Aave plans to launch its native stablecoin GHO

The Aave protocol is considering the launch of a native stablecoin called GHO. This proposal has been made public to the community in the form of a consultation, seeking feedback and support.

GHO is a decentralized stablecoin pegged to the US dollar, with the following main features:

• Fully decentralized
• Over-collateralized by assets that continuously generate returns
• Supports multiple Aave protocol collaterals
• Governed by the Aave community

If approved, GHO will be launched first on the Aave protocol. Users can mint GHO based on the collateral they provide. It is worth noting that borrowers can still earn interest on their collateral. All decisions related to GHO will be the responsibility of Aave governance.

The purpose of introducing GHO is to enhance the competitiveness of stablecoin lending in the Aave protocol and provide users with more options. The interest generated from GHO lending will be entirely allocated to the DAO, which will bring additional revenue to the Aave DAO.

The Operating Mechanism of GHO

As a decentralized stablecoin on the Ethereum mainnet, GHO will be created by users ( borrowers ). Users need to provide a certain percentage of collateral to mint GHO. When users repay their loans or are liquidated, the protocol will destroy the corresponding GHO. All interest generated from the minting of GHO will be directly transferred to the AaveDAO treasury.

GHO introduces the concept of "facilitators". Facilitators approved by Aave governance can mint and burn GHO tokens. Each facilitator has a "bucket" that represents the maximum amount of GHO they can generate.

Integration with the Aave Protocol

GHO will adopt the same mechanism as other assets in the Aave protocol, deploying specific GHO aTokens and debt tokens. The borrowing rate of GHO will be determined by AaveDAO, remaining stable but adjustable according to market conditions.

In addition, GHO will also introduce a discount model. Participants in the security module (stkAAVE holders ) can receive a discount on GHO borrowing rates. The discount range is controlled by Aave governance, ranging from 0% to 100%.

Future Development

Some features of Aave V3, such as isolation mode, E-Mode, and Portal functionality, will provide ideal support for the use and expansion of GHO. These features help reduce risk, increase stability, and enable cross-chain distribution.

The introduction of GHO will bring new sources of income and governance power to the Aave DAO. The DAO can decide on the native interest rate of GHO and adjust it through the governance process. This means that the monetary policy of GHO will be controlled in a decentralized manner by AAVE governance.

In addition to the native crypto community, GHO is expected to be widely applied in scenarios such as Layer 2. By offering cash rewards and hackathons, developers can be encouraged to integrate GHO payment methods to serve a broader user base.

If the community vote supports the deployment of GHO, initial interest rate and discount rate proposals will be put forward. These parameters can be adjusted through governance in the future. Before the official launch, OpenZeppelin and PeckShield will conduct a security audit of GHO.