[ARFC] GHO Arbitrum - Parameter Adjustments

[karpatkey_TokenLogic]

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title: [ARFC] GHO Arbitrum - Parameter Adjustments
author: @karpatkey_TokenLogic & @ChaosLabs
created: 2024-07-29

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Summary

This publication proposes adjusting several GHO related parameters on Arbitrum.

Motivation

After increasing the CCIP Facilitator Capacity from 1.0M to 2.5M, the new capacity was filled within 90 minutes. This reflects strong demand for GHO on Arbitrum.

With better than anticipated liquidity conditions and the Arbitrum incentives program in progression, this publication proposes several parameter increases that are supportive of enabling GHO to grow more freely.

Upon implementing this proposal, we anticipate ARB emissions will commence on the Aave Protocol. This along with Liquidity Mining incentives on several liquidity pools is expected to stimulate demand for GHO on Arbitrum.

Specification

This proposal will implement the following parameter adjustments, which are endorsed by @ChaosLabs as an Aave DAO Risk Service Provider.

Parameter	Current	Proposed
Eth GHO Bucket Capacity	2.5M	20.0M
Arb GHO Facilitator Capacity	2.5M	20.0M
Arb GHO Supply Cap	1.0M	5.0M
Arb GHO Borrow Cap	0.9M	4.5M

The adjustments are to be made via the Direct-to-AIP process.

Disclosure

TokenLogic and karpatkey receive no payment for this proposal. TokenLogic and karpatkey are both delegates within the Aave community.

Next Steps

1. Using the Direct-to-AIP process, submit a proposal for vote.

Copyright

Copyright and related rights waived via CC0.

[sid_areta]

@ChaosLabs would you please be able to provide the data that supports such large increases of 8x in bucket capacities and 5x in borrow and supply caps? We’re supportive of the changes but it’d be good to have some of the underlying data behind this to hand.

[ChaosLabs]

Thank you for the question, @sid_areta. We are comfortable endorsing these changes given the current distribution of GHO on Arbitrum, in which the vast majority — currently about $2.2M — of GHO on Arbitrum has been deposited into DEX liquidity pools.

Snapshot from Balancer (GHO, AaveUSDC)

Snapshot from Balancer (GHO, USDC, USDT)

Snapshot from Maverick

This has been facilitated by ongoing ARB rewards for these pools. As these rewards continue, we anticipate that a large portion of the newly available GHO will flow into liquidity pools, even as rewards are diluted with increased TVL.

We recommended that the supply and borrow caps be set relatively conservatively compared to the bucket capacity given the limited utilization we have observed relative to the bucket capacity thus far. The supply cap is currently 33% utilized with $330K supplied; the borrow cap is 24.5% utilized.