[ARFC] GHO - Increase Borrow Rate

There are currently several ongoing initiatives aimed at supporting the GHO peg and improving growth. These initiatives include adjustments to borrow rates, the introduction of a GHO stability module, the listing of wGHO as a collateral asset, and additional community-driven efforts to enhance GHO utility and stimulate demand. Chaos has played an integral role in this initiative, providing comprehensive recommendations and analyses. This is an ongoing effort, and we are collaboratively working with other contributors to realize the community’s goals.

Concerning the proposal to increase borrow rates, this marks the third iteration of rate adjustments for which we have previously provided comments and analyses. Given that GHO is still in its early stages, with limited historical data and usage, our current GHO-related recommendations do not exclusively rely on extensive quantitative analysis. Instead, we base our recommendations on theoretical and economic reasoning, taking into account observed usage patterns and trends. At this point, we support the idea of raising borrow rates to align with those of other stablecoins. This adjustment has the potential to contribute to the restoration of the peg, with the rationale articulated in the various forum posts and discussions promoting the rate increase. Our short comment on this thread reiterates this stance and highlights that no additional risk is introduced with this proposal.

Finally, as we’ve emphasized in various discussions, such as those found here and here, it is essential to recognize that increasing the borrowing rate by itself may not suffice in restoring and maintaining the peg. Increasing the utility of GHO and fostering organic demand remain the primary drivers for the sustainable restoration and maintenance of the peg in the long term.