Aave wants to launch a rival to MakerDAO’s DAI Stablecoin

Key receivers

Aave has submitted a governance proposal to launch a decentralized Dollar Page stablecoin on the Aave protocol. If approved by the community, GHO will be available to borrowers who can guarantee and earn interest on Aave DAO. Stablecoins have come into the spotlight in recent months due to the Terra UST implosion, but GHO has more in common with MakerDAO's DAI.

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If the community approves the proposal, borrowers can issue GHO by pledging the Aave protocol.

Aave offers GHO

Aave could be the next major crypto project to launch a stablecoin.

1/ Calling all GHOsts 👻

For a new decentralized, collateral-backed stablecoin known as GHO, we've created ARC, native to the Aave ecosystem.

Read more below and discuss your thoughts on the (coming soon) snapshot!

— Aave (@AaveAave) July 7, 2022

The leader of the DeFi protocol presented a new proposal on Thursday at the Aave Governance forum, suggesting the launch of a decentralized, dollar-pegged stablecoin, GHO.

The proposal suggests creating GHO as a fully secured stablecoin based on the Aave protocol. According to Aave's note, users can pledge to Mint GHO while earning interest on their collateral. Additionally, if approved by the community, the interest payments owed by GHO will go to the DAO treasury.

“GHO will make stablecoin lending on the Aave protocol more competitive, provide an additional option for stablecoin users, and generate additional revenue for the AAVE DAO by sending 100% of interest payments on GHO loans to the DAO,” the proposal reads.

With the Aave scheme, GHO is backed by various crypto assets chosen by the user. The amount the user can generate depends on the size of the deposit. The proposal suggests that the GHO will either burn or burn when consumers repay loans.

GHO will launch on the Ethereum mainnet, with the Aave protocol as the first “facilitator” able to generate and burn tokens. Any additional coordinators must be approved by Aave management. The proposal lays out plans to launch the GHO aToken and the GHO Debt Token.

The interest rates of the stable coin is determined by the community, and the decision on whether to move forward with the proposal comes down to the vote and the moment. The election period has not yet started.

Stablecoins have been in the crypto spotlight in recent months, thanks primarily to Terra's spectacular breakout in May. The Layer 1 blockchain algorithm stablecoin UST lost about $40 billion in value in a week when it lost its peg to the dollar. Other Layer 1 blockchains like TRON have created their own Terra-inspired stablecoins. However, Aave's GHO differs from those in that it is captured and released by the Diffie protocol instead of Layer 1.

The proposal concludes by stating that GHO could find adoption in Ethereum's Layer 2 low-fee environment. It also suggests that he has big plans to help Stablecoin reach an audience outside of the cryptosphere. “GHO offers an inclusive level of security and decentralization for crypto-native users and employs a growth strategy that emphasizes use cases for a growing mainstream audience,” he said.

Disclosure: At the time of writing, the author of this article owns AAVE, ETH and many other cryptocurrencies.

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