title: [TEMP CHECK] Deploy aUSDC GSM on Ethereum
author: @karpatkey_TokenLogic
created: 2024-09-27
Summary
This TEMP CHECK proposes creating a more capital efficient aToken GHO Stability Modules (GSM) to replace the USDC GSM on Ethereum.
Motivation
Whilst the primary focus of the GSM is to ensure price stability during periods of price fluctuation. The current instance of the GSMs issue GHO into circulating supply and offer no additional revenue beyond the fee for interacting with the GSM. To date, both GSMs have generated a combined 21.9K USD in fees.
Reference: GHO Stability Module Dashboard
With only 16M of combined USDC and USDT in the GSMs, the opportunity cost of holding aTokens in the GSM to date is 138.5k for the Aave DAO. However, during more recent times when GHO has been trading above peg and both GSMs have reached there Exposure Caps, the daily opportunity cost in lost yield is ~1.6k, which is equivalent to ~575k when annualised.
Reference: GHO Stability Module Dashboard
The proposed GSMs will enable funds held within the GSM to earn yield and for this yield to go the DAO’s treasury. Due to the enhanced capital efficiency, the USDC Exposure and GHO Bucket Capacity of the GSM can be sized based upon the lesser of the following:
- Preferred amount of USDC exposure; or,
- Available exit liquidity in the USDC reserve.
Either of the above options, compares favourably when determining GSM parameters relative to configuring the Exposure Capacity for peg stability. If additional capacity is needed, a USDT aToken GSM can be deployed.
The aToken yield acts as a proxy for Borrow Rate on the Aave v3 market. Meaning GHO Minted from the GSM generates aUSDC yield and GHO Borrowed on Aave v3 generates interest. The aUSDC revenue is available every block as it accrues, unlike the interest accruing from GHO debt which Aave only receives if the user repays their loan.
Specification
The proposed instance of the GSM is intended to replace the existing USDC GSM, will enable 1:1 fixed-ratio swaps between USDC and GHO and utilizes the USDC surplus to mint aEthUSDC tokens.
aEthUSDC is instantly redeemable for USDC within the main Aave v3 deployment on Ethereum. The GSM can mint and burn aEthUSDC in exchange for USDC based upon user demand.
Swap fees will be accumulated in GHO and surplus aEthUSDC will be claimable. A bot will be deployed to periodically claim the revenue to the DAO’s treasury.
A detailed specification will be shared during the ARFC phase.
Disclosure
TokenLogic and karpatkey receive no payment for this proposal. TokenLogic and karpatkey are both delegates within the Aave community.
Next Steps
- Gather feedback from the community.
- If consensus is reached on this [TEMP CHECK], escalate this proposal to the Snapshot stage.
- If Snapshot outcome is YAE, escalate this proposal to the ARFC stage.
Copyright
Copyright and related rights waived via CC0.