A snapshot vote on Aave DAO’s proposal to introduce a new decentralized stablecoin called GHO revealed the community’s reaction.
The proposal to introduce the GHO stablecoin was submitted to the AAVE community in early July 2022 and has since received a mostly positive response.
Aave is a decentralized protocol that allows users to take turns lending and borrowing cryptocurrencies to receive and pay fees. It is a peer-to-peer service that sets lending rates and uses algorithms to match lenders with borrowers.
According to the proposal, “facilitators” are other protocols that are able to mint GHO “trustlessly”, provided the loan-to-value collateral ratio is met. Servicers will burn minted GHO tokens when users repay their loans or liquidate their positions. The number of tokens a facilitator can mint will be limited to the “buckets” that AAVE governance will vote on.
All interest repaid will go into the DAO treasury. If the GHO stablecoin is approved through the Aave Improvement Proposal, GHO will be governed using the Aave governance method. The Aave governance token is an Ethereum-based token that allows holders to vote on proposals.
The token works like an algorithmic stablecoin, where $1 of stablecoin is minted in exchange for $1 worth of cryptocurrency.
In response to the proposal, the DAO community raised concerns about the importance of Aave DAO setting interest rates and limiting the supply of GHO tokens.
The community also highlighted the importance of the module responsible for maintaining the dollar peg of GHO and the importance of adequate screening of facilitators.
If approved by the community, the first facilitator will be the new Ethereum protocol when it switches to an energy-intensive consensus mechanism called proof-of-stake.
A separate proposal will be created to set the starting state of the GHO.
Celsius Pays Collateral to Access Locked Tokens Ahead of Bankruptcy Filing
Aave is not like more centralized lenders like the recently defunct Celsius. In centralized lending, the operation of lending is opaque and usually governed by several centralized voices. In Celsius’ bankruptcy filing, it was clear that the company borrowed money without providing any collateral that lenders could liquidate.
On a decentralized platform, without intermediaries and top-down hierarchies, 100% or more of the necessary collateral allows lenders to understand the lineage of borrowers. The lack of a middleman means lenders offer much lower returns than companies like Celsius offer.
Ironically, Celsius started repaying the loans it took from Maker and Aave to unlock the collateral just days before the bankruptcy was declared.
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