Author: Vince Quill, CoinTelegraph; Translated by: Baishui, Golden Finance
The GHO stablecoin has been deployed on the Arbitrum Network following a vote by the Aave Decentralized Autonomous Organization (DAO).
Aave’s DAO also plans to launch the GHO stablecoin on multiple networks over time, but chose to deploy GHO on Arbitrum to take advantage of the Layer 2 network’s low transaction costs and higher throughput.
The decision to roll out the stablecoin to other networks in phases was based on security and risk management factors. This allows the DAO to test the waters before expanding GHO’s presence to other blockchain ecosystems.
Chainlink’s CCIP makes multi-chain GHO possible
Chainlink’s CCIP protocol is the interoperability layer that allows Aave DAO to migrate the GHO stablecoin, originally launched on the Ethereum network, to Arbitrum and other networks in the future.
A high-level view of how Chainlink’s CCIP interoperability protocol works. Source: Chainlink
The interoperability of stablecoins is achieved through two mechanisms, namely the destruction and minting model and the lock and release function, which locks or destroys GHO tokens on the initial source chain and then releases them on the new chain.
If the GHO stablecoin is bridged from the Ethereum network to a different blockchain, the GHO tokens will be locked in a smart contract on Ethereum (called a “Vault Contract”) and then minted by a service provider on the target blockchain.
When GHO is bridged from another blockchain network to the Ethereum network, the GHO tokens on the alternative chain will be burned and an equal amount will be released from the Vault contract on the Ethereum blockchain network.
If neither chain is Ethereum, the service provider will destroy the GHO tokens on the first chain and mint new tokens on the second chain.
Chainlink and Arbitrum: An Evolving Partnership
The relationship between Chainlink and Arbitrum began in 2020 and later evolved into a partnership to promote cross-chain development of decentralized applications.
Since then, Chainlink has become one of the leading blockchain interoperability and oracle networks, running experimental pilot programs with global institutions such as the SWIFT interbank messaging system to transfer value across blockchains.
Building on this momentum, Chainlink’s CCIP usage and adoption will continue to increase in 2024, with cumulative network fee revenue climbing to $377,724 in March, driven primarily by activity on Arbitrum.
