Aave DAO Vote To Mint $GHO, An Algorithmic Stablecoin

Aave GHO

The Aave decentralized autonomous organization (DAO) voted to launch a stablecoin. This was published by the Aave platform on Twitter and via other channels on July 31. The update announced that the GHO, the proposed stablecoin would be an algorithmic stable cryptocurrency. The update states:

“The community has given the greenlight for GHO. The next step is voting on the genesis parameters of GHO, look out for a proposal next week on the governance forum”

The announcement is coming a few months after algorithmic stablecoins became a topic of discussion following the crash of the Terra stablecoin, UST.

Received With Mixed Feelings

In a blog post released on July 7, Aave said that:

“If approved, the introduction of GHO would make stablecoin borrowing on the Aave Protocol more competitive, provide more optionality for stablecoin users and generate additional revenue for the Aave DAO by sending 100% of interest payments on GHO borrows to the DAO.”

There are two types of stablecoins, the collateralized such as USDT and USDC and the algorithmic, such as the Tron-backed USDD. Other stablecoins are a mixture of both.

The Aave DAO approval for the $GHO was received with mixed feelings. Some community members feel that algorithmic stable coins are not reliable while others are of the opinion that if some algo stablecoins such as USDD are working, there is no reason for bthe Aave GHO not to work.

“Somebody hasn’t played with pseudo-stablecoins? There is no way they can be algorithmic, I don’t see any use for them, especially since there are years of proven backed stablecoins like USDT, why reinvent anything?” says Mathias Iguini in response to the GHO approval voting.

A Few Stablecoins Are Enough

Ahmad Alhussain, a crypto entusiast and software engineer believes that the market doesn’t need many stablecoins since those that are already operating are doing just fine. However, Filipe G, a wealth management advisor at Ankr sees reasons why Aave is keep to bown its own stablecoin. According to him,

“Borrowing a stablecoin from a peer-to-peer lending platform like Aave allows Aave to get only a % of the borrowing interest (rest goes to lending suppliers). If a protocol creates its own stablecoin, it has virtually unlimited supply and can keep all the fee for the protocol.”

The open source liquidity protocol announced that its stablecoin will be decentralized, user minted and backed by cryptocurrency.

Some Support for $GHO

Even with the skepticism of many in the crypto community, the Aave algo stablecoin still has a number of supporters. Eirc Dochartach, believes that the protocol should be given a benefit of the doubt deapite the failure of the Terra stablecoin. In his words,

“UST was uncollateralized and run by a crook that attacked people who called out that he was a crook. Aave is building an over collateralized algorithmic stablecoin similar to DAI. Aave is the biggest DeFi lending protocol in the world and have been nothing but transparen”


Author: Jofor Humani

Jofor is a crypto journalist with passion for investigative reviews.

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