Aave Protocol launches stablecoin GHO on Ethereum mainnet, $2M minted

Aave Protocol launches stablecoin GHO on Ethereum mainnet, M minted

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Decentralized finance protocol Aave has finally launched its new algorithmic dollar-pegged stablecoin GHO on Ethereum.

Decentralized finance (DeFi) protocol Aave has launched its algorithmic United States-dollar pegged stablecoin GHO on the Ethereum mainnet, with $2.19 million worth of GHO minted so far.

Aave announced the launch of the new stablecoin in a July 16 blog post, describing the new stablecoin GHO as a “decentralized, over-collateralized” asset. The stablecoin is backed by a “multitude” of digital assets including Ethereum’s native currency Ether (ETH) and Aave’s native token AAVE (AAVE).

Let's GHO! Congrats to the @AaveAave community on the Mainnet Launch. https://t.co/vI7JbMLYb4
— GHO (@GHOAave) July 15, 2023

The launch of GHO on mainnet came after a community governance vote, which saw nearly 100% of the 424 participating addresses vote in favor of the new stablecoin.

Unlike centralized stablecoins such as Tether’s USDT (USDT), which have drawn some criticism for an apparent lack of transparency around its reserves — the assets backing GHO are transparent and verifiable and can be confirmed by on-chain data, according to Aave.

“All transactions are performed through self-executing smart contracts, and all data regarding GHO transactions is available and auditable directly from the blockchain or via numerous user interfaces,” Aave wrote.

Additionally, Aave said GHO’s revenue would further bolster its DAO treasury, with governance being entrusted to AAVE and stkAAVE token holders.

*Total circulating supply of GHO since inception. Source: DeFiLlama*

The GHO stablecoin is currently available to the public:

“Anyone can mint GHO using the assets they supply into the Aave Protocol V3 Ethereum market as collateral, ensuring that GHO is overcollateralized by a multitude of assets.”

The launch of GHO marks another addition to the growing ranks of DeFi-native algorithmic stablecoins. On May 4, DeFi protocol Curve launched its flagship algorithmic stablecoin crvUSD.

At the time of publication, MakerDAO’s Ethereum-based stablecoin DAI, is the largest algorithmic stablecoin in circulation, commanding a $4.28 billion market capitalization according to data from DeFiLlama.

However, the total stablecoin market remains dominated by centralized issuers including Tether and Circle.

*Stablecoin dominance by market capitalization. Source: DeFiLlama*

At current, Tether’s USDT and Circle’s USD Coin (USDC) account for 87% of the total circulating supply of all U.S.-dollar pegged stablecoins.

At the time of publication, GHO is trading slightly below the desired $1 peg at $0.9927 and has fallen as low as $0.9814 on July 16, according to price data from CoinMarketCap.

Cointelegraph contacted Aave for comment but has yet to receive an immediate response.

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GHO would allow users to borrow the stablecoin while still learning yield on their locked assets on Aave, however the proposal is just seeking feedback at this stage.

Decentralized finance (DeFi) giant Aave has unveiled plans to launch an overcollateralized stablecoin called GHO, subject to the community DAO’s approval.

The announcement was made by Aave Companies — the centralized entity supporting the Aave protocol on its Twitter page on July 7, stating:

"We have created an ARC for a new decentralized, collateral-backed stablecoin, native to the Aave ecosystem, known as GHO."

According to the governance proposal shared on Thursday, GHO would be an Ethereum-based and decentralized stablecoin pegged to the U.S. dollar (USD) that could be collateralized with multiple assets of the user’s choice.

To obtain GHO, users would need to mint the stablecoin against their deposited collateral however, the list of supported collateralized assets and the collateral ratio has yet to be detailed.

As users are essentially borrowing the stablecoin against their holdings, the position will need to be overcollateralized as per any normal Aave loan.

“With community support, GHO can be launched on the Aave Protocol, allowing users to mint GHO against their supplied collaterals. GHO would be backed by a diversified set of crypto-assets chosen at the users’ discretion, while borrowers continue earning interest on their underlying collateral.”

The proposal notes that 100% of the interest payments accrued by GHO minters would be “directly transferred to the AaveDAO treasury; rather than the standard reserve factor collected when users borrow other assets.”

Holders of the staked AAVE token (stkAAVE) would also benefit from the stablecoin’s adoption, as Aave Companies has proposed that they would also be able to mint and borrow GHO at a discounted rate.

“If the community votes positively for the deployment of the protocol creating the ability for users to mint GHO, a recommended starting interest rate and discount rate will be proposed,” the team stated, adding that an audit would happen over the next few weeks if all goes to plan.

Aave founder Stani Kulechov stated via Twitter that the team has a broader vision of the USD-pegged asset:

“While GHO would be secured by the assets on the Ethereum market, the main vision for GHO is to pursue organic adoption via L2s to solve real life payment opportunities across the internet and on-ground.”

BREAKING: The @AaveAave team submitted ARC to launch a self-sovereign overcollateralized stablecoin GHO backed by the Aave Protocol collaterals https://t.co/YHpLmipLjl
— stani.lens (,) (@StaniKulechov) July 7, 2022

Aave is an automated DeFi protocol that enables users to lend and borrow digital assets without needing to go through or obtain approval from a centralized intermediary. The latest proposal to the DAO has coincided with Aave's native token AAVE gaining 15.04% over the past 24 hours to sit at $72.31 at the time of writing.

According to data from DeFi Llama, Aave is the second-largest DeFi platform in terms of total value locked (TVL) at $6.76 billion. The ecosystem is based on Ethereum and also supports multiple Layer 2s including Polygon, Optimism and Arbitrum.

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