Aave, the leading decentralized finance (DeFi) platform, is gearing up to launch its own stablecoin called GHO on the Ethereum mainnet.
The proposal to deploy GHO has gained significant support in Aave’s governance forum, and it is expected to proceed to an official governance vote.
If approved, Aave’s native stablecoin, GHO, will be introduced with an initial borrowing cap of $100 million. Users of Aave V3 will have the ability to mint GHO by leveraging their ETH deposits.
Aave anticipates that the introduction of GHO will intensify competition in the DeFi borrowing market while generating additional revenue for the Aave decentralized autonomous organization (DAO). The Aave DAO will collect 100% of the interest payments from GHO borrowing.
The announcement of GHO comes on the heels of the successful launch of Curve Finance’s crvUSD stablecoin, which has gained widespread popularity within the DeFi community.
Aave’s decision to introduce its own collateralized stablecoin is expected to further enhance decentralized exchange (DEX) trading.
In recent weeks, DEX volumes have experienced a surge due to increased memecoin trading and regulatory pressure faced by centralized exchanges.
However, the growing DEX volume may attract regulatory attention in the current landscape. Evan Kuo, the CEO of Fragments Inc, emphasized that stablecoins should be resilient to unforeseen events and that decentralized stablecoins are crucial for the future infrastructure, particularly as centralized stablecoins are more permissioned and subject to greater regulation.
The GHO stablecoin will introduce Facilitators, which are approved protocols or entities responsible for generating and burning GHO tokens.
The initial approved facilitators will be the Aave V3 Ethereum Pool and FlashMinter, both of which have received community approval in previous votes.
Users will have the option to deposit ETH as collateral and borrow GHO through the Aave V3 Facilitator. The borrowing rate for this pool will initially be set at 1.5%, with a 30% discount for staked Aave (stkAAVE) holders as per the community’s previous vote.
Additionally, sophisticated users will have the opportunity to leverage FlashMinting, enabling them to mint and repay GHO in a single transaction without the need for collateral.