[ARFC] GHO CEX Earn Incentive Program

Governance
8

Thank you to everyone who provided thoughtful feedback and raised important points. Below are detailed responses to each of the key themes and specific questions raised by community members.

1. Retention and Incentive Sustainability

(@sid_areta, @ST0X, @EzR3aL, @Kitten, @LlamaRisk)

We agree that retention after incentives end is a critical metric for success.

  • Retention Strategy: Our goal is to bootstrap adoption and GHO visibility across CEXs, but the long-term sustainability depends on unlocking utility (margin, perp collateral, trading pairs) and ensuring that GHO remains competitive as a stablecoin.

  • Incentives Design: Yield offered to CEX users is not perpetual. It will taper off as utility, circulating supply and integrations ramp up. To this end, we are prioritizing high-quality listings with supportive venues that are open to longer-term GHO utility.

  • Fixed APR Campaign: The proposed campaign uses a targeted APR approach for holding GHO, which avoids the inflated and unsustainable APRs. Rewards are distributed based on actual GHO supply held on CEXs, ensuring cost-conscious allocation aligned with performance.

  • Cost Efficiency First: This strategy ensures we only spend against verified GHO holdings, minimizing waste and focusing on velocity, retention, and liquidity provisioning.

  • Long-Term Sustainability: Looking ahead, if a significant portion of GHO on CEXs is minted via GSMs, we can explore transitioning to a yield-sharing model where part of the GSM yield helps fund a longer-term CEX Earn program. We’re also exploring if sGHO functionality could be integrated directly by CEXs to provide native passive yield without a separate reward layer.

  • Benchmarking: We’ve studied prior CEX Earn campaigns, including Ethena’s approach. Programs that combined earn mechanics with active utility had far greater retention than passive rewards-only campaigns.

2. Market Maker Selection and Structure

  • Selection Criteria: We have shortlisted MMs based on:

    • Strong CEX relationships
    • Proven experience with stablecoin markets
    • Preference for deploying their own inventory
    • Track record of maintaining tight spreads and price integrity

  • Working Capital and Hurdle Rate Structure:

    • As the selected Market Maker will be providing its own inventory, they have requested a hurdle rate tied to the capital they commit to GHO markets.

    • If their MM activity exceeds the hurdle rate, it’s a win-win outcome.

    • If the realized performance is below the hurdle, a portion of the program budget will be used to cover the shortfall, ensuring their capital remains productive.

    • The hurdle rate will be set in a similar range to what liquidity provising in DeFi looks like. It ensures that the DAO is not overpaying for the services provided.

    • The chosen Market Maker will also be subject to specific KPIs related to GHO strengh, peg, distribution and expansion. TokenLogic will work closely with the MM to ensure GHO keeps a tight spread, is competitive with other centralized stablecoins and ensure that liquidity provision is well performed.

    • Peg Hedging Strategy : We are collaborating with market makers to explore GHO peg hedging strategies using productive collateral and GHO debt. This could lead to proposals for new eModes to enhance capital efficiency and unlocking new utilities for GHO.

  • GSM Access for Market Efficiency:

    • The selected MM will be granted direct access to a GSM, allowing them to safely and quickly arbitrage any peg deviations across CEXs and DEXs.
    • This not only enhances GHO price stability but also ensures that CEX users can buy and sell GHO directly through the GSM, benefiting from tighter spreads and more reliable execution.

3. GSM Interaction

  • USDT/USDC inflows from CEX users trading into GHO will be used to mint GHO via the GSMs (e.g., stataUSDT).
  • This newly minted GHO will fund user rewards and simultaneously earn yield for the DAO by depositing stablecoins into Aave.
  • A dedicated dashboard will visualize GSM inflows, mint volume, and yield generation.

4. Liquidity Fragmentation & Peg Concerns

  • Preservation of On-Chain Liquidity: This program is funded separately from existing DEX incentives to prevent erosion of core on-chain liquidity.
  • CEX Incentives Are Additive: We see CEXs as a growth and distribution channel, not a replacement. On-chain users and yield remain the foundation of GHO.
  • It is worth noting that in the future we have the option to combine the budget of the ALC and CEX Earn program into a single GHO incentive budget. This is not applicable yet but will be kept in mind for when we enter the consolidation state of GHO growth on CEXs.

5. Legal and Regulatory Realism

  • We recognize the evolving regulatory landscape for stablecoins and appreciate LlamaRisk’s insights.
  • Listings will focus on jurisdictions with manageable regulatory hurdles

6. Program Tracking and KPIs

Yes, a dedicated dashboard from TokenLogic will track:

  • GHO minted via GSMs
  • TVL in Earn programs
  • Active participants
  • Weekly rewards distributed
  • On-chain vs CEX balances
  • Peg deviation and liquidity health

This will enable community oversight and real-time performance evaluation.

Closing Note

We deeply appreciate the community’s input and scrutiny. Our intent with this program is to scale GHO in a way that expands its reach without compromising its on-chain integrity.

The CEX Earn campaign is designed to bootstrap growth, while aligning with a long-term vision for GHO as a systemically important stablecoin across both DeFi and CEX environments.

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