The Popular Decentralized Finance Protocol (DeFi) Aave (AAVE) proposed to the Decentralized Autonomous Organization (DAO) the introduction of a native, decentralized, fully guaranteed stablecoin, pegged to USD on the Ethereum mainnet (ETH), dubbed GHO. Aave's proposal for the new native stablecoin On Thursday , Aave said, "We call all GHOsts," announcing that it has created a new Aave Request for Comments (ARC), which is the first step in the process of improving governance. According to the governance proposal, "With community support, GHO can be launched on the Aave protocol, allowing users to mint GHOs against their collaterals provided." As for these guarantees, GHO would be supported by "a diversified set of cryptocurrencies chosen at the discretion of users". Borrowers would continue to earn interest on their underlying collateral.
GHO would be created by users. These are borrowers and each would have to provide collateral with a specific collateral ratio in order to be able to mint GHOs. When a borrower repays a loan position or is liquidated, the GHO protocol would burn his GHO. The accumulated interest payments would be transferred to the AaveDAO treasury. GHO would introduce the concept of Facilitators (e.g., a protocol, entity, etc.), which has the ability to reliably generate and burn GHO tokens, and each would have to be approved by Aave Governance. For each Facilitator, Governance would also approve "one bucket" for each Facilitator, which is the maximum GHO limit that a specific Facilitator can generate. Ultimately, Aave Governance would have all the decision-making power related to GHO. The proposal argued that, "If approved, the introduction of GHO would make stablecoin loans more competitive on the Aave protocol, provide more options for stablecoin users , and generate additional revenue for DAO Aave by sending 100% of interest payments on GHO loans to the DAO." The goal of Aave's new stablecoin Stani Kulechov, founder of Aave, also shared the news on his Twitter account, stating that GHO's goal in the future is to "pursue organic adoption" via layer 2 (L2) to solve real-life payment opportunities. The argument of the proposal is that stablecoins have risen to a "central position" in the crypto sector, gaining billions in market capitalization, and their use will continue to grow and provide a fast, efficient, borderless and stable way to transfer value to the blockchain. Within the stablecoin category, decentralized stablecoins "add transparency and censorship resistance to this list of benefits, an integral part of web3." For DeFi Llama, the Total Value Locked (TVL) in DeFi is currently $78.27 billion. MakerDAO's (MKR) dominance is 9.9%, ranking at the top of the list as the largest DeFi platform for TVL, with $7.75 billion. Aave occupies second place with the TVL of 6.69 billion.