[ARFC] GHO Flash Minter Facilitator Arbitrum

Governance
2

Summary

LlamaRisk supports deploying the GHO Flash Minter Facilitator on Arbitrum. This proposal aims to extend the successful implementation from Ethereum to Arbitrum, enhancing the GHO ecosystem. We encourage stakeholders to read our recently published explainer article on GHO stablecoin for a comprehensive understanding of the Flash Minter mechanism and its implications.

Proposed Parameters

We reviewed the draft PR. The proposed configuration for Arbitrum mirrors the facilitator bucket and fee parameters of the GHO Flash Minter on Ethereum. This parameter composition has proven its relevance, as the facilitator continues to be utilized regularly on Ethereum, predominantly for debt swaps.

Use cases

The FlashMinting mechanism offers several use cases:

  • Arbitrage Opportunities: As mentioned by @karpatkey_TokenLogic, flashminting can be used for arbitrage within the Aave protocol and other DeFi platforms. This process allows the user to profit from the price difference between different liquidity pools without needing initial capital, leveraging the flashmint feature to perform the trade.
  • Liquidating Unhealthy Positions: Flashminting can also be utilized to liquidate unhealthy GHO borrow positions within the Aave protocol. If a borrower’s collateral falls below the required threshold, making their position unhealthy, a liquidator can flashmint GHO to repay the borrower’s debt and receive a liquidation bonus. This way, the liquidator does not need to use any of their funds to liquidate GHO debt.
  • Debt swap: One of the biggest entities using FlashMinting on Ethereum is the ParaSwapDebtSwap contract, allowing users to swap one debt position for another - partially or completely. A similar use case would arise if GHO Flashminter is deployed on Arbitrum.

These capabilities also contribute to market efficiency and help stabilize GHO’s price.

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