Popular DeFi lending protocol, Aave has now approved the integration of a GHO crypto-collateralized stablecoins into its ecosystem. Reportedly, the approval manifested after the completion of a consensus vote carried out through AaveDAO last Sunday.
According to reports, Aave had since Thursday conveyed the GHO proposal to its Decentralized Autonomous Organization (AaveDAO) voters. As revealed, the protocol admonished users to decide whether its US dollar-pegged GHO stablecoin should be unveiled on the ecosystem. The vote span reportedly lasted for three days, ending last Sunday. As per results obtained from a voter snapshot, about 501,000 AAVE, equivalent to 99.9%, endorsed the proposal. Twelve users voted against the proposal, while the remaining 17 were unavoidably absent.
With the approval of the proposal, subscribers and borrowers can now mint GHO against their supplied collaterals. Users who intends to first mint GHO must deposit cryptocurrencies accepted by Aave. This, as revealed, will not deter them from earning interest on the underlying. Recall that crypto-backed stablecoins usually function as assets collateralized by a basket of other cryptos. Its design appears entirely different from algorithmic stablecoins.
Additionally, Aave plans to charge interest on loans obtained through GHO. As revealed, the payments will be appropriated into the Aave DAO. More so, users who intend to mint GHO must allocate a value bigger than the value of received GHO. This thus translates into the over-collateralization of loans. As designed, whenever subscribers refund a borrowing position or become liquidated, the protocol burns the lent GHO.
Aave native token spikes after GHO approval
Shortly after the news of the approval dominated the airspace, Aave’s native token experienced a rise in value. The token reportedly spiked from $95.40 to $108. Within the last 24 hours, AAVE maintains a $102.50, recording a 4.5% increase.
Reportedly, the execution of the proposal won’t kickstart immediately. Its implementation, as revealed, becomes designed via an Aave Improvement Protocol (AIP). The Aave DAO will, however, supervise the distribution of the stablecoins after the vetting of its creation.
According to the lending protocol, AaveDAO will decide on the borrow interest rates for GHO. It says the adoption of a stable interest rates depend on the prevailing market conditions. As observed, this GHO model aligns with the borrow interest rate design flexibility of the Aave protocol. This thus makes it feasible for AaveDAO to execute any interest rate strategy in the future.
As of press time, Aave remains the third-biggest protocol by TVL. Reportedly, it possesses over $6.58 billion locked up in smart contracts.