Aave DAO Approves Creation of Yield-Generating Algorithmic Stablecoin ‘GHO’
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AaveDAO Approves Creation of Yield-Generating Algorithmic Stablecoin ‘GHO’
The Aave DAO (Decentralized Autonomous Organization) hasapproved the creation of a yield-generation stablecoin called GHO. Aaveis one of the most popular crypto lending protocols. Initially launched in theEthereum ecosystem, it also supports other layer-1 networks such as Avalancheand Phantom. According to the July 31 announcement, the GHO proposalwas submitted by Aave Companies, an association of developers supporting theAave protocol.
The Awe DAO voted 99.9 percent in favor of the creation ofthe GHO, which will reportedly be backed by a basket of cryptocurrencies. Userswishing to mint GHO must allocate collateral in excess of the amount of GHOthey wish to mint, while earning interest on the underlying stablecoin. Inother words, users must allocate an over-collateralized supply to shield theGHO.
The GHO algorithm differs from stablecoins, whose business model reliesentirely on two key factors to maintain parity with a fiat currency: thealgorithmic mechanism and the supply and demand of investors. But they are notreally supported by any kind of repository.
Terra was the most popular algorithmic stablecoin that rockedthe market throughout 2021 and early 2022. After the protocol broke in May,wiped out more than US$60 billion from the market and spread infection to otherstablecoin protocols, Terra launched Terra 2.0 in a bid to revive it.Ecosystem.