What is GHO?
GHO is a decentralized multi-collateral stablecoin introduced by the Aave Protocol. Designed to provide a transparent and secure stablecoin solution, GHO is fully backed by assets supplied within the Aave ecosystem. It allows users to mint GHO by depositing collateral into the Aave V3 facilitator pool, ensuring each GHO token is supported by an equivalent value of assets. This stablecoin is governed by the Aave DAO, which oversees its supply, interest rates, and risk parameters, ensuring its stability and alignment with market conditions.
GHO is designed to maintain its peg to the US dollar through various mechanisms. The Aave Governance can adjust the interest rate to influence the supply and demand dynamics of GHO, helping to maintain its peg. If the market price of GHO deviates from $1, adjustments to the interest rate incentivize minting or repayment to balance the supply.
The stablecoin also incorporates a Stability Module, inspired by MakerDAO's Peg Stability Module, allowing users to exchange GHO with other stablecoins at a predetermined ratio. This module helps to manage the supply and demand, providing an additional layer of stability.