I’m looking forward to more conversations on individual aspects of GHO, I think there’s a ton of interesting points in this. I love the fact that using aTokens as collateral gives you this automatic “interest rate” arbitrage: if deposit rates on the market are higher than the stability fee for GHO the yield on your collateral will make you more money than what you pay for minting GHO. Effectively this means you are never missing out on high Aave market rates when you use your assets as collateral for the stablecoin.
I wanted to share what I think are the three most critical things to do for a successful launch:
- Peg Stability: Ensure buying/selling it at the peg is extremely easy. The protocol already addresses this by allowing minting of GHO with other stablecoins as collateral. This is a great start, we should make sure that DEX aggregators like 1inch & Paraswap integrate these to allow their users slippage free trading even when liquidity is low. We should also allow people to leverage their LP positions to create a massive amount of liquidity similar to how MakerDAO allows 50x leverage on G-UNI DAI USDC LP tokens. This would require onboarding a G-UNI (now arakis) LP token to the market and allow minting of GHO against it.
- Create trust in the stablecoin by managing risk very conservatively and having diverse uncorrelated collateral. Every GHO holder needs to know that they will always be able to sell their GHO for $1. Diversity in collateral is critical here to avoid any cluster risk (if it’s 80% backed by USDC there’s no benefit over just holding USDC). The work that Gauntlet has been doing on the Aave market is a good start but I believe the Aave community must go beyond that and ensure that risk is managed well and becomes a bigger part of governance discussions on Aave. @Anjan-ParaFi also made good points on this.
- Give people reasons to hold GHO: people will be looking for yield opportunities when holding GHO. Current lending rates on the Aave market for stables are quite low. I believe onboarding higher yielding uncorrelated yield opportunities through things like fixed term lending and of course lending out to real world borrowers.
As GHO is coming closer to launch, how will the @RiskDAO start discussing some of the parameters? I’d love to get involved.