Title: [ARFC] GHO Stewards - Adjust GHO Borrow Rate Ethereum v3
Author: @karpatkey_TokenLogic, @ACI and @ChaosLabs
Created: 2024-08-30
Summary
This publication proposes decreasing the GHO Borrow Rate on Ethereum from 6.00% to 5.00%.
Motivation
For users without any stkAAVE holdings, GHO is currently more expensive than alternatives on Aave v3 Ethereum.
Source: Aave Analytics | TokenLogic
The weighted average borrow cost of GHO is 5.53%. This is similar to the USDT borrow rate and 25 bps lower than USDC borrow rate. However, this differential between the stablecoins borrow rates is proving insufficient at driving new GHO into supply.
Source: Not yet public
With GHO Exposure Caps of both USDC and USDT GSMs at capacity, users are unable to mint GHO. As a result, new GHO supply can only be achieved by borrowing GHO on Aave v3 Ethereum. The chart below shows the last week of GHO Supply data.
Source: Aave Analytics | TokenLogic
We are observing user(s) acquiring GHO from exchanges and depositing into the stkGHO category of the Safety Module. This is reflected by the relative increase in stkGHO as a fraction of GHO supply and also the GHO price. The chart below shows stkGHO supply increasing over the last week.
Source: Aave Analytics | TokenLogic
Both Chainlink and Redstone oracles are showing GHO trading above peg on Ethereum.
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Source: Aave Analytics | TokenLogic
The Merit program combined with AAVE incentives offers 24.22% APR before applying boost multipliers. With yields across DeFi falling over recent weeks, more users are being attracted to stkGHO.
stkGHO represents 69.18% of GHO supply from a total of 816 addresses.
This publication proposes reducing the GHO borrow rate by 1.00% to encourage new GHO being borrowed into supply. We expect users to migrate to GHO debt which is especially attractive when GHO is trading above $1.00 across Ethereum and there being 16M of funds in the GSM ready to support the peg.
In case this ARFC is approved, the stkGHO reward rate should be reviewed.
Specification
The GHO borrow rate is to be revised as follows:
| Description | Current | Proposed | Reduction |
|---|---|---|---|
| Borrow Rate | 6.00% | 5.00% | 1.00% |
Next Steps
- Using the Direct-to-AIP process an AIP will be submitted to implement the proposal.
Disclaimer
Chaos Labs, ACI, TokenLogic and karpatkey have not been compensated by any third party for publishing this ARFC.
Copyright
Copyright and related rights waived via CC0