After a unanimous decision via its DAO on Sunday, DeFi lending protocol Aave will soon introduce a new crypto-collateralized stablecoin into its ecosystem.
Aave Companies, a consortium of protocol-supporting development teams, put up a proposal on Thursday asking users to weigh in on whether its US dollar-pegged GHO stablecoin should be introduced.
According to the findings of a voter snapshot, the DAO voted with around 501,000 AAVE, or 99.9%, in favor, compared to 17 abstentions and 12 against the proposition.
This means that, in a manner similar to how other borrowed transactions work, Aave users and borrowers will be able to mint GHO against the provided collaterals while receiving interest on the underlying.
Crypto-backed stablecoins are assets that are collateralized by a collection of other digital assets, as opposed to algorithmic stablecoins, whose designs have come under scrutiny in the wake of Terra’s demise.
When people provide the necessary collateral, however, GHO will be built by users, much like its algorithmic counterpart. An initial proposal on July 8 stated that when a user pays back a borrow position, the GHO protocol managing the stablecoin burns that user’s GHO.
Aave declared:
“Borrow interest rates for GHO will be determined by the AaveDAO, with a stable rate that may be adapted depending on market conditions. This design retains the Aave protocol’s borrow interest rate model flexibility, and it will be possible in the future to implement any interest rate strategy the Aave community sees fit.”