Overview
Chaos Labs supports listing ggAVAX on Aave V3’s Avalanche instance. Below is our analysis and initial risk parameter recommendations.
Technical Overview
ggAVAX is an AVAX LST powered by GoGoPool. GoGoPool introduces the concept of MiniPool (Essentially a fully operational Avalanche Validator node). In this MiniPool, 1,000 AVAX is provided by the user who wishes to become a validator, while another 1,000 AVAX is supplied by the protocol. Additionally, the user must deposit a minimum of 100 AVAX worth of GGP (GoGoPool’s governance token) as collateral to ensure honest behavior. ggAVAX is a non-rebasing token that accumulates yield over time.
Users deposit 1,000 AVAX, determine the duration for their MiniPool, and provide their Avalanche Node ID during the Pre-Launch phase. The rewards are distributed throughout every 15 days. A validator cannot create a new MiniPool using the same Avalanche Node ID until they have withdrawn all AVAX funds—both the principal and any staking rewards—from their previous MiniPool.
In a previous post, we highlighted the potential challenges associated with ggAVAX’s withdrawal system. The AVAX provided by the protocol is sourced from liquid stakers who receive ggAVAX in return. Therefore, the withdrawal period for ggAVAX will be closely tied to the MiniPool’s validation period (duration). For all active MiniPools with a status of 2 (Staking), the duration effectively represents the time required for staked AVAX in the MiniPool to become withdrawable. This is because withdrawals are only permitted once a MiniPool transitions to the Withdrawable status, as enforced by the withdrawMinipoolFunds function outlined below.
withdrawMinipoolFunds Function; Source: miniPoolManager Smart Contract
Our previous observations indicate that the duration for MiniPools can range from 15 days to as long as 1 year, raising concerns about potential delays in withdrawal processing due to this structure. Reassessing the issue at this time reveals it has lessened. Currently, the distribution of MiniPool durations still ranges from 15 to 365 days. However, compared to our previous analysis, where only 7% of the distribution had a time until the withdrawal of 15 days, this figure has increased to 39.75% in the current analysis. Additionally, MiniPools with a time to withdrawal of less than 30 days now account for 54.35% of the distribution.
Distribution of MiniPool Durations
From a user behavior perspective, users are expected to have limited motivation to create MiniPools with very long durations. Beyond the convenience of continuous operation and avoiding re-queuing, there are few compelling incentives for opting for longer durations. For example, the GGP rewards earned by validators are determined by the total amount of GGP staked, not the staking duration. In addition, if a validator chooses a longer MiniPool duration, the rewards they receive will essentially be the compounded returns from reinvesting earnings from each reward cycle. This is functionally no different from reopening a new MiniPool every 15 days and reinvesting the previously earned interest.
Currently, the protocol has a total of 14,039 AVAX available for use in unstaking ggAVAX, as determined by the amountAvailableForStaking function specified in its smart contract.
Market Cap and Liquidity
The total TVL of GoGoPool has shown a general upward trend since its inception, despite several fluctuations. It experienced a notable surge starting in early November 2024, reaching a peak of approximately $90M in early December. However, the TVL has since declined and, as of the time of writing, stands at $58M.
Over the past three months, ggAVAX’s trading volume has shown some fluctuations but has generally remained above $500K daily. Most of the trading activity has taken place on Pharaoh V2 and Trader Joe V2.
ggAVAX Daily Volume By Platform
The majority of ggAVAX’s liquidity is concentrated on three platforms: LFJ V2, Pharaoh V2, and Balancer V2. The ggAVAX/AVAX trading pair dominates liquidity on LFJ V2 with a TVL of $9.15M, on Pharaoh V2 with $5.15M, and on Balancer V2 with $532K.
Below, we present the combined liquidity trends of ggAVAX/AVAX Liquidity Pools on Pharaoh and LFJ over time, observing sustained paired liquidity.
ggAVAX DEX Liquidity Over Time
Volatility
Below, we present a comparison between the internal exchange rate of ggAVAX to WAVAX and the corresponding exchange rate observed in the LFJ ggAVAX/WAVAX Pool.
According to our observations, the largest depeg between the ggAVAX/WAVAX internal rate and the WAVAX/ggAVAX LFJ market rate has been only 9.2 bps. Given this, the volatility of the ggAVAX/WAVAX secondary market pair is not expected to be significant as arbitrageurs currently lack incentives to enter the market, as the protocol fees outweigh the largest observed deviation.
LTV, Liquidation Threshold, and Liquidation Bonus
The total TVL and liquidity of ggAVAX have shown a positive trend. Additionally, the withdrawal concerns highlighted in our previous analysis have eased, and, as explained earlier, the likelihood of a significant number of MiniPools having very long durations is also low.
However, several concerns persist. First, ggAVAX’s high volatility and fluctuations remain an issue. Second, while withdrawal challenges have eased, with around 40% of MiniPools having durations of two weeks or less, most are operated by GoGoPool’s in-house validators, introducing centralization risks and potential liquidity shortages driven solely by the protocol behaviors. Third, ggAVAX distribution is highly concentrated, with the top three holders accounting for 65.67% of the total supply.
ggAVAX Top 100 Holders
Therefore, given the above reason, we suggest adopting parameters that are aligned with the highly conservative configuration of sAVAX in the generalized market, with an LTV of 50%, LT of 55%, and Liquidation Bonus at 10%.
E-Mode
We recommend creating an isolated liquid E-mode for ggAVAX and WAVAX. In this setup, ggAVAX would be designated solely as collateral, while WAVAX would be exclusively borrowable.
Given that the largest observed depeg between the internal exchange rate and the market rate is only 9.2 bps, it would be reasonable to consider recommending higher E-mode parameters for ggAVAX. However, due to the fundamental mechanism of ggAVAX and the concentration of holders, as discussed earlier, we recommend setting E-mode parameters slightly lower than those for sAVAX/AVAX. Specifically, we propose an LTV of 87% and a LT of 89%.
Supply Cap and Borrow Cap
We recommend setting ggAVAX’s supply cap using our standard methodology, which calculates the cap as 2x the liquidity available under the Liquidation Bonus. Based on this approach, we propose a supply cap of 720K.
Considering the yield-bearing nature of ggAVAX and the lack of borrowing demand for LSTs based on historical observation, we recommend designating ggAVAX as non-borrowable for now.
Pricing
We recommend using an internal exchange rate (convertToAssets * 10^-18) between ggAVAX and AVAX when pricing ggAVAX, aggregated with the AVAX/USD feed.
Recommendation
Following the above analyses, we have aligned with @LlamaRisk on the following parameter settings:
| Parameter | Value |
|---|---|
| Isolation Mode | No |
| Borrowable | No |
| Collateral Enabled | Yes |
| Supply Cap | 720,000 |
| Borrow Cap | - |
| Debt Ceiling | - |
| LTV | 50% |
| LT | 55% |
| Liquidation Bonus | 10% |
| Liquidation Protocol Fee | 10% |
| Variable Base | - |
| Variable Slope1 | - |
| Variable Slope2 | - |
| Uoptimal | - |
| Reserve Factor | - |
| Stable Borrowing | Disabled |
| Flashloanable | No |
| Siloed Borrowing | No |
| Borrowable in Isolation | No |
| E-Mode Category | ggAVAX/WAVAX |
ggAVAX/AVAX E-Mode
| Parameter | Value | Value |
|---|---|---|
| Asset | ggAVAX | WAVAX |
| Collateral | Yes | No |
| Borrowable | No | Yes |
| LTV | 87% | - |
| LT | 89% | - |
| Liquidation Penalty | 2.5% | - |
Disclosure
Chaos Labs has not been compensated by any third party for publishing this ARFC.
Copyright
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