The creators of the loans and borrowing system by the same name, Aave Companies, are releasing their native stablecoin GHO on the Ethereum Goerli testnet. The stablecoin, called “GO,” is completely decentralized and heavily securitized. Because minting will be performed using used so as security in the Aave Protocol, it is designed to guarantee that the GHO oracle price has always been locked at one in relation to the US dollar. Over-collateralization is a method used by the decentralized lending and borrowing platform Aave to guarantee the security of deposited cash.
In this arrangement, borrowers are required to put up more collateral than they borrow, serving as insurance for the lender in the event that they are unable to make good on their loan. By maintaining over-collateralized backing by a diverse range of cryptocurrencies provided by individuals who deposit on Aave, this enables a capital-efficient mechanism to issue stablecoins.
Stani Kulechov, the founder and CEO of Aave Companies, remarked, “With the support and management of the Aave community, GHOs decentralized stablecoin can power a payment layer that can easily, securely, and efficiently transfer value across DeFi and TradFi ecosystems.”
Aave DAO Assumes Control
Before it is anticipated to become live on the Ethereum mainnet, programmers can now study and test the GHO codebase on Github. The Aave DAO, which oversees both the Aave Protocol and GHO, must nevertheless approve the launch before it can take place.
Anyone who has AAVE, the system's governance token, will have a say in deciding GHO's quantity, rate of interest, and risk criteria because the stablecoin will be controlled by the Aave DAO. Additionally, the Aave DAO will be in charge of authorizing facilitator who can create and burn GHO tokens. Due to its comprehensive risk-mitigation capabilities, the Aave Companies selected the Ethereum V3 market to be the first facilitators.
The Aave DAO treasury will receive the interest payments made by lenders, unlike the other distributed stablecoin initiatives, because the property suppliers are already receiving interest on the collateral they have provided. According to the press release, the stablecoin is presently being audited by Certora after having already undergone audits by Open Zeppelin, SigmaPrime, and ABDK. The source repository is also a component of Aave's bug bounty program, which offers rewards to people who discover and disclose security flaws.
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