What GHO does
GHO is Aave's native, USD-pegged stablecoin, minted by borrowing directly against collateral already supplied to Aave. Unlike Aave's other borrowable assets, GHO's interest rate isn't set by market supply and demand — it's a fixed rate decided by Aave governance, with all interest paid on outstanding GHO debt flowing to the Aave DAO treasury rather than to third-party lenders. Other protocols can also become 'facilitators' authorised by governance to mint GHO up to an individual cap, spreading issuance beyond Aave itself.
To help hold the peg, Aave runs a stability module that lets users swap GHO for other stablecoins like USDC at close to 1:1 with minimal slippage, and pays yield to users who stake GHO into it — both mechanisms designed to make arbitrage cheap enough to pull GHO back to a dollar whenever it drifts.
GHO also underpins Aave's push into real-world institutional lending, with facilitator status extended to entities minting stablecoins for tokenised credit and treasury products, positioning GHO as infrastructure the wider Aave ecosystem builds on rather than a standalone side product.
Risks
GHO's peg has slipped below a dollar more than once since its 2023 launch, usually when Aave's governance-set borrow rate made holding or minting GHO less attractive than alternatives available on the open market — a reminder that a governance-set rate doesn't automatically track market reality, and Aave has had to adjust it repeatedly to defend the peg. GHO also inherits Aave's own risk surface: its backing sits on Aave's collateral base, so a bad debt event or oracle failure on Aave proper is a direct risk to GHO holders too, unlike stablecoins with fully segregated collateral. And at a market cap far smaller than USDC, USDT or even DAI, GHO still has thinner liquidity and fewer integrations than its ambitions require.