Summary
LlamaRisk acknowledges the potential of Aave’s proposed sGHO and Aave Savings Rate (ASR) implementation. The utilization of the ASR, anchored to aUSDC on the Ethereum Core instance, presents a foundation for a stable and predictable yield product. The flexibility offered by the ASR formula, allowing for fixed and variable rates through the Amp and Premium factors, is noted. Active management of these factors will be crucial in aligning sGHO with market conditions and maintaining its competitiveness.
The proposed integration of stataGSMs into the sGHO ecosystem has potential for optimizing capital efficiency and liquidity. However, careful consideration must be given to the balance between GHO minted via stataGSMs and those minted on the Mainnet. The potential dilution of USDC yield through increased sGHO supply via stataGSMs warrants close monitoring, as it could impact arbitrage opportunities and overall market dynamics. We also recognize the importance of aligning the sGHO supply cap with the upcoming Umbrella upgrade and potential stkGHO unlocks to mitigate secondary market selling pressure.
Finally, the absence of deposit and withdrawal fees enhances the user experience and aligns sGHO with competitive market offerings. To ensure the successful implementation of this proposal, LlamaRisk will provide further analysis during the ARFC stage, focusing specifically on:
- Analysis of USDC as an index rate, including historical performance simulations;
- Detailed parametrization and supply cap target recommendations, considering various market scenarios;
- In-depth consideration of the supply dynamics arising from stataGSMs vs. borrowed GHO and their respective impacts on GHO’s stability;
- Estimating potential impacts on Aave’s lending markets, including borrow rates and utilization.
Disclaimer
This review was independently prepared by LlamaRisk, a community-led decentralized organization funded in part by the Aave DAO. LlamaRisk is not directly affiliated with the protocol(s) reviewed in this assessment and did not receive any compensation from the protocol(s) or their affiliated entities for this work.
The information provided should not be construed as legal, financial, tax, or professional advice.