AAVE DAO APPROVING OVERCOLLATERALIZED STABLECOIN SPLITS CRYPTO COMMUNITY

Last updated: June 19, 2025, 20:17 | Written by: Changpeng Zhao

The world of decentralized finance (DeFi) is constantly evolving, and recent developments are sparking heated debates within the crypto community.One such development is the Aave DAO's near-unanimous approval of a proposal to create an overcollateralized stablecoin called GHO. Aave s stablecoin approval drew wild reactions from the crypto community, with many comparing its fate to TerraUSD while defenders pointed out its overcollateralization. Aave DAO, the governance body behind decentralized finance (DeFi) giant Aave, has voted practically unanimously to create an overcollateralized stablecoin called GHO. Aave Companies introduced the proposal on Thursday, andThis decision, while overwhelmingly supported by the Aave DAO, has ignited passionate discussion and even division among crypto enthusiasts. Aave DAO approving overcollateralized stablecoin splits crypto community. Aave DAO, the governance body behind decentralized finance (DeFi) giant Aave (AAVE) protocol, has unanimously voted in favor of creating an overcollateralized stablecoin called GHO.Some compare GHO to the ill-fated TerraUSD (UST), while others champion its overcollateralized design as a safeguard against similar vulnerabilities.With over 500,000 AAVE tokens pledged in favor of the proposal and a resounding 99.9% approval rate, the creation of GHO marks a significant milestone for the Aave protocol.Founded in 2025 after a successful $16 million ICO raise, Aave has cemented its position as the DeFi sector's third-largest protocol by total value locked (TVL), boasting around $6.58 billion. Related: Aave DAO approving overcollateralized stablecoin splits crypto community Having first been deployed on the Ethereum mainnet, Aave is now on Avalanche, Arbitrum, Optimism, Polygon, FantomBut what exactly is GHO, and why is its approval causing such a stir?This article delves into the details of the Aave DAO's decision, the mechanics of GHO, and the diverse reactions it's eliciting within the wider cryptocurrency ecosystem.

What is GHO and Why is Aave Creating It?

GHO is designed to be an overcollateralized stablecoin pegged to the US dollar. Aave DAO, o rg o de governan a por tr s da gigante das finan as descentralizadas (DeFi), Aave, votou praticamente por unanimidade pela cria o de uma stablecoin supercolateralizada chamada GHO. A Aave Companies apresentou a proposta na quinta-feira e recebeu uma esmagadora vota o de 99,9% da comunidade em apoio ao longo de tr s dias.This means that for every GHO in circulation, there will be more than $1 worth of collateral backing it.This overcollateralization is a key difference between GHO and algorithmic stablecoins like UST, which rely on complex algorithms to maintain their peg.The intention of the Aave team is to provide a more robust and reliable stablecoin option within the DeFi space.

The Mechanics of GHO

The process of creating and using GHO will involve a few key steps:

Borrowing GHO: Users will be able to borrow GHO by supplying collateral to the Aave protocol. Aave DAO approving overcollateralized stablecoin splits crypto community Aug . Aave DAO approving overcollateralized stablecoin splitsThis collateral can be in the form of various cryptocurrencies supported by Aave, such as ETH, WBTC, and AAVE itself.
Overcollateralization: As mentioned earlier, the amount of collateral required will be greater than the value of the GHO borrowed.This overcollateralization acts as a buffer against price fluctuations in the collateral assets.
Interest Rates: Borrowers will pay interest on their GHO loans. Aave DAO, the governance body behind decentralized finance (DeFi) giant Aave, has voted practically unanimously to create an overcollateralized stablecoin called GHO. Aave Companies introduced the proposal on Thursday, and it received an overwhelming 99.9% community vote in support over three days.This interest will be directed to the Aave DAO treasury, providing a source of revenue for the protocol.This is a key difference from how interest is typically handled on Aave, where a portion is usually allocated to a reserve factor.
Maintaining the Peg: The Aave DAO will have mechanisms in place to maintain the peg of GHO to the US dollar. Aave DAO, the governance body behind decentralized finance (DeFi) giant Aave, has voted practically unanimously to create an overcollateralized stablecoin called GHO.Aave Companies introduced the proposal on Thursday, and it received an overwhelming 99.9% community vote in support over three daysThese mechanisms could include adjusting interest rates, managing collateral ratios, and other stabilization strategies.

The ability to implement any interest rate strategy the Aave community sees fit is a key feature of GHO's design, providing Aave with flexibility in managing the stablecoin.This flexibility allows for adaptation to changing market conditions and the implementation of innovative strategies to enhance stability and adoption.

The Aave DAO Vote: A Landslide Victory

The proposal to create GHO was put forward by the Aave Companies on July 28th and received overwhelming support from the Aave DAO.The final vote count showed 99.9% in favor, with over 500,000 AAVE tokens pledged by voters. Aave DAO, the governance body behind decentralized finance (DeFi) giant Aave (AAVE) protocol, has unanimously voted in favor of creating an overcollateralized stablecoin called GHO.The Aave company put up the GHO creation proposal on July 28, which received an overwhelming 99.9% community vote over the course of three days. The proposal ended on Jul 31 at GMT with 501,000 AAVE tokensThis level of consensus highlights the community's belief in the potential of GHO and its alignment with the overall goals of the Aave protocol.This indicates that the Aave community believes this is a sound strategic move.

What is Aave DAO?

Aave DAO is the decentralized autonomous organization that governs the Aave protocol.A DAO is essentially an internet-native community with a shared bank account. The lending protocol will also charge interest on loans taken out in GHO, with payments going back to the Aave DAO treasury, rather than the standard reserve factor collected when users borrow other assets. Related: Aave to launch overcollateralized stablecoin called GHO. Aave s announcement about a crypto-collateralized stablecoin broughtDecisions about the future of the Aave protocol, including new features, parameter adjustments, and risk management strategies, are made through community proposals and voting.AAVE token holders have the right to vote on these proposals, giving them a direct say in the direction of the protocol.

The success of the vote demonstrates the strength of Aave's decentralized governance model and the active participation of its community members.

Why is the Crypto Community Divided?

Despite the strong support from the Aave DAO, the announcement of GHO has sparked a debate within the broader crypto community. 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. Founded in 2025 following a $16 million ICO raise, Aave is the DeFi sector s third-largest protocol by total value with around $6.58 billion lockedThe primary source of concern stems from the recent collapse of TerraUSD (UST), an algorithmic stablecoin that lost its peg to the US dollar and triggered a massive market crash.This event has made many crypto investors wary of stablecoins, particularly those that rely on complex mechanisms or are not fully backed by reserves.

Comparisons to TerraUSD (UST) and the Concerns Around Stablecoins

One of the main reasons for the division is the comparison of GHO to TerraUSD (UST).The collapse of UST is still fresh in the minds of many investors.The comparison is largely due to the inherent risks associated with all stablecoins, especially in times of high market volatility.While GHO is overcollateralized and UST was algorithmic, the association with stablecoins that have failed has created skepticism among some.

Many in the crypto community question whether GHO can truly maintain its peg to the US dollar in all market conditions. Aave DAO approving overcollateralized stablecoin splits crypto community . news and more. Buy, Sell and Swap bitcoin, ethereum and 350 cryptocurrencies on BitSwapNow.They worry about the potential for ""de-pegging,"" where the value of GHO deviates significantly from $1, leading to potential losses for users.The ability to maintain the peg is paramount to the success of the stablecoin.

Arguments in Favor of GHO: The Overcollateralization Factor

Proponents of GHO emphasize its overcollateralized nature as a key differentiator from UST and other unstable stablecoins.The overcollateralization provides a buffer against price fluctuations in the collateral assets, reducing the risk of de-pegging. Aave DAO, the governance body behind decentralized finance (DeFi) giant Aave protocol, has unanimously voted in favor of creating an overcollateralized stablecoin called GHO. The Aave company put up the GHO creation proposal on July 28, which received an overwhelming 99.9% community vote over the course of three days.The level of overcollateralization ensures that even if the value of the collateral falls, there will still be enough assets to cover the outstanding GHO.

They also point to the fact that GHO is governed by the Aave DAO, which has a proven track record of responsible risk management. Aave DAO approving overcollateralized stablecoin splits crypto community⁣ crypto dao aave stablecoin splitThe Aave DAO will have the ability to adjust interest rates, manage collateral ratios, and implement other stabilization strategies to ensure the stability of GHO.

Potential Benefits of GHO for the Aave Ecosystem

Despite the concerns, GHO has the potential to bring several benefits to the Aave ecosystem:

Increased Liquidity: GHO can be used to facilitate lending and borrowing on the Aave protocol, potentially increasing liquidity and reducing transaction costs.
New Revenue Streams: Interest paid on GHO loans will be directed to the Aave DAO treasury, providing a new source of revenue for the protocol.This revenue can be used to fund further development, marketing efforts, or community initiatives.
Greater Adoption: GHO could attract new users to the Aave protocol, particularly those who are looking for a stable and reliable way to participate in DeFi.
Flexibility in Interest Rate Strategies: The protocol has the ability to implement any interest rate strategy.

The success of GHO could strengthen Aave's position as a leading DeFi protocol and drive further adoption of its services.

Risks and Challenges Associated with GHO

While the overcollateralized design of GHO mitigates some of the risks associated with stablecoins, there are still potential challenges that need to be addressed:

Smart Contract Risk: Like any DeFi protocol, GHO is vulnerable to smart contract exploits.A flaw in the code could allow attackers to drain collateral or manipulate the peg.Robust security audits and bug bounty programs are essential to mitigate this risk.
Collateral Risk: The value of the collateral assets backing GHO could decline significantly, potentially leading to a shortage of collateral. Aave DAO approving overcollateralized stablecoin splits crypto community Aave DAO, the governance body behind decentralized finance (DeFi) giant Aave (AAVE) protocol, has unanimously voted in favor of creating an overcollateralized stablecoin calledAave needs to carefully manage the risk profile of the collateral assets and implement mechanisms to mitigate potential losses.
Governance Risk: The Aave DAO needs to make responsible decisions about the management of GHO.Poor governance decisions could undermine the stability of the stablecoin and damage the reputation of the Aave protocol.
Regulatory Risk: The regulatory landscape for stablecoins is still evolving. Aave DAO approving overcollateralized stablecoin splits crypto community . Buy, Sell, Trade Bitcoin with Credit Card 100 Cryptocurrencies @ BEST rates from multiple sources, Wallet-to-Wallet, Non-Custodial!New regulations could impact the operation of GHO and potentially require significant changes to its design.

Addressing these risks proactively is crucial for the long-term success of GHO.

The Future of Stablecoins in DeFi: A Balancing Act

The Aave DAO's approval of GHO highlights the ongoing evolution of stablecoins in the DeFi space. Aave s stablecoin approval drew wild reactions from the crypto community, with many comparing its fate to TerraUSD (UST); however, Aave proponents were quick to point toward the overcollateralized factor. Aave DAO, the governance body behind decentralized finance (DeFi) giant Aave (AAVE) protocol, has unanimously voted in favor of creating an overcollateralized stablecoin called GHO. The [ ]The industry is moving towards more robust and transparent stablecoin designs, with a focus on overcollateralization and decentralized governance. The proposal received 99.9% votes in favor, and over 500,000 AAVE tokens were pledged by voters for creating the overcollateralized stablecoin GHO. Aave DAO approving overcollateralized stablecoinHowever, the challenges remain.

Overcollateralization vs.Capital Efficiency

One of the key tradeoffs in stablecoin design is between overcollateralization and capital efficiency.Overcollateralized stablecoins are generally considered to be safer, but they require a significant amount of capital to back each stablecoin.This can make them less capital-efficient than algorithmic stablecoins, which aim to maintain their peg with less collateral.

The Importance of Decentralized Governance

Decentralized governance plays a crucial role in the success of any DeFi protocol, including stablecoin projects.Transparent and accountable governance processes are essential for building trust and ensuring that the protocol is managed in a responsible manner. A governance proposal, submitted in early July, was almost unanimously approved by the Aave DAO crypto community. The governance of the DeFi protocol Aave has approved, with 99,9% of the votes in favor, the creation of a new over-collateralized stablecoin called GHO, whose value will be pegged to the US dollar.The ability of the Aave community to adapt and change the protocol based on needs is important for long-term success.

Building Trust and Confidence

Ultimately, the success of any stablecoin depends on building trust and confidence among users. Aave DAO, the governance body behind decentralized finance (DeFi) giant Aave (AAVE) protocol, has unanimously voted in favor of creating an overcollateralized stablecoin called GHO. The Aave company put up the GHO creation proposal on July 28, which received an overwhelming 99.9% community vote over the course of three days.This requires transparency, security, and a proven track record of maintaining the peg. Aave s stablecoin approval drew wild reactions from the crypto community, with many comparing its fate to TerraUSD (UST); however, Aave proponents were quick to point toward the overcollateralized factor. Aave DAO, the governance body behind decentralized finance (DeFi) giant Aave protocol, has unanimously voted in favor of creating anThe Aave DAO needs to prioritize these factors in its management of GHO.

How Can Users Benefit From GHO?

If GHO proves to be a successful and stable stablecoin, it could offer several benefits to users:

Stable Store of Value: GHO could provide a stable store of value in the volatile crypto market.
DeFi Participation: GHO could be used to participate in various DeFi activities, such as lending, borrowing, and yield farming, without the risk of price fluctuations.
Remittances and Payments: GHO could be used for remittances and payments, offering a faster and cheaper alternative to traditional financial systems.

However, it is crucial for users to understand the risks associated with GHO and to only invest what they can afford to lose.

Conclusion: A Bold Step Forward, but Proceed with Caution

The Aave DAO's approval of GHO represents a significant step forward for the Aave protocol and the DeFi ecosystem. Aave DAO, l'organe de gouvernance du protocole Aave, g ant de la finance d centralis e (DeFi), a vot l'unanimit en faveur de la cr ation d'un stablecoin surcollat ralis appel GHO. La soci t Aave a pr sent la proposition de cr ation du GHO le 28 juillet, qui a re u un vote crasant de 99,9 % de la communaut au coursThe overcollateralized design and decentralized governance model offer a promising approach to creating a stable and reliable stablecoin.However, the crypto community is rightly cautious, given the recent failures of other stablecoin projects.The success of GHO will depend on the Aave DAO's ability to manage the risks effectively, maintain the peg, and build trust among users.The division in the crypto community reflects the uncertainty that comes with this new venture.It is crucial to keep a close eye on the project's development and to make informed decisions based on your own risk tolerance.

As with any investment in the cryptocurrency space, it's essential to do your own research and understand the risks involved.This isn't financial advice.Are you ready to learn more about DeFi and how you can get involved?Research other DeFi protocols, stablecoins, and risk management strategies to make informed decisions in this ever-evolving landscape.