We would like to thank @AaveLabs for writing this ARFC. We agree that creating strong secondary liquidity is the most important aspect of launching a stablecoin. However, we believe that the proposed genesis parameters are simply not fit for a launch, as they appear to be too conservative.
The Borrow rate in current market conditions would make GHO minting at best as expansive as borrowing other stablecoins, limiting its attractiveness significantly.
The bucket capacity is also too conservative; even with 100% of the 50M cap minted and provided in stableswaps, the secondary liquidity of GHO might not be good enough.
In the early days of a stablecoin launch, scalability is the most important factor in order to reach secondary critical mass. It’s more important than peg-resilience (by design, there’s incentives to profit from underpeg GHO and only over-peg is a likely scenario) and it’s more important than protocol revenue.
While the ACI thinks that a fixed fee model is simply a bad design and will only lead to risk teams, Llama, and ACI publishing AIPs every other week to adjust the rate and lagging behind the free market, we acknowledge that a low fixed fee model is a good Kickstarter for a stablecoin to reach the secondary critical mass needed before switching to more efficient models such as an interest rate strategy curve model. However, these benefits can’t simply happen if the fixed fee is equal or superior to the competition rate. As the ACI, we think that 1% should be a maximum pre-StkAAVE discount. For bucket capacity, we think that anything below 150-200M$ is too conservative. For DEX liquidity pool targets, we would like to query the opinion from DAO risk service providers such as @ChaosLabs & @Pauljlei to define what stableswap liquidity levels allow for significantly important exchanges to happen with minimum slippage impact.
Lastly, for the StkAAVE discount rate, as stated earlier, protocol revenue should not be the early days’ priority, and the DAO should favor attractivity over revenue. We kindly encourage AaveCompanies to reconsider their genesis parameters, opting for a more efficient approach that would better facilitate GHO’s successful launch. We appreciate the hard work and dedication that AaveCompanies have demonstrated thus far and believe that, together, we can create a more effective launch strategy for GHO to thrive in the DeFi ecosystem.