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Top Cryptocurrency News: Aave DAO Approves the Launch of GHO, a Collateral-Backed Stablecoin

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Aave, a non-custodial market protocol, announced on Sunday that the Aave DAO has approved the introduction of the "GHO" stablecoin to the network. 

The collateral-backed stablecoin was proposed by Aave Companies during the first week of July, and its value will be tied to that of the US dollar.

On Sunday, Aave announced that the Aave decentralized autonomous organization (DAO) has approved a proposal to create the GHO stablecoin token. According to the official Aave Twitter feed, "the community has granted the green light for GHO. The next stage is to vote on the genesis parameters of GHO; expect for a proposal on the governance forum next week."

According to the GHO introductory blog post, which was published on July 7, 2022, “the stablecoin would be backed by a diverse set of crypto-assets chosen by users, while borrowers continue to receive interest on their underlying collateral.” The governance proposal was supported by a large majority of Aave DAO voters, with more than 99 percent voting in favor of creating GHO.

As per the governance proposal's approval snapshot, GHO would deliver community benefits through the Aave DAO by paying 100 percent of interest payments on GHO borrows to the DAO, and GHO will be controlled by Aave governance. Aave's stablecoin will be added to the stablecoin economy, which is now worth $153 billion. Tether (USDT) leads the stablecoin group in total market capitalization, with USDC trailing behind.

GHO will also join stablecoin crypto assets that leverage collateral assets and those that utilize the approach of over-collateralization. Makerdao's DAI stablecoin is over-collateralized, as is Tron's USDD, which implies there is more collateral than is required to support the stablecoin's backing during times of significant market volatility.

According to a blog post by Aave Companies on the subject, “GHO would function as a decentralized stablecoin on the Ethereum mainnet and be created by users (or borrowers).”

The blog post further adds that "when a user repays a borrow position (or gets liquidated), the GHO protocol burns that user's GHO. Instead of the customary reserve factor gathered when users borrow other assets, all interest payments received by GHO minters would be immediately remitted to the Aave DAO treasury."

Additionally, Aave has a native token, which is now ranked 45th out of more than 13,000 crypto assets. The market value of the digital asset is around $1.46 billion, and AAVE has climbed by 84.7 percent over the last month. In terms of total value locked, the open source decentralized lending protocol ranks third among all decentralized finance (defi) protocols. According to data from sources, Aave had $6.59 billion locked up as of July 31. In-mid may, Aave launched the Lens Protocol, a Web3, smart-contracts-based social media network.  On top of the Polygon (MATIC) network, the Lens platform supports more than 50 applications.

According to Aave Companies , the community was extremely involved with the GHO stablecoin concept and provided tremendously insightful and useful input. Aave described some of the issues raised by the community that the team would concentrate on, including the need for thorough facilitator verification, supply caps, a peg stability module, and DAO-set interest rate risks. For the time being, the community will have to take part in voting on the stablecoin's genesis specifications before the cryptocurrency token is released.

Read also: Top cryptocurrency news: ECB Economists Propose Limiting Access to Digital Euros to Protect Banks

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