The token would work similarly to existing algorithmic stablecoins, which mint exactly $1 worth of tokens when users provide $1 worth of cryptocurrency. In GHO’s case, a user must supply collateral (at a specific collateral ratio) to be able to mint GHO. If a user repays a borrow position (or is liquidated), the GHO protocol burns that user’s GHO, the proposal explained.
Source: https://www.coindesk.com/tech/2022/08/01/aave-passes-proposal-for-yield-generating-stablecoin-gho/?utm_medium=referral&utm_source=rss&utm_campaign=headlines