Summary
Chaos Labs supports the adoption of the Cross-Chain GHO Strategy and provides initial recommendation for the phased rollout strategy on Arbitrum.
Analysis
Bucket Capacity for CCIP Bridge
We recommend a staggered deployment strategy that allows us to observe user behavior before there is significant growth in GHO on Arbitrum. This will ideally begin with a relatively small bucket capacity on Arbitrum of 1M. Following this tranche, and as liquidity develops, we recommend increasing the bucket capacity further.
| Asset | Chain | Recommended Capacity | Rec. Capacity Second Tranche | Rec. Capacity Third Tranche |
|---|---|---|---|---|
| GHO | Arbitrum | 1,000,000 | 2,500,000 | 5,000,000 |
CCIP Rate Limits
Given the conservative initial Bucket Capacity, we don’t anticipate a significant impact from additional rate limiting. We will revisit this issue after the initial launch phase, at which point a more aggressive bucket capacity may be recommended.
Risk Parameters
As an initial use case, we would like to provide recommendations on listing GHO on Aave V3’s Arbitrum deployment. As liquidity develops, we recommend listing GHO as a borrowable asset only, not allowing it to be used as collateral given the difficulty with potentially liquidating positions.
We apply a similar methodology used across Aave, in which Slope1 on an Ethereum L2 is set 1 percentage point higher than on Ethereum; should GHO rates on Ethereum adjust, we recommend that these be adjusted in line.
| Parameter | Value |
|---|---|
| Isolation Mode | No |
| Borrowable | Yes |
| Collateral Enabled | No |
| Supply Cap (GHO) | 1,000,000 |
| Borrow Cap (GHO) | 900,000 |
| UOptimal | 90% |
| Slope1 | 13.00% |
| Slope2 | 65.00% |
| Reserve Factor | 10.00% |
| LTV | NA |
| LT | NA |
| Liquidation Bonus | NA |
| Liquidation Protocol Fee | NA |
| Flashloanable | YES |
GHO Pricing
We recommend using a fixed price to 1 USD, consistent with GHO’s pricing on Ethereum.
This recommendation will be reconsidered if, in the future, there is an intention to use GHO as collateral.
GSM
Given that the early use case for Arbitrum GHO will likely be lending and borrowing on Aave, there is limited need for an Arbitrum GSM at this time. However, as the market develops we will revisit this recommendation.