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Looking at the void created after Terra’s UST stablecoins, Aave’s GHO stabloin may contribute to crypto space.
AAVE protocol is looking towards bringing a stablecoin. This came to know when the prominent defi protocol proposed to create a stablecoin dubbed GHO. As per reports, the project is detailed as it would enable users to generate, or ‘mint’ in crypto language, GHO stablecoin. They can be minted against their collateral supply and all the payments generated through interest will be allocated to AaveDAO.
The official blog post noted that, GHO stablecoin will be similar to the yet another stablecoin of MakerDAO named DAI. This would be in many terms including that GHO would be minted following the certain collaterals ratio supplied by users.
The protocol would be abided to burn the GHO stablecoin belonging to the users at the time of repayment of borrowed amount. Additionally these collateral assets that are deposited on Aave protocol are said to continue so that it would generate yield as well as also be used as collateral.
Aave outlined that the protocol will also see the deployment of GHO aToken and GHO Debt Token. This will be coming in the wake of the same mechanisms like other assets that are listed on Aave protocol. This integration of tokens with protocol is designed in such a way that it would facilitate the growth on the Ethereum blockchain network.
Stablecoins has been under the skepticism given the collapse of UST algorithmic stablecoin of Terra (LUNA) network. This fall of UST stablecoin also led the whole crypto industry under immense pressure. Due to the uncertainty about the underlying collateral assets across leading projects, it has seen consistent rise.
So this would also put a halt on lending and borrowing as it is expected that a certain limit will be imposed. This approach could minimize the risk that would play a crucial role during the development of the project. In case of a market downturn, the protocol also holds the feature to implement a stabilizing factor dubbed as E-Mode.
Demand of GHO stablecoin also increases following the collateral contracts’ price and users can also borrow more GHO while using several other collateral assets that are primarily non-volatile.
Nancy J. Allen is a crypto enthusiast, with a major in macroeconomics and minor in business statistics. She believes that cryptocurrencies inspire people to be their own banks, and step aside from traditional monetary exchange systems. She is also intrigued by blockchain technology and its functioning. She frequently researches, and posts content on the top altcoins, their theoretical working principles and technical price predictions.
