Enabling GNO as a Borrowable Asset
We support the proposal to enable GNO as a borrowable asset on the Aave V3 Gnosis Pool with an initial conservative cap. This will provide valuable insights into the borrowing dynamics and utility of GNO, enhancing the understanding of its potential use cases before considering further potential increases.
Borrow Cap
For our recommendation for the borrow cap for GNO, we review the average daily trading volume of GNO. Over the past 180 days, this volume is approximately $2.1 million (CeFi & DeFi). Based on this data, we propose an initial borrow cap set at 10% of the average daily volume, equating to roughly 1,100 GNO.
IR Curves
We recommend setting the initial IR Curves in line with those for other governance tokens on Aave. These parameters are subject to future adjustments based on usage on the protocol and evolving market conditions
Taking GNO out of Isolation Mode
Given the recent launch and the absence of significant changes in liquidity conditions, we continue to support our earlier stance as mentioned in our previous recommendations, which is to retain GNO in Isolation Mode. We understand the consideration for a potential GNO LST E-Mode category, but currently, we advise that keeping GNO in isolation mode remains the safer and more effective approach for managing the protocol’s risk exposure. This is due to the current market dynamics characterized by low average daily volume and on-chain liquidity for GNO. We plan to keep evaluating the status of GNO in relation to isolation mode, taking into account its liquidity and usage on the protocol, and the introduction of new use cases, such as LST assets that might be listed on the protocol.
While we recommend this approach, it’s important to note that if the community opts to list GNO outside of isolation mode, given the current market conditions, platform usage, and risk parameter settings (specifically supply caps and LT), we do not foresee substantial risk to the protocol.
Additionally, we’d like to point out that currently, almost 96% of all GNO is supplied by a single account, which has not borrowed against it.
Specification
We propose these changes for the enablement of GNO as a borrowable asset with adjusted risk parameters:
| Risk Parameter | GNO |
|---|---|
| Isolation Mode | YES |
| Enable Borrow | YES |
| Enable Collateral | YES |
| Loan To Value | 31% |
| Liquidation Threshold | 36% |
| Liquidation Bonus | 10% |
| Reserve Factor | 20% |
| Liquidation Protocol Fee | 10% |
| Borrow Cap | 1,100 |
| Supply Cap | 30,000 |
| Debt Ceiling | $1M |
| uOptimal | 45% |
| Base | 0% |
| Slope1 | 7% |
| Slope2 | 300% |
| Stable Borrowing | Disabled |
| Flahloanable | YES |
| Siloed Borrowing | NO |
| Borrowed in Isolation | NO |