title: [GHO Stewards] August 2026 - GHO Borrow Rate and Aave Savings Rate Update
author: @TokenLogic
created: 2026-08-27
Overview
This update adjusts rates on both sides of GHO’s balance sheet. The GHO borrow rate on Ethereum Core rises from 3.75% to 4.25% in two 25 bps steps, the Ethereum Prime base rate rises by 75 bps to 2.75% in two steps, and the Monad configuration is aligned in two steps so that no cross-chain instance prices GHO materially below the Core anchor. On the demand side, the Aave Savings Rate (ASR) paid by sGHO rises from 4.25% to 4.50%. The package accompanies the August 2026 Stablecoin Interest Rate Adjustments update, which kept GHO under separate rate management. It addresses the recovered peg, GSM backing outflows, sGHO retention as rival savings rates move higher, and protocol revenue from GHO debt. All changes sit within the existing Risk Steward and GHO Risk Council mandates and will be implemented directly.
Market context
Demand conditions have improved materially. Across Aave’s stablecoin reserves, utilization has held at or near the kink through August, which supports the 50 bps Slope1 increases in the companion update. The regulatory backdrop also strengthened: the US Treasury opened the GENIUS Act stablecoin rulemaking to public comment on August 17, the SEC proposed exemptive crypto rules on August 18, and FASB proposed standards under which stablecoins would qualify as cash equivalents, which could support corporate adoption. On August 19 the Treasury doubled its long-end liquidity-support buybacks. The operation is not quantitative easing, but the market received it as support for bond-market liquidity. Short-term dollar yields remain elevated. GHO borrowers can therefore absorb a higher rate, while savings products still need to retain deposits.
Against this improving backdrop, GHO spent July and August losing ground on three connected fronts:
- Peg. GHO traded below par consistently over the last weeks, driven primarily by the USDT underperformance, but exacerbated the price crossed the limits of the Fluid GHO-USDC pool. The gap has since closed: GHO trades at $0.9997 today, and the peg is no longer under pressure.
- GSM backing. The USDT GSM on Ethereum has lost 12.4M of underlying exposure since August 13, from 53.2M to 40.8M USDT, roughly a quarter of the module’s backing. The USDC GSM remains effectively empty. Redemptions through the GSM follow from a persistent sub-par secondary price.
- Savings retention. stkGHO has shed 7.0M over the past 28 days, and while sGHO deposits still grew on a net basis to 158.6M, the past two weeks show multi-million single-day redemption spikes. With roughly three quarters of circulating GHO held in savings products, retention supports the peg.
The GSM’s fee schedule links the peg to the module. Minting GHO through the GSM is free, while redeeming GHO for the underlying costs 10 bps. Redemption arbitrage pays whenever the secondary discount exceeds that fee: an arbitrageur buys GHO below par, redeems it at par, and keeps the difference. The discount exceeded 10 bps on 29 of the 30 days to August 25, and the resulting spread drove the module outflow. As the discount narrows to within 10 bps of par, redemption no longer pays and the drain stops.
The three pressures have the same cause, which remains in place: GHO is the cheapest stablecoin to source on Aave, and debt minted below the market-clearing rate is sold into the market. Ethereum Core prices GHO at 3.82%, while USDC and USDT have held at or above their optimal utilization through August and price above their 4.00% Slope1 targets. As the companion update lifts those targets toward 4.50%, an unchanged GHO would be mintable up to 75 bps below the next cheapest stable. That gap would extend the flows that have pressured the peg and reduced GSM backing.
The most recent data indicates that the pressure is easing. The market-wide rally has reduced the discount from its 26 bps peak to roughly 3 bps, within the range where redemption arbitrage no longer pays, and the module’s backing recorded its first flat day on August 25 after a week of daily outflows. Liquidity in the main Fluid pool, which had been almost entirely one-sided in GHO since mid June, has begun to rebalance as USDC returns. USDT borrow demand on Ethereum Core has continued to grow, keeping the reserve at its optimal utilization and increasing the yield earned by GSM backing. The proposed changes enter a recovering market and seek to preserve that recovery.
Circulating GHO comes from two source families: debt drawn from facilitator-supplied markets on Ethereum, Core, Prime and Horizon, and stablecoins swapped into the GSMs. Debt currently accounts for roughly 69% of issuance against 31% for the GSMs. The balance has moved toward debt over the last month as borrowing grew while the modules drained. GHO can be minted through lending markets below the cost of comparable stablecoins, so issuance has increasingly come through borrowing. GSM backing earns the DAO the underlying Aave yield, and its share has declined alongside the backing. The debt side already carries about two thirds of GHO revenue. Higher debt rates improve the revenue earned on remaining borrowing, while a peg recovery and restored GSM backing would increase the module’s share of issuance and revenue.
Borrow rate changes
Ethereum Core, 3.75% to 4.25%, in two 25 bps steps. The rate moves to 4.00% first and to 4.25% approximately two weeks later, alongside the staged Slope1 increases in the companion update. GHO remains priced below USDC and USDT at each point in the sequence, preserving the protocol’s preference for its own stablecoin. Higher borrowing costs also support the peg because borrowers repaying GHO buy it in the market below par. Repayments reduce circulating supply, so the rate increase is paired with an ASR increase to retain and attract savings holders.
Ethereum Prime, base rate from 2.00% to 2.75%, in two steps. Prime is the leverage venue, and the current curve prices GHO at 3.16% at prevailing utilization, well below Core. Raising the base rate moves the curve at every utilization level. A first step to 2.50% and a second to 2.75% move the current rate to approximately 3.91% and the kink rate from 3.25% to 4.00%. A base-rate change takes effect immediately at all utilization levels. Prime retains a modest discount to Core, keeping looping activity on Prime while avoiding a venue where GHO can be sourced far below its mint rate.
Instance alignment. No cross-chain deployment should offer GHO at a target rate materially below the Core anchor. Monad Core’s Slope1 of 4.00% sits below the new anchor and rises to 4.50% in two steps, 4.25% first, matching the harmonized stablecoin Slope1 and folding into the Monad IRM implementation already in flight. All other cross-chain deployments already price GHO at a kink rate of 4.50% or above and are left unchanged. Horizon operates under the separate RWA instance arrangement and is out of scope for this update.
ASR increase
The competitive set is moving up. Under the same reserve-factor convention the companion update applies to USDe, the Sky Savings Rate grosses to a USDS borrow floor near 4.75%, and the Ethena staking rate is expected to settle around 5.3% as looped USDe supply unwinds. At 4.25%, sGHO would be the lowest-paying major on-chain savings product at exactly the moment retention matters most. Moving the ASR to 4.50% keeps sGHO within 25 bps of sUSDS while remaining below the new Core borrow rate. The core viability spread, savings cost below CDP interest plus backing yield plus GSM fees, is preserved and widens relative to today.
At current sGHO deposits of 158.6M GHO, the additional savings cost is approximately $397K per year.
Revenue impact
GHO borrow interest on Ethereum Core accrues entirely to the treasury under a 100% reserve factor. Prime and Horizon have a 10% reserve factor, but the DAO supplies most of both markets through their facilitators and earns supply-side interest on those deposits. Effective capture is approximately 92% on Prime and nearly 100% on Horizon. The following are static estimates at current balances and utilization:
Across every avenue, DAO revenue from GHO rises from approximately $2.2M to $3.0M per year. This proposal accounts for $474K of the increase, while the companion update reaching the GSM backing accounts for $345K across the USDT and USDT0 legs. The package generates $871K of additional market revenue against $397K of additional savings cost.
GSM yield revenue reflects two opposing movements. The module holds its backing as wrapped Aave aTokens, so the rate earned rises with the companion’s Slope1 increases. Its backing has contracted through August as redemptions drained the module. At the current 40.8M of USDT backing the companion move adds approximately $169K per year; if outflows continued at the August pace, the uplift would compress toward $12K. The Plasma USDT0 leg holds a further 40.6M of backing that has stayed flat through the month, and the companion increase on that reserve adds approximately $176K per year. The USDC leg is currently empty and contributes nothing until backing returns. August 25 was the first flat day after a week of outflows, which indicates that the narrowing discount is slowing the drain. Redemption fees earned during the drain, approximately $0.8M annualized over the past week, follow from the sub-par price and are excluded from the figures above.
These estimates exclude second-order effects. Each basis point of peg recovery reduces arbitrage flows from the GSM, and retained sGHO deposits support circulating supply.
Specification
The following parameter updates will be implemented:
Each borrow-rate change above is the first of two steps: Core moves to 4.00% and then 4.25%, Prime to 2.50% and then 2.75%, and Monad Slope1 to 4.25% and then 4.50%, with the second step following approximately two weeks after the first, in line with the staged execution of the companion update. Prime keeps its current Slope1 (1.25%), Slope2 (35.00%) and optimal utilization (92%). The Monad change composes with the optimal utilization (92%) and Slope2 (20.00%) update already specified in the LlamaRisk Monad IRM proposal.
For reference, the remaining GHO deployments already price at or above the new anchor at their kink and are unchanged: Base, Avalanche, Arbitrum and Gnosis (Slope1 4.50%), Plasma (base 1.25% plus Slope1 3.50%), X Layer (5.00%), Mantle (base 2.00% plus Slope1 3.00%), Ink (5.50%).
Disclaimer
TokenLogic is an active service provider to the Aave DAO, the beneficiary of stream 100086 and the KPI as outlined in this publication. The scope of this engagement is available via this forum proposal.
TokenLogic supports and maintains an independent delegate voting platform within the Aave community.
TokenLogic and associated entities have no undisclosed material conflicts of interest at the time of submission.
Next Steps
- Implement the Core, Prime and Monad rate updates through the Risk Stewards within their existing caps and cooldowns, each performed in two steps spaced approximately one week apart.
- Implement the ASR update through the GHO Risk Council via the sGHO Steward, and size the weekly sGHO backing top-up cadence to the new rate.
- Monitor the peg, GSM flows, sGHO deposits and Core debt weekly following execution, and report to the community before any further adjustment.
Copyright
Copyright and related rights waived via CC0.