As Michigan Blockchain, we support deploying stataUSDC GSM on Base, as this proposal introduces an efficient way to reduce volatility and manage supply during market fluctuations.
First of all, GHO currently has thin secondary market liquidity on Base, as GHO has very recently gone live on Base on February 10, 2025. We believe that it is essential to mitigate volatility - a result of thin liquidity - by offering a way for users to swap USDC for GHO, at a 1:1 ratio, on Base. This will increase GHO’s circulating supply on Base, therefore reducing volatility. Furtheremore, the GSM will help maintain GHO’s peg and also contribute to additional revenue to Aave DAO through swap fees, surplus yield, and USDC incentives. Low liquidity assets can pose threats as collateral assets - and GHO is a collateral asset on the Aave v3 Base market. Currently, to increase GHO supply on Base, it must be bridged from Ethereum. This process uses a lock-and-mint model enabled by Chainlink CCIP. The stataUSDC GSM will allow users to exchange USDC for GHO without having to bridge assets themselves, simplifying the process. The GSM on Base provides a direct and efficient way for users to acquire GHO using USDC which will enhance liquidity on the Base network, the main reason why we support this proposal. This will mitigate the initial liquidity problem.
Also, since the underlying USDC is going to be provided as collateral on the Aave v3 Base market. It is going to earn revenue for the Aave DAO and it will be capital efficient for Aave, creating a new revenue stream. That is another reason why we are in favor of the proposal. Over the last 6 months, average supply APR has been 7%. Assuming the proposed GHO Bucket Cap of 10.00M is reached, the $10m worth of USDC will generate more than $60k even considering the dilution in the supply.
USDC supply APR on Aave
We agree with LlamaRisk on the idea of choosing USDC as the stablecoin of choice. USDC has 92% market share among stablecoins on Base, so USDC should be the only option as the backing asset.
USDC dominance on Base, DefiLlama
For the reasons of reducing volatility, increasing GHO supply, generating revenue for the DAO, USDC being the right stablecoin of choice, and ensuring long-term stability for Aave’s ecosystem, Michigan blockchain fully supports the proposal do deploy stataUSDC GSM on Base.
-Kerem DIllice and nsks