Aave DAO community members will begin voting on whether to deploy the much-awaited gho (GHO) U.S. dollar-pegged stablecoin on the Ethereum blockchain later today, an Aave Improvement Proposal (AIP) shows.
Aave is a lending and borrowing platform that allows users to earn yields on their pledged tokens. Gho, an algorithmic stablecoin, can be minted by users against a diversified set of crypto assets. GHO holders will continue to earn interest on the supplied collateral, just as in other lending transactions on Aave, which means ghost in Finnish.
The proposal seeks to introduce GHO through so-called "facilitators," allowing users of Aave version 3 (V3) to mint GHO against token holdings supplied to the platform.
"If approved, the introduction of GHO would make stablecoin borrowing on the Aave Protocol more competitive and generate additional revenue for the Aave DAO by providing to the DAO treasury 100% of the interest payments made on GHO borrows," the proposal states.
Gho has been available on the Ethereum blockchain’s Goerli testnet since February, where it has functioned without encountering any major bugs.
governance post in early June, developer Aave Companies proposed the V3 Ethereum Facilitator – to allow for gho lending against collateral deposits – and the FlashMinter Facilitator – a variant of flash loans, or loans that are issued against zero collateral.
These facilitators, which can be protocols or entities, have the ability to generate and burn GHO tokens up to a certain limit, enabling depositors to borrow GHO against their collateral deposited in Aave V3's Ethereum mainnet pool.
After launch, Aave will allow users to mint GHO tokens against their supplied collaterals. GHO would be backed by a basket of cryptocurrencies chosen at the users’ discretion, while borrowers would continue earning interest on their underlying collateral.
GHO would work similar to other algorithmic stablecoins, which mint exactly $1 worth of tokens when users provide $1 worth of cryptocurrency. In GHO’s case, a user must supply collateral (at a specific collateral ratio) to be able to mint GHO. Correspondingly, when a user repays a borrow position (or is liquidated), the GHO protocol burns that user’s GHO, according to the proposal.
UPDATE (July 11, 11:29 UTC): Adds dollar peg in first paragraph, algorithmic mechanism in final paragraph.
Edited by Sheldon Reback.
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