The latest US stablecoin bill iteration seems to only require Insured Depository Institution status (FDIC insured) for stablecoin issuers that engage in lending (as understand would be the case for GHO).
How would you deal with that scenario?
Hey @TokenBrice ty for the feedback! I have a small question though:
I don’t quite understand this, Aave DAO is controlling other interest rates. In fact, governance changes interest rates relatively frequently. Even then, how would you have the interest rate set algorithmically? Maybe via an IR curve, but then the DAO just controls optimal utilisation (just like other assets) except the “utilisation” is virtual, since GHO is minted.
That said, if you have other ideas about algorithmically setting interest rates autonomously, I think that’s awesome!
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Thank you to everyone for sharing your thoughts on the proposal. It is now time to go vote, you can find the Snapshot here: Snapshot
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We fully support the launch of stablecoin GHO. The use of GHO in isolation mode will allow users to borrow while keeping thee GHO collateralized and reducing risk. It will also increase the utility of stkAAVE, which is an incentive to help secure the Aave Protocol by increasing the protocol’s Safety Module.
We are looking forward see the adoption of decentralised GHO increase while maintaining the security of the Ethereum Network. This will especially benefit the Aave DAO both the security and the protocol revenue. It will be the base stablecoin used in the Aave ecosystem.
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tl;dr: make GHO stronger by adding a ‘PSM 2.0’
GHO will need some structure like Maker’s PSM, which has proven itself crucial to maintaining stability and liquidity in Dai. As a reminder, Maker’s PSM hardcodes an exchange rate of 1 DAI to 1 USDC. Arguably, this is a bit too simple.
An improved PSM could increase resilience in a few ways:
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Better diversify PSM reserves: multiple PSMs with different asset risks could be used.
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Programmatic risk control: Maker-style PSMs are static and don’t adapt if risks of PSM assets materialize. For instance, if a PSM asset broke peg or got frozen, the entire protocol including other PSMs would be affected negatively. For static PSMs, the only way to adapt is through (slow) governance, whereas risk control could be encoded programmatically.
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Coordinated PSM strategies: different static PSMs don’t ‘talk to each other’. This is a problem because a good risk control strategy should know the global health of all PSMs to be able to adjust policy accordingly. A dynamic PSM policy could overlay many facilitators that each perform PSM roles.
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Contingency pricing: why hardcode the PSM exchange rate at 1:1? If severe shocks to PSM reserves lead to a shortfall, the remaining reserve assets could be managed instead of depleted. A dynamic PSM that prices for this contingency would keep the protocol’s balance sheet alive and give the stablecoin a better chance to survive and stabilize into the future.
Launching a new stablecoin is a chance to build in a better PSM, which could autonomously support stability and liquidity to the best abilities of the protocol, given its state of health.
We have developed such an improved PSM design (or an automated “primary market” for minting and redeeming stablecoins) from first principles as part of Gyroscope. Reach out to us with any questions. We would be excited to work with Aave to develop stronger stablecoins.
You can find details about our design in a recent talk, a full paper and implementation will also be released soon.
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Something that came up in my mind.
If we really want a decentralized stablecoin, then this stabelcoin shouldn’t be backed (or at least not that much) by another stablecoin like USDC or USDT. We all know what happend to tornado.cash and what USDC and USDT (had to do) did to those addresses that have been using tornado. This isn’t decentralized at all when one institution can decide if the stables i am holding are legal so i can use/transfer them or freeze them because they think something illegal happend. Its either everything or nothing.
I would prefer to see GHO being overcollaterized but not too much backed by the other. Also doesn’t make sense. I also don’t want my Euros which may be shitty being backed by another shitty USD currency.
DAI already went that way which is bad if you ask me.
The only ones doing it right are RAI and LUSD, but they don’t have enough liquidity. Lets be like Aave, permissionless and not centralized and controllable by another instance.
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I don’t like to see the phrase “Credit Score” anywhere near the subject of minting debt. I would like to see some clarity on the potential minting power of a facilitator. If it is at all possible for an entity to mint uncollateralized GHO, I can’t cast my vote in favor of this proposal.
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Wen airdrop ??? I’m kidding.
We really need some stablecoin independant from centralised token, as we are in danger with DAI and the USDC collateral we need to be decentralized as much as we can to avoid any bankster/ centralised government dictatorship . I dream a day when all stablecoin will be peg to BTC/ ETH is place of the USD volatile shitcoin. actually BTC is stable, ETH will become more stable with the merge and POS and the fiat currency should be peg to them as the old gold system.
when the GHO will take birth ?
You have to keep in mind that GHO will mostly (at least its looking like that for now) be backed by USDC and USDT. But if the community agrees that we are having a cap here we could lead the way to decentralisation. Its all up to us all.
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Thanks for the precision, so I will not invest more than 1% on it. On the long term, centralised stablecoins will be the poison that will destroy the cryptos revolution. With this dollar peg, banksters found their way to manipulate and control the crypto space. Greediness of crypto actors will supplant the cypherpunk vision like the gafam destroyed the Internet vision of liberty into a centralised infrastructure where our datas are used against us. As the dollar is manipulated and the crypto space continue to value according this shitcoin, we just definitively burried satoshi and the emancipation of the financial power. we need a bitcoin standard or whatever peg on a crypto standard of value or we’ll still financial slaves for life.
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Really good analysis, thanks for this.
The interest rate should be derived from parameters like risk of the collateral used to mint GHO, essentially the same risk scale the protocol uses today that is constantly updated as market conditions change. The ‘virtual utilisation’ in this case is the max amount of collateral for that asset that can be used to mint GHO across Aave.
Interest rates set by the DAO aren’t as responsive to market conditions as algorithmically controlled ones are. It’s safer for the protocol and users to use an algo IR curve.
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GHO (as far as my understanding) has a key factor of potentially being fully accepted, stable and secure. Hindsight could be THE token accepted globally.
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Gm!
We have just deployed GHO on Ethereum’s Goerli Testnet.
Find out more here in our latest GHO development update 
LFGho!
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Hello, I have a few questions about how the GHO works
-Can facilitators have their own borrowing rules for their users? For example, can they mint the GHO with different collateral rules than those established by Aave Governance?
-Can facilitators be liquidated or does AAVE have the ability to trigger a liquidation on facilitators users?
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Debt is denominated in the token it’s borrowed in. 5k GHO might be the same as $5k when you borrow it, but you’re borrowing GHO, not a USD equivalent value of GHO. If the price of GHO drops below $1, the 5k GHO you borrowed can now be paid for less than $5k.
Let’s say GHO dropped to $0.80. Your 5K GHO loan is now only worth $4k. You could borrow $4K of pegged stablecoin and sell it for 5k GHO. You would have paid back what was a $5k equivalent loan for only $4k.
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Nice interface and face transaction compare with Goerli network.
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Thanks for the questions Athym,
Facilitators could indeed technically have their own borrowing rules for their users.
Facilitators receive a credit line that is uncollateralised, so they couldn’t be liquidated.
Aave also wouldn’t be able to liquidate a facilitators user, that would be up to a facilitator.
The above is predicated on any facilitator being approved by governance first.
To support the coming launch of GHO, we are proud to present our GHO Risk Monitoring Dashboard. This new dashboard, currently supporting the Goerli test net version of GHO, provides real-time monitoring of the stablecoin and allows users and developers to dive deep into GHO data and usage.
For more details and product run-through, please read our dedicated blog post.
We invite the community to try it out and welcome any feedback.
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Hello, I´m using testnet Goerly for long time, it is working right 99%, We will need any action to migrate to Mainnet?, Do you know it should be any compensations for testers in future?
Thanks a lot