The GHO stablecoin is a new algorithmic token that tracks the value of the United States dollar and is supported by a basket of digital assets. Aave, a leading decentralized finance (DeFi) platform, has announced the launch of its GHO stablecoin on the Ethereum network.
The stablecoin, which aims to provide low volatility and high liquidity, has seen strong demand from users, as the total supply of GHO increased by $1.5 million on the first day of the launch. At the time of writing, more than $2.19 million worth of GHO has been created.
The launch followed a successful community governance vote, where 424 addresses participated and almost unanimously approved the new stablecoin.
Aave Utilizes Transparency of Reserves to Build Trust
According to Aave’s announcement, the GHO stablecoin is pegged against the United States dollar and is backed by several digital assets. Notably, its reserves include Ethereum’s native currency Ether (ETH), and Aave’s native token AAVE.
— Aave (@AaveAave) July 15, 2023
Centralized stablecoins such as Tether (USDT) continue to be subject to criticism due to a lack of transparency around their reserves. Nonetheless, Aave has proceeded to build on this key area of transparency with the GHO. The protocol has highlighted that all assets backing the GHO stablecoin are fully verifiable and transparent, and on-chain data can confirm this.
According to the available evidence, DeFi-native algorithmic stablecoins are slowly gaining popularity. MakerDAO’s DAI is arguably the most popular algorithmic stablecoin right now. As of press time, the Ethereum-based stablecoin has a $4.28 billion market capitalization, according to DefiLlama data.
There are also other notable algorithmic stablecoins such as Frax, Ampleforth, and others. The most recent addition was when DeFi protocol Curve launched its own algorithmic stablecoin crvUSD in May.
However, this growing trend does not change the fact that the general stablecoin market is still dominated by centralized issuers. Tether (USDT) and Circle (USDC) are the main ones. They account for at least 87% of the whole circulating pool of all US dollar-pegged stablecoins.
Aave’s GHO, however, is also making progress as an algorithmic stablecoin. At the time of publication, GHO is trading slightly below the target $1 peg at $0.9898. It sank to $0.9814 earlier on July 16, according to CoinMarketCap data.