Title: [TEMP CHECK] Deploy a Gnosis DAO Credit Line Aave v3 Instance
Author: @ACI and Karpatkey
Date: 2024-09-20
Summary
This proposal is for the creation of a specific Aave v3 instance to extend a GHO credit line to Gnosis DAO using GNO and wstETH collateral.
Motivation
Gnosis DAO, a long term partner of Aave DAO, has expressed a need for flexible access to stablecoins. This proposal aims to address this need by leveraging Gnosis DAO’s treasury holdings as collateral for a GHO credit line funded by Aave DAO. By establishing this credit facility, we can enhance Gnosis DAO’s liquidity management capabilities while fostering closer collaboration between Gnosis DAO and Aave DAO.
The proposed credit line will provide Gnosis DAO with a reliable source of stablecoin liquidity, enabling them to manage their treasury more efficiently and respond quickly to market opportunities or operational needs. This arrangement also presents an opportunity for Aave to expand its services to other DAOs, potentially opening up a new market segment. The credit line will also serve as a proof-of-concept for further customized extension of credit to reputable DAOs and organizations in the industry.
The GnosisDAO GHO credit line is described by the following conditions:
- Exclusive Borrower: Gnosis DAO will be the only borrower in this specialised GHO market.
- Collateral Requirements: GNO and wstETH tokens will be the primary collateral. Other potential collaterals can be considered but must be approved at a later stage.
- Risk Parameters:
- Borrowing Rate (BR): DSR rate
- Other risk parameters will be discussed and decided upon by relevant service providers in collaboration with GnosisDAO during the ARFC phase of this proposal.
- Liquidation Process: Managed by a designated Aave entity to ensure controlled handling of collateral.
- Progressive Cap Increase: An initial Cap of 5M GHO will be configured
- Once the initial cap is utilized and the system operates smoothly for a predefined period (e.g., 1 month), the cap will increase progressively.
- The increase will be contingent upon maintaining a healthy average Health Factor (e.g., above 1.5).
- Further increases will be evaluated based on ongoing performance metrics and governance approvals.
Benefits for Aave
- A dedicated GHO borrowing market will increase the demand for GHO and its supply.
- Generates consistent income from the interest paid on GHO borrowing by Gnosis DAO.
- GNO is first-class crypto asset that is currently securing the Gnosis Chain ecosystem.
- Gnosis DAO will be able to further provide liquidity enhancing GHO’s value proposition as DeFi stablecoin in mainnet, and specially once GHO is deployed in GC.
- GnosisDAO is a reputable DAO with one of the largest treasuries and footprint in DeFi.
Benefits for Gnosis DAO
- Provides Gnosis DAO with a reliable and sustainable credit line to support its operations and growth.
- GNO as collateral will increase the treasury’s capital efficiency and help in yield generation by borrowing GHO and putting it to use.
- Tailored risk parameters offer better borrowing conditions compared to other lending markets.
- Permissioned liquidation within Aave representatives will ensure proper collateral management, minimizing the risk of market manipulation, price volatility and sudden large sell-offs, also protecting Aave from excessive losses.
- With the implementation of karpatkey’s infrastructure and risk management best practices, tooling and monitoring will be put in place to ensure the debt position is properly managed at all times.
Specification
The proposed Gnosis DAO credit line will implement the following:
- Credit Line Amount: 5 million GHO tokens to start, with the option to size up based on risk service provider feedback and DAO governance process.
- Collateral Assets: GNO and wstETH
- Authorized Users: Limited to Gnosis DAO and Aave DAO
- GHO Borrow Rate: Set to match the current sUSDS rate of 6%
This credit line will be implemented as a specialized Aave v3 instance with the following key features:
- Customized access controls to ensure only Gnosis DAO and Aave DAO can interact with the instance
- Tailored risk parameters for GNO and wstETH as collateral assets
- Regular reporting and monitoring mechanisms to track the usage and health of the credit line. ACI will propose further methods for safe management of this credit line pending further discussions with Gnosis DAO and risk service providers.
By implementing this credit line, we aim to provide Gnosis DAO with a flexible financial tool that leverages their existing treasury assets while maintaining the security and transparency inherent in Aave.
Disclaimer
The ACI did not receive compensation for creating this proposal. ACI and employees are holders and stakers of GNO as well as delegates within the Gnosis ecosystem. Gnosis DAO and Aave also share some service providers including finance service provider Karpatkey.
Next Steps
- If consensus is reached on this [TEMP CHECK], escalate this proposal to the Snapshot stage.
- If the Snapshot outcome is YAE, this proposal will be escalated to the ARFC stage.
- Publication of a standard ARFC, collect community & service providers feedback before escalating the proposal to the ARFC snapshot stage.
- If the ARFC snapshot outcome is YAE, publish an AIP vote for final confirmation and enforcement of the proposal.
Copyright:
Copyright and related rights waived under CC0