[TEMP CHECK] Rollout plan for Cross-Chain GHO

Governance
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This is a proposal by the Ava Labs DeFi Business Development Team, which has been the primary group interacting with various stakeholders in the wider Aave ecosystem on behalf of the Avalanche Foundation.

We are proud to have built a long-standing relationship with Aave DAO, having spent years contributing to the growth of the Aave ecosystem, and we welcome transparency in this exploratory process.

High-level summary of Avalanche

  • Scalable technology: Avalanche is built upon two key technical breakthroughs: Avalanche Consensus & Subnets. Learn more here. DeFi dApps on Avalanche benefit from its high throughput, extremely low time-to-finality (< 2s) and instant confirmations.

As one of the leading EVM DeFi ecosystems, we have aimed to create a very welcoming development environment for DeFi builders. There are extensive resources available and Avalanche is compatible with an overwhelming majority of Ethereum tooling, in addition to having best in class wallet support, analytics, RPCs, explorers etc.

Network’s relationship with the Aave ecosystem

  • The Aave protocol was initially launched on October 4th, 2021 with significant support from the Aave community and was the first recipient of the Avalanche Rush incentive campaign.

  • Avalanche Rush enabled Aave’s initial hockey stick growth on Avalanche: TVL grew from $0 to $2.7b in a month, catapulting Avalanche to Aave’s second largest market, eventually reaching up to $3.2b in TVL.

  • This successful growth was repeated again with significantly less incentives with the deployment of Aave V3 which quickly reached upwards of $900m in TVL.

  • Avalanche has partnered with other key stakeholders in the Aave Ecosystem. It was notably amongst the initial networks supported by CCIP for both testnet and mainnet launch.

Outline of opportunities that the adoption of the GHO stablecoin could bring to both GHO and the Aave ecosystem.

There is a considerable opportunity for GHO to become the leading DeFi-native stablecoin in the Avalanche ecosystem. USDC and USDT make up the large majority of all stablecoins on Avalanche, with no decentralized alternative having seen significant adoption. This creates a unique opportunity for GHO to consolidate itself as the top decentralized stablecoin in one of the largest DeFi ecosystems.

  • Stablecoin liquidity is on the rise: Avalanche has seen significant renewed demand for stablecoins, with over $50m minted in the past few weeks.

  • Avalanche Foundation LP Initiative: the Avalanche Foundation is committed to ensure that Avalanche provides the most liquid markets for both USD and non-USD stablecoins. As part of a wider initiative to create efficient FX markets on-chain, many new stablecoins will be onboarded with both LP and incentive support. Aave DAO could become a key partner in this initiative, with GHO being a prime candidate for newly created incentivised pairs.

  • Countless integration opportunities in the Avalanche Ecosystem: Avalanche’s DeFi ecosystem boasts hundreds of composable DeFi protocols across sub-verticals. This includes:

    • Delta Prime: leveraged DeFi strategies
    • Struct Finance: yield tranching fixed term vaults
    • GMX: on-chain perps exchange
    • Trader Joe: capital efficient CLAMM (and so much more).
    • Pharaoh Exchange: (3,3) CLAMM
    • Many more DEXes: Uniswap, Balancer, Pangolin
    • Xave: FX exchange on-chain
    • Benqi: Lending & Liquid Staking
    • CIAN: Automated looping strategies
    • Definitive: Automated DeFi strategies with leverage & custom vaults
    • Yield Yak: Yield Optimizer
    • SteakHut: Flexible liquidity layer for DeFi
    • … and many more!

Incentives

The Avalanche Foundation is able to commit to up to $3M in incentives for a duration of 6 to 12 months to ensure the successful deployment of GHO on Avalanche. The specific disbursement milestones will have to be defined and targets will need to be set, but there are multiple ways in which AVAX incentives can help bootstrap GHO on Avalanche:

  • Supply/Borrow Incentives: Direct incentives can be applied to borrowing and lending rates for GHO.
    • Boost supply rate for collaterals (if available to supply on Avalanche)
    • Reduce borrow rate for GHO (if borrowed on Avalanche against native collateral)

Setting a target % boost and duration to ensure GHO’s competitiveness makes more sense than proposing an absolute amount; these incentives would specifically apply to a native GHO deployment.

  • Liquidity mining for GHO pools: GHO-denominated pairs can receive direct AVAX incentives to ensure sufficient liquidity (below are examples of parameters that we would need to set, not fixed amounts)

    • Eg. pools: GHO-USDC, GHO-USDT, GHO-AVAX
    • Target min. Yield: 20% (base yield 5-10%)
    • Target duration: 6 months
    • Target TVL across pools: $20M

  • Participation in active incentive programs

    • Memecoin Rush: can incentivise memecoin pools paired with GHO across Trader Joe, Steakhut and other DEXes
    • Struct Rush: for any strategies on top of Trader Joe Liquidity Book

The Ava Labs DeFi BD team is committed to pursuing integration opportunities outlined above, ensuring that GHO is supported by key protocols in the Avalanche ecosystem and receives both indirect and indirect support from the Avalanche Foundation.

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