Aave plans to launch a decentralized stablecoin GHO

With the booming development of stablecoins in the cryptocurrency space, the decentralized finance platform Aave is considering launching its own native decentralized stablecoin GHO. The proposal has already been submitted to the community for discussion and feedback.

GHO, as a decentralized stablecoin pegged to the US dollar, has the following main characteristics:

1. Completely Decentralized
2. Over-collateralization through assets that continuously generate income
3. Various collateral supported by the Aave protocol provide protection.
4. Governed by the Aave community

If the proposal is approved, users will be able to mint GHO using the collateral they provide on the Aave protocol. Borrowers can continue to earn interest through their collateral assets, while all decisions related to GHO will be governed by the Aave community.

The introduction of GHO is expected to enhance the competitiveness of the Aave protocol in the stablecoin lending market, providing users with more options. At the same time, all interest generated from borrowing GHO will be allocated to the DAO, bringing additional revenue to the Aave ecosystem.

The Operating Mechanism of GHO

As a decentralized stablecoin on the Ethereum mainnet, GHO will be created by users ( borrowers ). Users need to provide collateral at a specific collateralization ratio to mint GHO. When users repay their loans or are liquidated, the corresponding GHO will be destroyed.

GHO introduces the concept of "facilitators", which can be protocols or entities that can generate and destroy GHO tokens in a trustless manner. All facilitators need to be approved by the Aave community governance.

For each facilitator, the Aave community also needs to approve what is known as a "bucket", which represents the cap on the GHO that a specific facilitator can generate.

Integration of Aave and GHO

GHO will be integrated using the same mechanism as other assets in the Aave protocol, deploying specific GHO aTokens and GHO debt tokens. The borrowing rate for GHO will be determined by the Aave community, remaining relatively stable but adjustable based on market conditions.

In addition, GHO will also introduce a discount mechanism. The initial deployment allows participants of the security module ( stkAAVE holders ) to receive discounts on GHO borrowing rates. The discount ranges from 0% to 100%, with specific parameters controlled by community governance.

Potential Applications of GHO

GHO can not only be applied to the native crypto community, but also has the potential to expand into broader scenarios. Considering the low transaction fees and growth trends of layer two networks, GHO may gain widespread application on these networks.

The community can encourage developers to integrate GHO payment methods through cash rewards and hackathons, serving both crypto-native users and a more mainstream user base.

Overall, GHO aims to provide users with a certain level of security and Decentralization, while adopting a growth strategy to develop applicable scenarios for an increasing number of mainstream users. This strategy will focus on use cases such as payments, while leveraging the growth potential of layer two networks.

Currently, the proposal is seeking community feedback. If approved, subsequent security audits will be conducted. In the future, the community will also decide whether to provide retroactive rewards to contributors of the GHO creation.