DeFi lending platform Aave announced its new stablecoin, is coming “in weeks.” The token is called GHO, pronounced “go,” like “ghost,” after Aave's ghost mascot.
Aave is a decentralized lending platform operating on Ethereum, Optimism, Arbitrum, and a few EVM-compatible L1s. Aave is the fourth largest DeFi project with $4.75B in TVL. Many consider Aave to be one of a few “blue chip” DeFi projects that rose to prominence during the last bull run.
Aave proposed the GHO stablecoin last summer, and 99.9% of Aave voters were in favor of the stablecoin, despite the Terra/UST collapse happening just a couple months prior to the vote. GHO is said to be an over-collateralized stablecoin, which is backed by assets, rather than an algorithmic stablecoin like Terra's UST.
The Aave DAO believes its GHO stablecoin can drive significant revenue back to the organization over the next few years, and I think they're right. There are so many great ways to make money from printing a stablecoin, like Circle hiring BlackRock to manage USDC's reserves in exchange for a $400M investment or Tether printing USDT and keeping it (just kidding).
The top three stablecoins–USDT, USDC, and BUSD–combine for a $125B market cap, and there are major concerns with holding each of them. We’ve been worried about Tether’s reserves for years, Circle can blacklist anyone’s USDC, and BUSD is minted and controlled by Binance. Sometimes MakerDAO’s DAI seems like the only good stablecoin, but they’ve discussed de-pegging DAI from the dollar intentionally.
Operating a stablecoin is profitable, but following the Terra collapse there’s a serious lack of trust in new stablecoin operators. It makes sense for new stablecoins to come from trusted projects, like Aave, instead of internet randos. We need a serious competitor for DAI, and I don’t think we’re going to get that from the stablecoins available today.