Aave Community Vote Approves Stablecoin Creation

Decentralized finance (DeFi) protocol Aave has passed a community proposal, with 99% of votes in favor of it, which will see the creation of a new stablecoin, Aave’s voting page revealed on 31 July.

According to the snapshot of the votes, the Aave DAO — the governance body of the protocol — passed the GHO stablecoin proposal with 501,000 AAVE tokens in favor, which amounted to 99.99% of the total votes cast during the three-day long voting period. The new stablecoin was designed to improve on the features of the Aave lending platform, enabling users to mint GHO by using supported crypto tokens as collateral. The original GHO proposal reads:

“The usage of stablecoins will only continue to grow as cryptoassets become further integrated with a user base that is less crypto-native. Decentralized stablecoins provide censorship-resistant fiat-denominated currency on the blockchain. Introducing, GHO, a decentralized multi-collateral stablecoin that is fully backed and native to the Aave Protocol.”

Although crypto tokens will be used as collateral when creating the new stablecoins, users will continue to earn interest on those assets. GHO will work similarly to other algorithmic stablecoins, and mint exactly $1 worth of tokens when provided with $1 worth of crypto collateral. The goal of the Aave DAO is for GHO to become an overcollateralized stablecoin like DAI, meaning it deposits exceed the amount of tokens minted.

The Aave protocol will charge interest on GHO loans, with the borrowers sending their payments directly to the protocols’ DAO, which will be in charge of the stablecoin’s administration. The generated revenue will be used by the community to bolster the project’s treasury, and fund future products and tools.