LlamaRisk is supportive of the proposed GHO bootstrapping plan for Plasma.
The GHO incentive strategies outlined are a positive step towards creating sustainable GHO supply sinks, which will in turn support the GHO peg. It is encouraging to see that even GHO sourced from the remote GSM contributes to this goal by generating yield for the DAO.
We agree that the proposed E-Modes, where GHO is borrowable for PT leveraging strategies, will create demand. The initiatives on Fluid and Balancer are a thoughtful addition to absorb potential GHO sell pressure and create a net-positive flow for GHO on secondary markets.
Regarding the new GHO / USDT0 E-Mode Category:
| Parameter | GHO | USDT0 |
|---|---|---|
| Collateral | Yes | No |
| Borrowable | No | Yes |
| Max LTV | 94% | - |
| Liquidation Threshold | 96% | - |
| Liquidation Bonus | 2.0% | - |
Given that GHO’s price is fixed at $1 across Aave’s instances, the primary risk for this E-Mode is a significant and sustained shock to the USDT borrow rate. We believe that this risk is minimal, especially as USDT borrow rate shocks are resolved within hours. Therefore, we see no issue with the revised LTV/LT that will help to improve capital efficiency.
We will continue to monitor the on-chain flows and market dynamics once this plan is implemented to ensure the continued stability and growth of GHO.
Disclaimer
This review was independently prepared by LlamaRisk, a DeFi risk service provider funded in part by the Aave DAO. LlamaRisk is not directly affiliated with the protocol(s) reviewed in this assessment and did not receive any compensation from the protocol(s) or their affiliated entities for this work.
The information provided should not be construed as legal, financial, tax, or professional advice.