backed by various crypto assets as collateral and governed by the Aave community.

The main features of GHO include:

• Complete Decentralization
• Over-collateralized by assets that continuously generate returns
• Supports multiple Aave protocol collateral types
• Managed by the Aave community

If the proposal is approved, users can mint GHO on the Aave protocol, with collateral being selectable. Borrowers can still earn interest on their collateralized assets, while all decisions related to GHO will be governed by Aave governance.

The introduction of GHO is expected to enhance the competitiveness of stablecoin lending on the Aave protocol, providing users with more choices. Additionally, the interest generated from GHO lending will be entirely attributed to the DAO, creating an additional source of income for the Aave DAO.

The Operating Mechanism of GHO

As a decentralized stablecoin on the Ethereum mainnet, GHO will be created by users. Users need to provide a specific ratio of collateral to mint GHO. When users repay the loan or are liquidated, the protocol will destroy the corresponding amount of GHO. All interest generated by GHO minting will be directly transferred to the AaveDAO treasury.

GHO introduces the concept of "facilitators". Facilitators approved by Aave governance can generate and destroy GHO tokens trustlessly. Each facilitator has a "bucket" that represents the upper limit of GHO they can generate.

Integration of Aave and GHO

The Aave-GHO integration will adopt the same mechanism as other assets in the Aave protocol, deploying specific GHO aTokens and debt tokens. The lending interest rate for GHO will be determined by AaveDAO, remaining stable but adjustable based on market conditions.

In addition, GHO will also launch a discount model. Early security module participants (stkAAVE holders ) can receive GHO loan rate discounts, with specific parameters controlled by Aave governance.

The Synergy between Aave V3 and GHO

Through the isolation mode, users can generate GHO using various assets supported by the Aave protocol while reducing risk. E-Mode can play a stabilizing role in market fluctuations, while the Portal feature provides an ideal way for GHO's cross-chain expansion.

Governance and Application Prospects

stkAAVE holders can enjoy discounts on GHO minting, which will incentivize them to protect the Aave protocol. The introduction of GHO will also bring significant revenue to the Aave DAO, which can be used for various purposes such as innovation and supporting ecosystem contributors.

GHO is expected to be applied in the crypto-native community and broader scenarios. The low transaction fees and growth trend of Layer2 provide ample space for GHO. In the future, there may be encouragement for the development of GHO payment solutions through cash rewards and hackathons, covering crypto-native users and mainstream users.

If the community votes to support the deployment of GHO, initial interest rate and discount rate proposals will be made. Future cross-chain deployment of GHO will also require further governance approval. If the proposal is passed, relevant security audit work will begin in the near future.