[ARFC] Further increase GHO Borrow Rate

Ultimately, I agree with @ApuMallku’s position: it’s a total non-sense that the Aave governance can vote on the GHO interest rates, as it hinders borrowers’ confidence in the product.

Interest rates are operational parameters; it’s utterly unfit to be managed by governance. I anticipated issues around this topic since the first announcement of GHO about a year before its launch in post published on my blog in August 2022:

The interest rate model for GHO is currently its most underwhelming component, as the initial post envisioned an interest rate directly determined by the Aave DAO, just like how it works on Maker. However, that would be inefficient and add unnecessary bloat to the governance.

When it comes to deciding which components of a protocol should fall under the governance umbrella, I think Hayden puts it very eloquently, and I fully align with his view:


The interest GHO falls in the first category: we’ve been able to set interest rates programmatically for more than three years on Aave’s money markets; I don’t see why we couldn’t on GHO.

I agree with @monet-supply suggestion, as this would, in one vote, provide a credible solution to the current interest rate vs. GHO interest rate conundrum, and would support such a proposal.

However, I urge Aave’s governance and service providers to consider, explore, and eventually formalize an algorithmic solution to this question. Building and sustaining trust with borrowers is essential for a stablecoin based on debt - the best way to achieve it is to offer the most predictable conditions to borrowers.

Borrowers should not have to check the governance every couple of weeks to anticipate the rate they will pay in the (short-term) future. They should be able to anticipate it based on a clear set of rules. It doesn’t prevent a solution/algorithm adapting to various market conditions, such as GHO’s price.