“Bitcoin billionaire” Tyler Winklevoss of Gemini submitted a governance proposal on a community forum for GUSD to be used as stablecoin collateral for loans on AAVE. Currently, GUSD can only be borrowed.
GUSD is a stablecoin that maintains value by holding one USD in reserve for each stablecoin issued. By using GUSD as collateral, borrowers can better prevent liquidation as it becomes harder for the collateral value to drop below the required ratio relative to the borrowed amount.
Beyond the utility of GUSD in Aave, it’s worth noting that the founder of a major centralized exchange and crypto celebrity is making a proposal via a DeFi lender’s decentralized governance mechanism, in the same way that any user could also make a proposal. It shows DeFi is making strides in taking its more open version of management to the mainstream.
Since the end of 2020, growing support for GUSD by DeFi projects and platforms has led to a surge in its market cap from $16m to more than $120m, a 650% change in two months.
For GUSD to be approved as a collateral asset, AAVE token holders in the DAO will move this proposal to be voted on. If GUSD becomes a collateral option on AAVE, this continues to extend the utility of GUSD on an institutional level.