Aave deploys DAI stablecoin competitor on Ethereum

Aave has launched its algorithmic stablecoin, $GHO, backed by multiple crypto assets, including ethereum (ETH). $GHO will be an alternative to $DAI, a stablecoin minted by MakerDAO.

Aave’s $GHO is live

After more than one year in development, Aave, the world’s second-largest decentralized finance (DeFi) protocol, has launched $GHO (pronounced “go”), an overcollateralized decentralized algorithmic stablecoin on Ethereum.

On July 15, Aave said DeFi market participants could mint the $GHO stablecoin by depositing supported collateral assets into the Aave Protocol V3 on Ethereum.

Unlike popular stablecoins like tether ($USDT), issued by centralized entities, the $GHO algorithmic stablecoin will be issued and managed by AaveDAO, a decentralized autonomous organization.

In correspondence with Bloomberg, Stani Kulechov, founder and CEO of Aave, said revenue generated by $GHO will be allocated to the project’s community contributors, including security experts, developers, and others.

The Aave team says all $GHO transactions will be handled by self-executing smart contracts, with transaction data, reserves, and other key information regarding the stablecoin verifiable on-chain, underscoring the project’s transparency.

Crypto, DeFi, and stablecoins

Despite the transparency offered by decentralized stablecoins, their centralized counterparts still dominate the market. The collapse of UST, a Terra algorithmic stablecoin project last year, proved that the so-called decentralized stablecoins are not immune to the risks of manipulation and de-pegging.

MarkerDAO’s $DAI, which managed to recover from a de-peg event in March, is the world’s largest algorithmic stablecoin, with a market cap of $4.27 billion.

At the time of writing, $GHO trades at $0.993870 with a total supply of 2,267,933 $GHO, according to CoinGecko.

Whether Aave’s $GHO stablecoin will gain traction and potentially overtake $DAI or $USDT remains to be seen.