[ARFC] Amend Safety Module Emissions


Title: [ARFC] Amend Safety Module Emissions
Author: @karpatkey_TokenLogic
Created: 2024-02-15


Summary

This publication proposes amending daily AAVE emissions across the three Safety Module (SM) categories to support GHO stability.

Motivation

With the introduction of stkGHO, GHO went through a positive price action and recovered the 1:1 peg.

Since then, however, the price of GHO has been drifting. There is an additional risk of GHO being redeemed from the SM and sold in the market. There are currently around 5.2M GHO cooling off from the stkGHO module.

To support the GHO peg and to pave the way for future GHO supply expansion, this publication proposes increasing the daily AAVE emission going to stkGHO holders.

This publication also proposes to offset this increase in AAVE emissions by reducing the emissions directed to stkAAVE and stkBPT holders. The overall amount of AAVE per day is to remain unchanged.

Specification

This proposal will implement the following changes to the AAVE emissions across the three SM categories:

Asset Current AAVE/Day Proposed AAVE/Day
stkAAVE 385 360
stkGHO 50 100
stkBPT (AAVE/wstETH) 385 360

Next Steps

  1. Gather feedback from the community and risk service providers.
  2. If consensus is reached on this ARFC, escalate this proposal to the Snapshot stage.
  3. If Snapshot outcome is YAE, escalate this proposal to AIP stage

Copyright

Copyright and related rights waived via CC0.

4 Likes

With the ACI we’re supportive of this proposal.

GHO is strategic for the protocol growth and as AAVE stakers we’re ready to accept the reduced revenue to increase GHO stability & attractiveness.

We appreciate that this new schedule of emissions is neutral in terms of Ecosystem reward spending.

2 Likes

Supportive of this ARFC.
GHO is crucial for the future of Aave and additional revenue. Rebalancing rewards is the best approach here.

1 Like

I generally support the direction of this proposal, but am wondering how effective it will be. Risk providers didn’t increase borrow caps by a single $, although they could every 5 days*. As long as this stays the behavior any added “incentive to borrowing” is useless and just benefitting first users imo. I don’t want to buy a unstable stablecoin at/(slightly below) peg when i should be able to just borrow and simply market buy the accrued interest to payback at some point.

GHO usecases are still rare besides farming, IMO might make sense for cross-chain to move forward whatever the state on this is. Would be good if you could use GHO on gnosis pay or similar.

Arguably stkAAVE is far more useless than stkABPT in a case of shortfall. Perhaps would make more sense to decrease stkAAVE rewards more than stkABPT. There is no good reason for them to be the same, especially as stkAAVE has the benefit of GHO discount which stkABPT has not.


Idk if in fact “risk” is the reason for not increasing or sth different (peg concerns or whatever…). Seems odd that not even small increases are done.

1 Like

I would suggest the following for GHO. Load up GSM, activate cross chain GHO, raise bucket to 70-100m and start Merit.
Cross chain GHO depends on Avara. Communication is quite rare. And I think most people want to see GHO first holding it’s peg some more time before opening bucket size.

3 Likes

Sounds like a plan to me. steward would allow a more gradual and incremental increase from 35 → 50M cap
I’m in favor of this as soon as we bump StkGHO rewards

4 Likes

This proposal’s goal is to improve the current GHO’s use cases to build a stronger foundation for new supply increases (as going cross-chain, for example). Historically, price action reacted positively to stkGHO updates. GHO price has been much better lately, but there is still a margin to improve price volatility that could suffer with a premature increased supply.

Hello,

I am not sure to understand the full logic behind this ARFC.
Current stkGHO is already yielding 15.75% … that’s already very competitive for a stablecoin. Directing further SM emissions towards stkGHO might have an adverse impact on AAVE token utility by reducing its SM yield. I wonder whether such a move would reduce GHO utility to this sole stkGHO opportunity instead of diversifying its usage across defi.

What about reducing GHO borrow rate instead in order to rebalance its attractiveness ?

Thanks for your clarifications !

Reducing rates would result in a selling event. People would borrow GHO, then sell for USDC. Doesn’t makes sense.

This proposal has been escalated to ARFC Snapshot.

The vote will start in a few hours. Thank you for your support.