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Aave DAO voters want new stablecoin.

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The majority of Aave DAO voters, around 99.9%, want to create a new stablecoin. They pledged half a million AAVE in approving the measure to create GHO – a stablecoin that will be backed by collateral made up of other cryptocurrencies.

This proposal prompted AAVE, the protocol’s native coin, to surge to $108 from $95.40. At the time of writing this article, AAVE was trading at $98.27. It has gained 15.56% in the past seven days.

Users first have to deposit cryptocurrencies accepted by Aave to mint GHO. And those who borrow GHO against crypto assets have to earn interest on the underlying collateral used to mint the stablecoin. Moreover, the lending protocol will charge interest on loans taken out in GHO. Payments will go back to the Aave DAO. The users have to make sure that the deposits they make have to greater than the value of the GHO they receive. This means the loans will be over-collateralized. The GHO lent will be burned from the protocol when users repay a borrowing position or are liquidated.

It will take time for the GHO to be introduced as its implemented through an Aave improvement protocol (AIP). The Aave DAO is in charge of supervising the stablecoin’s distribution. The GHO would work similarly to existing algorithmic stablecoins which mint $1 worth of tokens when users provide $1 worth of cryptocurrency.

Aave is a DeFi platform that locks over $6.8 billion worth of various cryptocurrencies on supported networks. Basically, it’s a lending and borrowing platform wherein users can earn yields on their pledged tokens.

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