Aave, the largest DeFi protocol on the Ethereum network, is planning to release its own stablecoin. This was an announcement made by the project’s founder, Stani Kuchlekov on July 7. According to him, the dev team has created an Aave request for comments (ARC) for a new stablecoin. The stablecoin will be decentralized, and collateral-backed and will be native to the Aave ecosystem.
What this means is that the proposal is now in the hands of the community to decide whether an AAVE stablecoin is going to be materialized.
The AAVE GHO Stablecoin
AAVE DAO members consist of holders of the AAVE token. The AAVE token gives the ability to vote on decisions that affect the future of the protocol. If the community votes to go ahead with the proposal, then AAVE will introduce GHO stablecoin into the market.
AAVE has over $6.6 billion TVL, making it the largest DeFi protocol across all blockchains. If the proposal passes, the introduction of the GHO will allow borrowing on the AAVE protocol to become even more competitive and produce more options for stablecoin users.
Furthermore, it will generate extra revenue for the DAO by sending all of the interest payments on the GHO stablecoin to the DAO treasury.
AAVE automates borrowing and lending similar to the way banks do but in a decentralized way. While such products are experimental and are prone to hacks, they offer users a way to become more financially independent.
Why A Stablecoin?
Stablecoins are important in the DeFi world. A stablecoin is a token that is more stable than other cryptocurrencies, such as Chainlink, Bitcoin, or Ethereum. Stablecoins are typically pegged to fiat currencies or hard assets such as gold and silver to prevent fluctuations, and allow traders to maintain their liquidity on-chain.
Final Thoughts
A few months back, an attack on the TerraUSD stable coin sent the Terra DAO crashing down. If the AAVE GHO stable is going to be successful, it must learn from the mistakes of its predecessors and establish stronger mechanisms that will hold against any type of attack.