Most AAVE investors residing in Aave DAO approve of creating a new stablecoin called GHO. It can be seen that 99.9% of participants who took part in the vote within three days agreed to the proposal regarding the issuance of this new algorithmic stablecoin. Seeing the many issues surrounding the new stablecoin today, many investors are surprised and doubt whether GHO will succeed.
AAVE Forms New Stablecoin
The proposal regarding this new stablecoin is a direct proposal from the founding company of Aave, which states that the company will issue 500,000 AAVE as a capital fund. Aave currently operates as a decentralized application on Ethereum that functions as a lending platform. Until now, Aave is still the most prominent lending and borrowing application in the crypto world, but it seems that this achievement has not been satisfactory because of the plans to create this new stablecoin.
Reportedly later, GHO, this stablecoin from Aave, will have an algorithmic system where the stablecoin is guaranteed or underpinned by several cryptos.
But according to publications, later, this stablecoin guarantee system will be the same as Dai (DAI), which is a guarantee using crypto but with a more significant number of stablecoins in circulation.
The point of this statement is that DAI uses a system where every 100 DAI issued, there is a guarantee of 200 DAI in Ethereum to mitigate the high volatility.
So most likely, GHO will have the same system, but it is not yet known what crypto will be the guarantee.
GHO will be the main stablecoin on the Aave platform, where later GHO can be used as collateral when borrowing other cryptos to lend, to borrow, and all profits will be transferred to Aave DAO.
For those who want to get GHO, it is rumored that they have to buy GHO with a higher value. It is possible to follow the DAI system, but we have not been told how the details will be.
So an example might be an investor who wants to buy GHO having to pay $2 in other cryptos to get $1 in DAI in the early days to fulfill the system equal to DAI. Although it has been approved, it appears that the GHO still needs time to complete and will go into renewal through the Aave Improvement Proposal or AIP.
Will GHO be Troubled?
For now, many investors seem worried about the issuance of the GHO stablecoin, seeing that many stablecoins are in trouble.
This is because Aave has stood firm as a lending platform that doesn’t need its stablecoin.
With so many new stablecoins, especially algorithmic ones ending badly, many are worried that GHO will lead Aave into ruin. Most investors equate GHO with UST, which has a bad history and succeeded in destroying the Terra project and one lending application, Anchor Protocol.
But for the information obtained at this time, it is likely that GHO will not be the same as UST but will be more similar to DAI, which is still moving safely.
This is because UST has a one-to-one ratio with collateral, namely LUNA, which is now LUNC, and the existence of a burn and mint mechanism that makes stablecoins more volatile.
Although later GHO will also have a burn mechanism, Aave ensures that the guarantee system is the same as DAI, which is one to two, so there is a possibility that this stablecoin will not have problems.
But it depends on the implementation that will be carried out by the team because, until now, everything is still in the planning stage.
Sentiment toward stablecoins now also seems to be improving as the current market capitalization of stablecoins has beaten Ethereum for the first time in July 2022.
This condition is also a sign that most investors are in a state of waiting to buy with many stablecoins still in storage.
So this sign could give the possibility of high volatility in the next few weeks.
Keep in mind that the GHO will have a value equal to $1 but will be guaranteed by several cryptocurrencies that have yet to be announced.
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