Overview
Chaos Labs has assessed the proposal to deploy GHO on the Sonic blockchain and set ACI as the Emissions Manager for GHO, and aGHO supports the proposed changes. Our analysis considers GHO’s current multi-chain strategy with successful deployments on Arbitrum and Base, along with the proposed risk parameters and infrastructure for Sonic integration.
Risk Assessment
The proposed deployment of GHO on Sonic represents a logical continuation of Aave’s cross-chain expansion strategy. Based on our analysis of GHO’s performance on Ethereum mainnet, Arbitrum, and Base, expanding to emerging ecosystems like Sonic presents both opportunities and challenges that require careful risk management.
The current proposal aligns with the cross-chain architecture previously implemented for GHO, utilizing Chainlink CCIP as the secure interoperability layer. This consistency in architecture reduces technical risks associated with new deployments, as the framework has been rigorously tested and successfully implemented on Arbitrum and Base networks.
GHO’s performance on previously expanded networks demonstrates the effectiveness of a carefully coordinated, multi-stakeholder approach to new deployments. On Arbitrum, for instance, GHO has benefited from the network’s established ecosystem and user base while offering lower transaction costs and enhanced accessibility compared to Ethereum mainnet. Similarly, the Base expansion has further validated GHO’s cross-chain strategy and technical implementation.
Parameter Recommendations
The proposed parameters for GHO on Sonic align with Chaos Labs’ risk assessment methodology. Specifically, the conservative initial settings for borrowing and supply caps (2.5M supply cap and 2.25M borrow cap) appropriately limit exposure during the early adoption phase while allowing for sufficient liquidity. These caps can be adjusted by GHO Stewards as adoption increases, providing necessary flexibility while maintaining risk controls.
We recommend an IR curve, instead with a 6.5% slope1, aligned its Borrow Rate at UOptimal on the Prime Instance. The 10% reserve factor also appropriately balances protocol revenue generation with supplier incentives.
For the CCIP configuration, the bucket capacity increase of 15M units, rate limit capacity of 1M units, and refill rate of 200 GHO/sec provide sufficient cross-chain liquidity while implementing appropriate rate limiting to mitigate potential bridge exploitation risks.
GSM Implementation Analysis
The stataUSDC.e GSM implementation is particularly important for maintaining GHO’s stability across networks. The proposed freeze and unfreeze bounds (0.990-1.010 and 0.995-1.005, respectively) align with established risk parameters used in previous deployments. Setting both mint and burn fees to 0% initially is appropriate to encourage adoption, though Chaos Labs recommends closely monitoring utilization and considering fee adjustments as the market matures.
The GHO Bucket Cap of 10M and USDC Exposure Cap of 5M establish appropriate initial constraints that balance growth potential with risk management. As utilization patterns emerge, these parameters should be reviewed regularly by the GHO Stewards.
Steward Authority Framework
The governance structure, with GHO Stewards having parameter adjustment authority within defined bounds, provides an effective balance between operational flexibility and risk containment. The ability to update borrow caps, interest rates, supply caps, and GSM parameters within specified limits enables timely responses to changing market conditions while maintaining appropriate governance oversight.
Based on our observations of previous GHO deployments on Arbitrum and Base, this governance model has proven effective in maintaining stability during the initial launch phase and supporting subsequent growth.
Liquidity Strategy Considerations
The proposal’s emphasis on a coordinated liquidity strategy involving Beethoven (Balancer v3 fork) and the Aave Boosted StableSurge Pool is well-aligned with successful approaches used in previous GHO deployments. Automatic redeployment of idle liquidity into Aave maximizes capital efficiency while maintaining sufficient market depth.
The allocation of 1M GHO from the Prime instance to support initial growth on Sonic is appropriate given the early-stage nature of the deployment. This approach mirrors successful liquidity bootstrapping strategies previously implemented for Arbitrum and Base expansions.
Recommendation
Based on our assessment, Chaos Labs supports the proposal to deploy GHO on Sonic with the specified parameters and governance structure. However, we propose a lower Slope1 parameter.
| Parameter | Proposed | Recommended |
|---|---|---|
| Slope1 | 9.5% | 6.5% |
Disclaimer
Chaos Labs has not been compensated by any third party for publishing this recommendation.
Copyright
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