Title: [ARFC] Increase GHO Borrow Rate 08-03-2024
Author: @ACI (Aave Chan Initiative)
Date: 2024-03-08
Motivation
With the evolving market dynamics and the increasing popularity of GHO as a stablecoin option, it is necessary to maintain competitiveness by aligning borrowing costs with average market rates. The current GHO borrow rate of 7.22% APR (~7.48% APY) no longer meets this requirement.
AIP-381 allows for 100 bps increases in the GHO borrow rate every 7 days while maintaining rates up to 9.5% APR if the monthly average price of GHO stays outside a 0,995<>1,005 price range. The peg has shown improvement but remains below the target.
| Monthly Average Borrow Cost (APR) | Stablecoin |
|---|---|
| 10.45% | DAI |
| 10.89% | LUSD |
| 10.91% | USDC |
| 11.87% | USDT |
Source: TokenLogic | GHO Analytics
Increasing the non-discounted borrow rate of GHO from 7.22% to 7.92% is proposed to remain competitive, increase protocol revenue, and not negatively affect the peg.
Specification
- Current Borrow Rate: 7.22% APR - ~7.48% APY (non-discounted)
- Proposed Borrow Rate: 7.92% - ~8% APY (non-discounted)
- Discounted Rates: 30% discount
- New Discounted Borrow Rate:
- GHO: ~5.6% APY
If required, ACI will monitor the GHO peg and use authorized discretion for further rate adjustments in coordination with @karpatkey_TokenLogic Aave finance SPs.
Next Steps
- Implement the proposed borrow rate increase via a Direct-to-AIP process.
- Monitor GHO’s peg and use authorized discretion for further rate adjustments.
Disclaimer
This proposal is made independently by the ACI.
Copyright
Copyright and related rights waived via CC0.