Aave has announced the launch of its new stablecoin, dubbed GHO, on the Ethereum mainnet. The stablecoin is pegged on a 1:1 ratio with the US dollar and is backed up by a series of digital assets that include Ethereum. As of now, GHO tokens worth more than $2.19 million have been minted. Aave announced the launch of the GHO stablecoin and described the new stablecoin as a decentralized and over-collateralized digital asset.
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 the mainnet comes after the Aave community’s governance vote, which saw almost 100% of the 424 participants voting in favor of the new stablecoin. Traditional stablecoins have attracted great criticism over time as a result of lower transparency around their reserves, but this is not the case with the new stablecoin as well.
According to the statements, the assets backing GHO are completely verifiable and can be confirmed by on-chain data. The platform also mentioned that the revenue generated by GHO would play a major role in bolstering its DAO treasury, with governance being entrusted to AAVE and sktAAVE holders.
Aave declared,
‘GHO was developed with the same goal as the Aave Protocol: to enable a people-powered financial ecosystem, accessible to all, that everyone can benefit from. With the Aave Protocol and GHO, people around the world have equal access to the same financial tools that are based on transparent and decentralized technology.’
Aave Adds to the Stablecoin list with GHO
At the time of writing, the GHO stablecoin is trading for almost $0.9922, slightly below its intended $1 peg, and was reported to have fallen to as low as $0.9814 not too long after its launch. Similarly, the stablecoin is all set to compete with other stablecoins like USDT and USDC which account for approximately 87% of the market’s total circulating supply of stablecoins. Whether or not the new stablecoin survives is a topic that needs extensive observation in the long run.
The launch of the stablecoin marks another addition to the continuously growing ranks of DeFi-native algorithmic stablecoins. On May 4 this year, the DeFi protocol Curve launched its flagship algorithmic stablecoin dubbed crvUSD. However, as of now, MakerDAO’s Ethereum-based stablecoin DAI is the largest algorithmic stablecoin in circulation, which commands a $4.28 billion market cap.
GHO has introduced a series of innovative roles and mechanisms, including Facilitators endorsed by DAO to mint the stablecoin. There are two facilitators which include the Aave v3 market on Ethereum and the Flashminting Facilitator. The v3 market currently has a minting capacity of $100, which might be increased. Apart from that, the Flashminting Facilitator enables users to mint GHO without collateral but proposes a condition for them to repay in the same block.
