Overview
Chaos Labs supports the proposal to deploy GHO on the Gnosis and designate ACI as the Emissions Manager for GHO rewards and incentives. Our analysis considers GHO’s current marketing state, along with the proposed risk parameters and infrastructure for Gnosis integration.
GHO
Deploying GHO on Gnosis is consistent with Aave’s strategic approach to multi-chain expansion. With GHO demonstrating strong growth across Ethereum, Arbitrum, and Base, its deployment on Gnosis presents a rational opportunity to further scale adoption and enhance its accessibility within the broader ecosystem.
GHO has demonstrated strong and steady growth over the past three months on Ethereum, stabilizing around $200M in the past month. As of the time of writing, its total market capitalization stands at $210.29M.
In addition, based on our analysis in this post, while GHO’s total supply on Base and Arbitrum remains relatively limited compared to Ethereum, it has maintained a steady growth trajectory following its expansion to these networks. As of the time of writing, the total supply of GHO stands at 4.32M on Base and 3.62M on Arbitrum.
Gnosis
Since 2024, Gnosis has demonstrated a stable upward trend in TVL, consistently remaining above $200M. As of the time of writing, its total TVL stands at $276M, with Aave contributing approximately 22% of the total.
Gnosis TVL Over Time
The total market size of Aave on Gnosis stands at $84.2M, with sDAI and wstETH being the largest supplied assets. Over the past three months, Aave’s market size on Gnosis has remained relatively stable, with only a slight recent adjustment.
Parameter Recommendations
We align with the proposed GHO parameters on Gnosis as they are consistent with Chaos Labs’ risk assessment methodology. The conservative initial supply cap of 2.5M and borrow cap of 2.25M effectively manage exposure during the early adoption phase while ensuring adequate liquidity.
However, we propose adjusting the parameters to Base: 0%, Slope 1: 6.5%, and Slope 2: 50% to better align with parameter on other major markets. This adjustment reduces borrowing costs at low utilization, provides a more gradual rate increase as utilization grows, and enforces a sharper penalty once utilization surpasses the optimal threshold.
GSM Implementation
Given the limited total supply of USDC.e on Gnosis is currently only at 18.57M, deploying a USDC.e GSM introduces liquidity and rate risk. Since the GSM relies on user-supplied USDC.e reserves to mint and redeem GHO, a low circulating supply constrains the GSM’s capacity to effectively stabilize GHO’s peg. Even with a modest GHO bucket cap, the GSM could absorb a material share of the available USDC.e, reducing liquidity in core lending markets. This fragmentation may lead to increased volatility in USDC.e borrow and supply rates, impair capital efficiency, and limit the GSM’s utility in maintaining peg stability. Until USDC.e liquidity deepens, a GSM deployment on Gnosis is not recommended.
Steward Authority Framework
The governance framework, which grants GHO Stewards the authority to adjust parameters within predefined limits, strikes a balance between operational agility and risk management. By allowing updates to borrow caps, interest rates, supply caps, and GSM parameters within controlled thresholds, the system can quickly adapt to market dynamics while ensuring governance oversight. Observations from previous GHO deployments on Arbitrum and Base indicate that this model has been effective in maintaining stability during the initial rollout and facilitating continued growth.
Recommendation
Based on our assessment, Chaos Labs supports the proposal to deploy GHO on Gnosis with the specified parameters and governance structure. However, we recommend adjusting the base and slope parameters.
| Parameter | Proposed | Recommended |
|---|---|---|
| Base | 5% | 0% |
| Slope 1 | 3% | 6.5% |
| Slope 2 | 30% | 50% |
Disclaimer
Chaos Labs has not been compensated by any third party for publishing this recommendation.
Copyright
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