Major Decentralised Finance Protocol Aave has deployed its native stablecoin GHO on Ethereum’s Goerli testnet. The deployment was announced by Aave companies, on Thursday 9th February.
Pronounced as “Go”, the stablecoin codebase is accessible so developers and adopters can access and interact with it before the main net release. The stablecoin’s deployment on the mainnet is subject to Community discussion approval.
The deployment of the stablecoin has been massively anticipated, ever since the community approved the proposal for its development in August 2022.
Stablecoins are a unique group of cryptocurrency assets, whose value is backed, or “pegged to an outside–majorly non-crypto related asset– like the US Dollar and Gold, slowlyy but steadily, these asset bases have become an underlying factor in the crypto space– a backbone for crypto transactions worldwide. They facilitate transactions, trading, and transfers between traditional currencies and digital assets. They have grown to a total market capitalization of $136 billion.
Aave’s GHO will face fierce competition as a slew of rival decentralized finance (DeFi) protocols issue or are in the process of crafting their own native stablecoin as a means to attract users at a time when crypto lending is flagging. Defi lender Maker’s DAI is the largest decentralized stablecoin with a $5 billion circulation, while Curve, another top protocol, is inching toward launching its native crvUSD stablecoin.
The stablecoin may be given a jumpstart, thanks to Aave’s top position in the DeFi Market, which is backed by $7 billion worth of digital assets pledged on the platform.
Aave is a lending and borrowing platform that allows users to take out crypto loans or earn yields on their tokens using smart contracts, without third-party oversight. It is managed by a decentralized autonomous organization, Aave DAO, through proposals and community votes.
In a recent interview, Dustin Teander, an analyst at crypto intelligence firm Messari said, “I suspect GHO will soon be a top decentralized stablecoin behind DAI.”
GHO will be an overcollateralized stablecoin backed by crypto assets, according to a technical paper authored by Emilio Frangella and Steven Valeri from Aave Companies. Its price will be fixed with an oracle to $1.
The GHO stablecoin supply is controlled by a mint-and-burn mechanism. Aave creates (mints) GHO tokens when users deposit digital assets as collateral to borrow GHO, while they keep earning a yield on their underlying assets.
Those who stake the protocol’s AAVE governance token may borrow GHO at a discounted rate.
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