Aave DeFi Protocol Plans To Launch Its Own Stablecoin: Report

The Aave Defi protocol plans to launch its own stablecoin and the new proposal will go for a vote now as we can see more today in our latest cryptocurrency news.

The Aave DeFi protocol plans to launch its own stablecoin and the annoucnement by the founder Stani Kulechov read:

“We have created an ARC [Aave request for comments] for a new decentralized, collateral-backed stablecoin, native to the Aave ecosystem, known as GHO.”

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

This means that Aave’s proposal for a new stablecoin is in the hands of the DAO and the community of the Aave token holders which vote on the decisions that can affect the future of the protocol. If the vote succeeds, it will mean that one of the biggest players in DEFI will introduce another stablecoin option in the market which is something that can prove to be lucrative for the DAO. The lending protocol now has a total value locked of $6.6 billion as per Defi lama and it refers to the amount of crypto now being used in the protocol. People can use Aave which runs on Ethereum in order to lend or borrow digital assets without having to use a centralized intermediary. The native token Aave is the 47^th biggest crypto with a  market cap of $1 billion and Aave was trading today for $71.22.

If all goes according to plan and the Aave holders voted to approve GHO, the stablecoin will be backed by a diversified set of assets as per the proposal. It added:

“If approved, the introduction of GHO would make stablecoin borrowing on the Aave Protocol more competitive, provide more optionality for stablecoin users and generate additional revenue for the Aave DAO by sending 100% of interest payments on GHO borrows to the DAO.”

Stablecoin is a huge part of the crypto ecosystem as a token designed to be more stable than cryptos like Ethereum or Bitcoin. This is beucase the stablecoins are often pegged to the fiat currencies to prevent fluctuations and to help traders maintain liquidity. The defi projects built on the blockchain aim to become bankless banks but these projects are quite experimental and prone to hacks. In May we witnessed Terra as one of the biggest blockchains completely crashed. After a run on anchor and the UST stablecoin, the stablecoin deepened and didn’t hold on the value as the dollar which made LUNA worthless. Tens of billions of dollars in value disappeared into thin air.

Aave’s GHO stablecoin falls in the category of collateralized tokens and puts them in the same class as DAI which is also collateralized by MKR tokens. Aave Companies added that huge risk mitigation features will be in place in order to prevent too many GHOs from being minted.