[ARFC]. BGD. GhoDirectMinter

Development
4

Overview

Chaos Labs strongly supports the creation and use of the GhoDirectMinter facilitator module, which represents a significant step toward improving GHO’s adaptability, efficiency, and growth within Aave.

Motivation

As previously detailed in this ARFC, recent history demonstrates the difficulty of attracting meaningful GHO deposits in new instances and chains without offering substantial incentives. On Arbitrum, for example, GHO remained underutilized until liquidity rewards were introduced. A direct minting facilitator allows the DAO to bypass the initial friction of limited liquidity, depositing GHO directly into pools without costly external campaigns.

Directly supplying minted GHO into the target instance ensures the asset never enters circulation unless backed by approved collateral. Furthermore, this approach reduces the need to bridge liquidity back and forth with Ethereum, thus enhancing operational efficiency. GhoDirectMinter ensures that liquidity stays localized, cutting down on cross-chain transfers and, in this way, providing relief to the GHO Bridge Limits.

Furthermore, it enables more granularity in controlling how much GHO is minted per chain or instance deployment, tailoring exposure to the relevant assets and, as such, also reducing risk.

GHO Steward

Thanks to this new facilitator framework, the GHO Steward gains the ability to quickly react to market changes in order to provide or remove liquidity from a GHO market. This approach allows GHO Stewards to strategically time GHO deployment, for example, to counteract sudden increases in borrowing costs.

While the GHO Facilitator can mint and burn GHO without going through the AIP governance process, the maximum amount of supply mintable by each facilitator is still determined by governance at the time of creation and can be adjusted in the future through the governance process.

Supply Caps

The mintAndSupply function in the GhoDirectMinter smart contract bypasses the standard supply cap mechanism of the pool. It achieves this by temporarily removing the supply cap, allowing GHO to be minted and deposited directly into the pool. Once the deposit is complete, the supply cap is reinstated to its original value.

This introduces the following effect: if the reinstated supply cap is lower than the new total supply (previously present supply plus the GHO minted and deposited through mintAndSupply), normal user deposits into the pool will become impossible. This restriction remains in place until sufficient withdrawals reduce the total supply below the supply cap.

  // @inheritdoc IGHODirectMinter
  function mintAndSupply(uint256 amount) external onlyOwnerOrGuardian {
    IGhoToken(GHO).mint(address(this), amount);
    IERC20(GHO).forceApprove(address(POOL), amount);
    DataTypes.ReserveConfigurationMap memory configuration = POOL.getConfiguration(GHO);
    // setting supplycap to zero to disable it
    POOL_CONFIGURATOR.setSupplyCap(GHO, 0);
    POOL.supply(GHO, amount, address(this), 0);
    // setting supplycap back the original value
    POOL_CONFIGURATOR.setSupplyCap(GHO, configuration.getSupplyCap());
  }

Disclaimer

Chaos Labs has not been compensated by any third party for publishing this recommendation.

Copyright

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