Summary
Chaos Labs supports the adoption of the Cross-Chain GHO Strategy, facilitated by CCIP integration. With the flexibility to parameterize respective chain deployments based on risk factors, our initial recommendation is to execute a phased rollout strategy, prioritizing chains that offer the greatest economic benefits to GHO.
Analysis
Risk Assessment
When considering risk management, the blockchain chosen for GHO deployment becomes less significant, provided that appropriate caps and rate-limiting mechanisms are in place. Given that all processes involving GHO, including minting, burning, and liquidations, occur exclusively on Ethereum, and the fact that GHO maintains a hardcoded value of $1 within the Aave protocol, it becomes crucial to ensure that the majority of GHO tokens in circulation and on-chain liquidity are concentrated on the Ethereum blockchain. This strategic setup facilitates efficient and seamless atomic liquidations during market downturns, thereby enhancing risk mitigation measures. Consequently, our recommendation is to deploy GHO on the blockchain that offers the most cost-effective growth opportunities, while also ensuring that limitations are correctly parameterized to optimize performance and risk management.
Liquidity and Expansion
Based on our earlier analysis, we observed a decrease in GHO’s liquidity against USDC on Ethereum after the implementation of the stkGHO incentive plan in January. However, the introduction of the GHOTHENA (GHO/USDe) and GHO/fxUSD pools on Curve Finance has significantly increased GHO’s overall liquidity.
Currently, Curve has $16.6M worth of GHO-linked TVL, Balancer has $4.8M, Maverick has $1.6M, and Uniswap has $34K.
When considering growth and scalability, it’s crucial to thoroughly analyze various factors that can influence GHO’s expansion while ensuring sufficient liquidity on Ethereum. These factors encompass Aave TVL, stablecoin liquidity, trading volume, and the proposed incentives provided by respective chains. As such, we evaluate and compare key metrics across proposals tied to Metis, Avalanche, Scroll, Arbitrum, and Optimism to foster the cross-chain implementation of GHO on their respective chains. For instance, Avalanche, Arbitrum, and Optimism have introduced compelling incentives to attract GHO and encourage adoption. Their well-established and widely-used chains make them strong contenders for the initial deployment of cross-chain GHO.
| Chain | TVL on Aave Deployment | Stablecoin TVL | Dominant Stable | Volume (7D) | Top DEXes by Volume | Incentives |
|---|---|---|---|---|---|---|
| Metis | $24M | $40M | USDC — 46% | $23M | Hermes, Tethys, NetSwap | None proposed |
| Avalanche | $253M | $1.7B | USDT — 65% | $830M | Trader Joe, Pangolin | $3M for a duration of 6 to 12 months. |
| Scroll | $6M | $41M | USDC — 72% | $24M | Ambient, iZUMi, SyncSwap | “Willing to explore” |
| Optimism | $146M | $960M | USDT — 68% | $806M | Uniswap, Velodrome | Retroactive Public Goods Funding, Foundation Grants, growth campaigns |
| Arbitrum | $520M | $3.4B | USDT — 65% | $6B | Uniswap, Camelot, Ramses | Retroactive Public Goods Funding, Foundation Grants |
Next Steps
After the Temp-check phase concludes and the community decides on the preferred network for the initial launch of the cross-chain GHO strategy, we will provide further quantitative analysis and recommendations on the initial parameters for a cross-chain deployment of GHO.