Aave, a non-custodial market protocol, announced the approval of a new stablecoin that is backed by collateral and indexed to the U.S. dollar. 

GHO, an Ethereum-based, stablecoin backed by collateral based on other cryptocurrencies, was approved by 99.9% of voters who pledged half a million AAVE in support of the proposal. AAVE, the platform's native coin, increased to $108 from $95.40 after the proposal was approved over three days.  

On July 7, 2022, GHO announced its stablecoin would be “backed by a diversified set of crypto-assets chosen at the users’ discretion, while borrowers continue earning interest on their underlying collateral.”  

GHO can be minted by depositing a cryptocurrency that is accepted by Aave. Borrowers who borrow GHO against digital assets will still receive interest on the collateral used to mint the stablecoin. Aave DAO will receive interest payments on GHO loans through the lending protocol. 

This overcollateralized stablecoin requires the user to deposit more cryptocurrency than the coin's minting value in order to secure an overcollateralized loan. In the event that users redeem their borrowing positions or liquidate their positions, the GHO loaned will be burnt from the protocol.  

Besides using collateral assets, GHO will also take advantage of the method of over-collateralization in stablecoin crypto assets. The Aave Improvement Protocol (AIP) will be used to implement GHO, under the supervision of the Aave DAO. 

The value of the stablecoin economy is currently estimated at $153 billion. Tether (USDT) leads the stablecoin pack, followed by USD coin (USDC).