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Aave, the leading DeFi lending protocol, has launched its long-awaited GHO stablecoin on Ethereum.
Aave v3 users on Ethereum can now mint the stablecoin against assets deposited into the protocol. GHO offers a fixed interest rate of 1.5%, with AAVE stakers receiving a 30% discount.
Aave DAO’s treasury will receive all fees generated from GHO. Aave v3 users can mint GHO against all collateral assets supplied to the protocol, allowing users to continue earning yield on their assets while accessing dollar-pegged liquidity. The stablecoin’s initial debt ceiling is $100M.
“[GHO] makes borrowing on the Aave Protocol more competitive, provides more optionality for stablecoin users, and generates additional revenue for the Aave DAO by sending 100% of interest payments on GHO borrows to the DAO,” Aave told The Defiant. “The goal is to create a decentralized and resilient stablecoin with no single points of failure or overexposure to… centralized or single-set assets.”
The deployment follows the passing of a governance proposal on July 14 with near-unanimous support. GHO’s code was audited four times before its mainnet launch. The price of AAVE is up nearly 60% in the past month.
Aave is seeking to capitalize on the demand for a good decentralized option in the stablecoin sector with GHO.
Confidence in incumbent stablecoins was recently rattled, with each of the top four centralized stablecoins briefly depegging this year. The market capitalization of USDC, the second-largest stablecoin and a popular asset among DeFi protocols, also slumped 50% in the past 12 months, according to CoinGecko.
Aave said it developed GHO to enable a permissionless web3 financial ecosystem, touting its efficacy for DeFi, cross-border remittances, and micropayments applications.
Governance and Facilitators
Chaos Labs and Gauntlet, Aave DAO Risk Contributors, will take on the role of GHO Risk Steward for the first 60 days after its launch.
Pending approval via an accelerated 24-hour governance process, the steward can raise GHO’s debt ceiling by up to 100% or move interest rates up or down by 50 basis points once every five days.
Moving forward, the Aave DAO will oversee GHO governance. The DAO can change GHO’s interest rate or debt ceiling, and appoint facilitators — entities that can trustlessly mint and burn GHO and integrate the stablecoin into other protocols. Prospective facilitators must apply by submitting a governance proposal in Aave DAO’s forum.
Aave has already approved three GHO facilitators, starting with Aave v3 on Ethereum. Governance also greenlit the “Flashmint Facilitator,” — which allows users to take out flash loans, provided borrowing and repayment occur within the same Ethereum block.