Aave DAO approves crypto-backed Stablecoin GHO

Decentralized finance (DeFi) lending protocol Aave will soon inject a new crypto-secured stablecoin into its ecosystem following the conclusion of a unanimous vote via its DAO on Sunday.

A proposal made by Aave Companies, a group of development teams working in support of the protocol, asked users on Thursday to weigh in on whether to launch its US dollar-pegged GHO stablecoin.

The Decentralized Autonomous Organization (DAO) voted with approximately 501,000 AAVE, or 99.9%, in the affirmative, compared to 17 abstentions and 12 against the idea, according to results from a snapshot of voters.

The move means that Aave users and borrowers will be allowed to mint GHO against their delivered collateral while earning interest on the underlying, in the same way that other borrowed transactions work.

Unlike algorithmic stablecoins, whose design has been questioned since the collapse of Terra, crypto-backed stablecoins are assets that are secured by a basket of other digital assets.

Still, like its algorithmic cousin, GHO will be created by users once they provide the required security. When a user repays a loan position, the GHO protocol that governs the stablecoin burns that user’s GHO, according to an initial proposal on July 8.

“Loan rates for GHO will be determined by AaveDAO, with a stable rate that can be adjusted depending on market conditions,” Aave Companies said. “This design retains the Aave protocol’s loan rate model flexibility, and it will be possible in the future to implement any rate strategy the Aave community sees fit.”

Founded in 2017 after a $16 million ICO raise, Aave is the DeFi sector’s third largest protocol by total value with around $6.58 billion unlocked in smart contracts, per DeFi Llama, behind Lido and MakerDAO.

Aave’s native token (AAVE) has risen 70% in the past month and is changing hands at around $99.40, up 4% on the day.

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