[ARFC] Launch GHO on Gnosis Chain

kpk · March 13, 2025, 9:55am

2025-03-26: This post was edited to reflect @LlamaRisk and @ChaosLabs parameters recommendations. When they differ, the most conservative one is selected.

[ARFC] Launch GHO on Gnosis Chain

author: kpk

date: 2025-03-13

Summary

This proposal aims to launch GHO on the Gnosis chain and designate ACI as the Emissions Manager for GHO rewards and incentives. Deploying GHO to Gnosis is one part of kpk’s (formerly karpatkey) mandate and a milestone towards sGHO (savings GHO) deployment. Gnosis Chain has low transaction fees, an engaged community, and a rapidly growing suite of DeFi applications focused on RWAs and innovative payment solutions like Gnosis Pay.

Motivation

The sGHO vault will provide a risk-minimized yield alternative that can be used as collateral for enhanced capital efficiency, debuting on Gnosis Chain. The first step of this deployment is introducing GHO to the Gnosis Chain, which is renowned for its cost-efficiency, active community, and innovative DeFi landscape, making it an ideal environment for GHO. As GHO Growth Service Provider, kpk has been entrusted with driving community engagement, forging strategic partnerships, and ensuring the successful liquidity bootstrapping of GHO.

This proposal leverages kpk’s expertise and the favorable market conditions on Gnosis to deploy GHO with risk parameters and smart contract implementations that are finely tuned to the unique characteristics of the Gnosis ecosystem. sGHO deployment, the enhancements proposed to the GC Instance and future incentives for GHO (subject to an upcoming proposal on both DAOs) will work together to position GHO as a strong player within Gnosis, enhancing the TVL and revenue for Aave on this chain.

Specification

The deployment of GHO on Gnosis will be executed through coordinated efforts among various service providers. The necessary smart contracts and supporting infrastructure will be designed and deployed to enable full GHO functionality on the Gnosis chain, including the implementation of any required cross-chain bridge infrastructure to ensure seamless integration within the Aave ecosystem. In parallel, risk and finance service providers will collaborate to establish risk parameters and collateral requirements specifically optimized for the Gnosis environment, incorporating insights gained from previous network launches.

Therefore, kpk is inviting all Service Providers to provide input on their scopes in this proposal. The proposed launch of GHO at Gnosis Chain will have the following key components:

BGD and Avara (Aave Labs) to implement and deploy the necessary smart contracts for GHO on the Gnosis Chain network, including cross chain bridge infrastructure and addition to Aave v3 Gnosis Chain.
Risk service providers and finance service providers should collaborate on appropriate risk parameters and collateral requirements tailored to the Gnosis Chain ecosystem.

Additionally, a strategic plan will be developed to bootstrap initial liquidity on Gnosis, including tailored incentives and partnerships with established protocols in the ecosystem. @ACI will serve as the Emissions Manager for GHO rewards and incentives.

ACI multisig address: 0xac140648435d03f784879cd789130F22Ef588Fcd

The exact timeline and detailed technical specifications for each component will be determined by the service providers and presented in subsequent AIPs, pending the approval of this ARFC.

GHO parameters

Parameter	Value
Asset	GHO
Market	Gnosis
Isolation Mode	No
Borrowable	Yes
Collateral Enabled	No
Supply Cap	2,500,000
Borrow Cap	2,250,000
Debt Ceiling	-
LTV	-
LT	-
Liquidation Bonus	-
Liquidation Protocol Fee	-
Variable Base	0%
Variable Slope1	6.5%
Variable Slope2	50%
Optimal	90%
Reserve Factor	0%
Stable Borrowing	Disabled
Flashloanable	Yes
Siloed Borrowing	No
Borrowable in Isolation	No
E-Mode Category	N/A

Ethereum ↔ Gnosis GHO Facilitator

A facilitator will be deployed on Ethereum specifically to support Gnosis with this initial configuration:

Parameter	Value
Mint Cap	10M Units

CCIP Configuration

Bridge Facilitator parameters:

Parameter	Value
Bucket Capacity	+15M Units
Rate Limit Capacity	1,000,000 units
Refill Rate	200 GHO/sec

GHO Stewards

As with every GHO deployment, GHO Stewards are recommended to be deployed. Stewards would have the same parameter change capabilities as on other chains.

Disclaimer

kpk is not presenting this ARFC on behalf of any third party and is not compensated for creating this ARFC.

Next Steps

If consensus is reached on this ARFC, the proposal will be escalated to the Snapshot stage. Upon a positive Snapshot outcome, service providers will proceed with the appropriate AIPs.

Copyright
Copyright and related rights waived via CC0.

Tor_GAINS · March 14, 2025, 11:49am

Gnosis being the go-to chain for payments and a solid long-term partner for AAVE, I’m excited to see this proposal ̶$̶G̶H̶O̶ go live and I’m fully in favor of it

LlamaRisk · March 17, 2025, 1:58pm

Summary

LlamaRisk supports the deployment of GHO on Gnosis Chain. As GHO continues scaling after successful deployments on L2s, it is rational to expand the GHO availability further. Our analysis indicates that GHO is ready for further cross-chain deployments, with Sonic and Gnosis considered suitable candidates. Introducing GHO would also continue the Gnosis market enhancements, where GHO and USDC.e expected to become the primary stablecoins of the market.

Notably, GSMs will now provide an alternative way for users to enter Aave’s GHO ecosystem because of the zero-fee setup. This way, GSMs will support GHO stability and contribute to the sGHO roll-out. Nonetheless, due to the small USDC.e supply on Aave’s Gnosis market, introducing a (stata)USDC.e GSM could undermine the borrow rate stability. Nonetheless, after the Gnosis market enhancements are finalized, the deployment of a GSM could be re-considered.

Current GHO Scale

Arbitrum and Base were selected as the first blockchains for GHO expansion beyond Ethereum, with GHO already operational on these networks. The stablecoin’s total supply is now fluctuating around 200M after a period of a temporary supply slump back in January 2025. Shortly after sGHO is adopted, an additional boost in growth is anticipated.

A week before this proposal, we publicly covered the current GHO state, highlighting that:

GHO’s total liquidity TVL is $95.5M, with 44.6M GHO in pools, mainly paired with USDC, USDT, and USR.
18M GHO can now be sold with only a 1% price impact, a strong recovery from the November 2024 de-peg.
GHO borrowing remains healthy with a 2.08 collateral ratio. WBTC (18.9%) is now the top collateral, surpassing WETH (15.3%).

At the time of writing, the situation remains unchanged, except for the GHO borrow rate on Core being lowered to an interval of 3.77%-5.39% as broader market rates continue to decrease.

Network-Specific Considerations

Gnosis has established itself as a chain focused on RWA and payment solutions. The native asset of this chain is GNO, which does not serve as a gas token but is used for staking on the Gnosis Beacon Chain and acts as the governance token for the GnosisDAO. The current chain TVL is at $270M, with Aave representing 1/4th of that value. This mature market can be considered for GHO introduction. Upcoming incentive programs would help bootstrap GHO’s supply in this chain. Deploying GHO would also enable potential token integrations into Gnosis yield venues.

Source: DefiLlama, March 15th, 2025

Liquidity Venues

Balancer DEX is the major venue on the Gnosis chain with a TVL of ~$74.5M. Other DEXs, such as Uniswap V3, Curve, Sushiswap, and Honeyswap, are also available but represent relatively minimal liquidity size. The dominance of Balancer results in 98.8% of trading activity happening in this DEX.

Source: Dune Analytics, March 15th, 2025

A key part of early GHO growth on Gnosis will be securing initial liquidity that would later become a supportive factor for further GHO supply and borrow cap increases. Incentive programs would contribute significantly to this goal, although sustainability depends on future GHO use cases on the Gnosis chain.

Yield Venues

Gnosis chain is notable for the availability of RWA venues. A significant RWA protocol is RealT, which offers tokenized real estate products. Moreover, Backed Finance offers tokenized securities and derivatives. Apart from Aave, Spark lending protocol has a moderate presence on Gnosis. This chain also hosts a significant payment platform, GnosisPay, which offers direct payments from an on-chain savings account with up to 5% cashback in GNO tokens.

Source: DefiLlama, March 15th, 2025

Due to the RWA presence and availability of EURe, GBPe, and Forex, trades on this chain are significant and currently represent 23.2% of the trading volume.

Source: Dune Analytics, March 15th, 2025

Aave’s Market

At the time of writing, $62.6M of assets are supplied to Aave’s Gnosis market. The largest assets by supply are sDAI, wstETH, and GNO. USDC.e and xDAI are currently the largest dollar-denominated stablecoins, with Monerium EURe also having an established position with $9.7M of supply.

Source: Aave Gnosis, March 15th, 2025

The most popular strategies in this market are sDAI yield-looping using USDC.e or EURe as collateral and wstETH yield leveraging. After the market enhancements that will take effect shortly, the sDAI yield leveraging the use case is expected to expand further. Backed’s bCSPX tokenized S&P 500 ETF will also enable a novel use case unseen for Aave’s markets. Concerning the stablecoins, the long-term goals of reworking the Gnosis market are:

USDC is to be phased out and off-boarded gradually;
xDAI is to be discontinued and off-boarded gradually;
USDC.e and GHO are to become the primary stablecoins of the market.

Facilitators

Unlike Mainnet, GHO would not be minted on-demand in the Aave Gnosis market; it must be directly supplied to the lending pool. GHO is to be first minted on Mainnet and then bridged to Gnosis using the CCIP Bridge Facilitator. The initial configuration for the Gnosis GhoDirectMinter facilitator is recommended to have a mint cap of 10M GHO.

Price Feed

GHO oracles on all markets use a fixed 1:1 price ratio, and Sonic will follow this standard.

GSM

Deploying GSM modules and new chain deployments is a robust and welcomed stability measure. Nonetheless, low current USDC.e supply availability (both absolute and on Aave’s Gnosis market) is susceptible to larger borrow and supply rate fluctuations if a (stata)USDC.e GSM would be deployed. Due to the lack of other asset candidates, abstaining from a GSM creation is recommended until the market develops further.

Source: DefiLlama, March 15th, 2025