Aave Companies presents the last phase of the GHO stablecoin
Aave Companies, a prominent contributor to the decentralized finance platform, is approaching the final stage of implementing its decentralized GHO stablecoin. The stablecoin is already operational on Ethereum’s Goerli testnet.
To complete the rollout, two rounds of on-chain voting by the Aave community are required. The initial step involves the “ARFC” preliminary proposal, followed by the final Aave Improvement Proposal. If approved by Aave’s decentralized autonomous organization, GHO will be launched on the Ethereum mainnet, accessible to V3 users.
Stablecoins are cryptocurrencies designed to minimize price volatility by pegging their value to a stable asset or a basket of assets, typically fiat currencies. Aave plans to back the value of GHO using crypto assets and issue it as an overcollateralized loan, similar to the approach taken by MakerDAO’s DAI stablecoin.
In the event of approval from the DAO, all interest generated from GHO loans will be directed towards the DAO treasury as supplementary income. This incentive has the potential to influence DAO members to vote in favor of the proposal, thereby strengthening the project’s financial sustainability.
Aave Companies stated, “By introducing GHO, stablecoin borrowing on the Aave Protocol would become more competitive, resulting in additional revenue for the Aave DAO. 100% of the interest payments made on GHO borrows would be contributed to the DAO treasury.”
Aave Companies intends to utilize two of its smart contract systems
Aave Companies intends to utilize two of its smart contract systems, namely the V3 Ethereum Facilitator and the FlashMinter Facilitator, to establish and operate the GHO stablecoin. The V3 Ethereum Facilitator will enable users to deposit collateral and lend GHO, with the collateral stored in the Ethereum mainnet pool. Users can secure their crypto assets as collateral to borrow GHO.
The second system, the FlashMinter Facilitator, will allow for FlashMinting of GHO. FlashMinting is a variation of Flash Loans, an innovative concept pioneered by Aave. It allows users to borrow assets without requiring collateral, as long as the loan is repaid within the same transaction block, reducing risks for lenders. With this feature, users can create GHO and repay it in a single transaction without needing to borrow assets from a separate liquidity pool.
Furthermore, Aave Companies is contemplating the implementation of a multi-chain strategy following the GHO launch on the Ethereum mainnet. Multi-chain strategies are gaining popularity in the DeFi sector as they enhance access to diverse user bases and mitigate risks associated with relying solely on a single blockchain.
This proposal from Aave Companies comes shortly after Curve Finance, one of the prominent decentralized exchanges, also introduced its stablecoin.
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