Aave lending protocol is gearing up to launch its own decentralized stablecoin, but so far only on the testnet.
The developers of the Aave ecosystem have introduced a decentralized stablecoin based on the Ethereum network (ERC20) called GHO. Project details published on the Aave website forum. According to the description, blockchain developers can already familiarize with the technical documentation of the project on GitHub.
Initially, the decentralized stablecoin GHO will be released on the Goerli test network, and only then on the main Ethereum network. The time frame for the deployment of the project is not disclosed. Aave claims that the audit of the project held already three firms: Open Zeppelin, SigmaPrime and ABDK.
The project will be managed by AaveDAO and will require support from AAVE token holders for its development. The stablecoin will be backed by assets from the reserves of the Aave protocol, and the rate will be pegged to the US dollar. At the same time, the users themselves will be engaged in the issue of the stablecoin, however, more assets will have to be invested in the security than can be obtained in the form of GHO. Such a gap is explained by the need to maintain stablecoin quotes with a decentralized project structure.
According to the whitepaper, users will be able to use the same assets to issue GHO that are used as collateral for loans in the Aave protocol. At the time of writing, users can lay ether (ETH) as collateral for a loan in Aave, but the stablecoin tether (USDT), for example, cannot be used for the same purposes.
With the help of the GHO stablecoin, it will be possible to earn interest accruals, however, their size will not be formed according to the supply-demand model. Instead, the interest rate will be determined by the key players in Aave Governance. The developers also added that the formation of the course will be carried out due to pre-established frameworks, and not market dynamics, as is the case with centralized stablecoins.
Aave acknowledges that the risk of a decentralized stablecoin smart contract being hacked will always be high, but the developers hope they have eliminated loopholes through a “conservative approach” in development.
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