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While Terra’s collapse may have cast a shadow over stablecoins, one big DeFi player doesn’t appear to be deterred.
Aave Companies, the centralized entity that stewards the Aave lending protocol, proposed a new dollar-pegged stablecoin to the protocol’s DAO on July 7. The GHO stablecoin would be minted by borrowing against assets locked as collateral on Aave.
Borrowers would still earn yield on their deposited assets, while also racking up interest on their borrowed GHO, according to Aave Companies’ proposal. The interest payments would go directly to the DAO treasury, and could be considered revenue, a welcome word in a bear market.
“The power of DeFi is that GHO allows more liquidity for decentralized stablecoin[s] in the market, more fees for Aave, more volume and fees for Curve, more stability for other stablecoins, more attractiveness of DeFi in general compared to CeFi,” wrote Mark Zeller, integrations lead at Aave.
He emphasized that the move wasn’t a hostile one, reminiscent of Terra founder Do Kwon’s war against DAI, DeFi’s leading decentralized stablecoin. “The idea is to grow the decentralized stablecoin market not to compete,” Zeller wrote in Aave’s forum.
Facilitators
In service of GHO, Aave Companies has proposed the concept of “Facilitators,” which would be entities permitted to mint and burn GHO tokens based on their chosen strategies.
Under the proposal, Aave’s Ethereum market would serve as the first Facilitator by allowing users to mint GHO against collateralized debt positions. A diagram outlining other possible facilitators included more exotic uses like delta neutral positions and credit score-based GHO issuance.
Discount For AAVE Stakers
A discounted rate on GHO borrowing would be offered to users staking AAVE tokens, potentially driving more value to the digital asset.
As part of Aave Companies’ vision for a multi-blockchain future, the organization emphasizes the use of the protocol’s Portal feature, as the key to enabling GHO to move securely across blockchains.
According to Aave Companies’ post, a Snapshot vote will follow the proposal to develop GHO. If it’s a go, then an initial interest rate and discount rate for stkAAVE holders will be proposed with governance maintaining the ability to modify it in response to market conditions.
