[ARFC] GHO - Increase Borrow Rate

[chippervan]

@0xTogbe

of note is that every few weeks they vote to increase the interest rate.

GHO is doomed if they think they can get it to peg by using interest rate alone.

they need to find use for it outside of LPing and Aave ecosystem.

Look at DAI integrated into loads of things, look at crvUSD integrated into SILO.
(and curve founder is trying to get Venus on mainnet too, I wonder why? My guess so that he can use CRV and crvUSD as collateral)

just increasing interest rate is literally taking money out of the pockets of early adopters and putting it into the DAO @MarcZeller

[0xTogbe]

@josojo

I think this does not help. Many GHO holders don’t wanna LP at these prices, as impermanent loss will be too high, if the community works on the peg. I mean if we would be able to restore the peg in two months, then the APY of buying GHO is 4%*6=24%. I guess people don’t risk that for some LP reward, unless its very very high.

In addition to GHO utility, you need to facilitate people selling GHO at $1. This means there needs to be that $1 of another stablecoin to sell in to in a liquidity pool. Right now there is a lack of these players in the system because GHO has no utility (and therefore no reason to swap and hold it) and it has an unclear path to repeg (so no arbitrage traders stepping in with enough size).

You can entice people to come in with fresh stablecoins by adding utility (still a ways off) or by incentivizing them to LP (which means they buy GHO off market to put in the pool). Aave DAO has a lot of Aura, Balancer and Curve voting potential from treasury holdings. That these aren’t being used to incentivize liquidity for GHO and in fact they aren’t being used for anything ($3m of CRV is just sitting idle in the treasury) is just a big waste.

Instead, @TokenBrice and team are bribing a few thousands dollars on Maverick and the like. While a good start, there could be more done and we are almost at their self-imposed deadline of fin November.

@chippervan

of note is that every few weeks they vote to increase the interest rate.

The interest rates are basically going as high as they will for now I think. Because it is a fixed rate it is still going to be attractive as a borrow asset even if rates were 8% or something crazy. The variable rate market has been extremely volatile across DeFi which will continue to make this kind of position attractive.

Look at DAI integrated into loads of things, look at crvUSD integrated into SILO.

Don’t think you can compare crvUSD and DAI as they have very different mechanisms for maintaining their peg. Peg-keepers and the Peg Stability Module allow users to easily arbitrage the system when the stablecoin is below peg.

GHO has no such mechanism currently (which is also why we have been advocating for making it pegged to $1 of collateral within Aave).

just increasing interest rate is literally taking money out of the pockets of early adopters and putting it into the DAO

Anyone who was really an early adopter has benefited and can still repay their debt cheaply even now. They’ve also benefited from some of the lowest stablecoin borrow rates in DeFi for months. There is a clear path to increase supply and even lower interest rates if the peg improves.