Less than 48 hours have passed since decentralized finance (DeFi) lender Aave launched its new algorithmic stablecoin GHO, pegged to the U.S. dollar on the Ethereum blockchain, and according to DeFiLlama statistics, approximately 2.5 million coins have already been minted.
The launch was approved nearly unanimously by token holders governing the Aave protocol
Aave DAO oversees the governance of GHO, including establishing and adjusting the overall supply, interest rates, and minting limits for facilitators, defining risk parameters, as well as approving and managing the facilitators.
Facilitators are protocols or organizations authorized by Aave DAO to create GHO.
In the final vote for the launch, 421 wallets with a total of 881,059 AAVE tokens voted in favor. Only three wallets with a total of 10 AAVE dissented; one of the three dissenting wallets held 10 AAVE, and the other two held fractions of it.
GHO was deployed on the Aave V3 market. Users can mint GHO by providing other cryptocurrencies listed on Aave V3 as collateral, including AAVE, ETH, USDT, USDC, and DAI.
As GHO is overcollateralized, the total value of reserves deposited for its minting far exceeds the value of GHO in circulation.
According to an official blog post published during the launch, the total mining power of Aave V3 as a facilitator is set at 100 million GHO. While the current supply indicates that only 2.5% has been minted so far, this limit can be increased by Aave DAO through another community vote.
The collateral deposited in the Aave V3 protocol continues to generate income, and the interest paid for borrowing GHO is directed to the DAO treasury.
Furthermore, users who contribute AAVE to the protocol’s safety module to support the stablecoin can acquire GHO at a discount.
Stablecoin competition heats up
The largest stablecoins, USDT and USDC, issued by Tether and Circle, respectively, maintain their 1:1 peg to the dollar, holding reserves of assets typically in the form of cash and U.S. Treasury bonds held by centralized organizations such as banks.
The DAI stablecoin by the Maker Foundation on Ethereum was the first of its kind, backed by overcollateralized crypto loans.
DAI is primarily backed by USDC, although other Ethereum-based cryptocurrencies, including Ethereum and Wrapped Bitcoin (WBTC), can be used to create it. Due to its decentralized collateralization nature and the fact that the stablecoin protocol is not controlled by a single company, it is often referred to as a decentralized stablecoin.