Summary
LlamaRisk supports minting an additional 50M GHO on Ethereum and bridging it to the Plasma GSM, as this expansion would further reinforce GHO’s peg buffer and expansion on Plasma. The strong demand for GHO, evidenced by 60% of bridged supply being swapped into USDT0 via the GSM, highlights the effectiveness of this mechanism. However, as the GSM scales toward 100M in USDT0 deposits, it will represent a more significant share of the Aave Plasma USDT0 reserve. This introduces increased sensitivity to large withdrawals, which could materially spike utilization rates. Accordingly, while the expansion is justified under current conditions, GSM growth should be closely monitored, particularly before considering any further increases beyond this level.
GSM Performance
Plasma currently hosts 64.9M GHO in circulation, making it the second-largest network after Ethereum (310.6M). Of the initial 50M GHO bridged to Plasma into the GhoReserve, nearly 60% has entered circulation via users depositing USDT0 for GHO. This is further driven by GHO Aave lending incentives on Plasma, highlighting strong demand for GHO within the ecosystem.
Source: LlamaRisk, March 26, 2025
GHO Volatility
Since its launch, GHO has generally traded at a minimal discount, averaging around 2 basis points below peg. In March, however, GHO briefly traded at a premium for the first time, driven by incentive programs on Plasma that boosted GHO demand. Following this, the introduction of the GHO–USDT0 GSM, which currently holds $29.9M in USDT0, has strengthened peg stability. This is evident in March, when GHO briefly traded at a slight premium for the first time, driven by increased GHO demand from incentives, indicating improved market balance. A GSM backed by substantial USDT0 liquidity reinforces the peg by offering reliable 1:1 swap liquidity, helping absorb demand imbalances and reduce price deviations.
Source: LlamaRisk, March 26, 2025
USDT0 Supply Impact
The USDT0 deposited in the GSM and subsequently supplied to Aave’s Plasma USDT0 reserve (which holds $1.6B in deposits) accounts for only a small share of the overall market, representing approximately 1.87%. At current capacity, a full withdrawal from GSM would increase utilization by about 1.6%, bringing it to 90.44% based on total borrows as of March 26, 2026. This remains below the optimal utilization threshold of 92%, indicating limited immediate risk.
However, if GSM expands to its projected capacity of 100M in USDT0 deposits, its market share would rise to nearly 6%. At that level, GSM could have a more pronounced impact on both supply APR during large inflows and utilization spikes during withdrawals. This underscores the importance of closely monitoring GSM as it scales.
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.