[ARFC] Increase GHO Borrow Rate 100 bps to 6.35% on Aave V3

Title: [ARFC] Increase GHO Borrow Rate 100 bps to 6.35% on Aave V3

Author: @ACI (Aave Chan Initiative)

Date: 2023-12-04


This ARFC proposes an increase in the GHO borrow rate from 5.35% APR to 6.35% APR to support the GHO peg restoration and align borrowing costs with market rates.


AIP-381 allows for 100 bps increases in the GHO borrow rate every 7 days while days up to 9.5% APR if the monthly average price of GHO stays outside a 0,995<>1,005 price range. While the peg has improved, it is still outside of the target range. This AIP continues with further increases of the GHO interest rate aligned with the previous proposal.


  • Current Borrow Rate: 5.22% APR - ~5.35% APY
  • Proposed Borrow Rate: 6.22% - ~6.35% APY
  • New Discounted Borrow Rate: ~4.7% - 4.75% APY

ACI will continue with up to 100 bps incremental increases every 7 days if required up to 9.5% if the monthly average price of GHO stays outside a 0,995<>1,005 price range.

Next Steps

  1. Implement the proposed borrow rate increase via a Direct-to-AIP process.
  2. Monitor GHO’s peg and use authorized discretion for further rate adjustments.


This proposal is made independently by the ACI.


Copyright and related rights waived via CC0.


I would love to see this being pushed to Aave Governance voting and that the new process for increasing to 7.35% is initiated. We wanna stick to our plan of “every 7 days”. Let us show the community that we can hold our promises/plans in a timely manner.


I completely agree with josojo, I don’t understand why the increase was not followed through this week. It was clear that the DAO agreed to push interest rates every 7 days.

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@MarcZeller would you be so kind to initiate the steps? if we community members can help somehow, I am happy to help



The AIP code for this is ready & in review. AIP creation is likely today if we pass the review successfully.


Can we please submit the next rate increase already as an PR? Otherwise, - given the time that review takes - we won’t make the 7 day schedule.
( I am also happy to submit it, if I would be allowed to)

hello josojo,

we can write the code in advance, but:

  1. We’re in Governance embargo until Dec 21th due to Gov V3 upgrade
  2. The GLC would like to consider the effects of current increase first before a greenlight to another one
  3. the market is a bit more quiet these days, another increase would place GHO above avg borrow rates of other stables coins. that would be good for peg but terrible for supply
  4. StkGHO & GSM are expected in early Jan, I’m keen to explore these options and their effect first before increasing the rates again.

I understand your points, but I think GHO borrow rates should not be compared with average variable borrow rates, but instead with stable borrow rates as fixed borrow rates always command a premium to variable rates.

Average USDC rates are also still higher.


We are also seeing borrow rates on CEXs expressed through funding rates that are way higher than current GHO rates. Which means a rational actor still has an incentive to borrow GHO and dump since there are no other clear use case except for having a fixed rate leverage exposure.

I get the concern about supply but I think the peg should be the priority for long term supply growth.

In my understanding the GSM will only work if GHO is already at peg or trading between a narrow range to 1$ so waiting for the GSM in January to raise rates does not make sense IMO.

On the other hand. I look forward to StkGHO launch as it provides a use case for GHO and will bring some demand from external actors. This could help with the peg and even bootstrapping liquidity for the GSM once GHO trades above 1$, if the DAO won’t bootstrap it with treasury funds.


I think we can really not expect any substantial change after these days

This might have been true on Monday, but today it’s already looking different.
I think not deviating from the proposed plans would definitively help building more trust and credibility into aaves governance and might help in future repeg situations as well.

As @stableghost says, its better to first meet the peg and then introduce it.



i don’t see how this is a long term solution? yes, it should force early adopters to pay back GHO and help reduce supply. but surely working on integrations like using GHO as collateral on Spark and SILO makes more sense?

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