GHO

GHO (pronounced "go") is a decentralised, over-collateralised stablecoin that is fully backed, transparent, and native to the Aave Protocol. Designed to maintain a value pegged to the U.S. dollar, GHO is minted by users on demand, subject to mint cap limitations set by Aave's governance. Its stability is maintained through market efficiencies and over-collateralisation mechanisms inherent in the Aave Protocol.

Facilitators are contract addresses approved by Aave Governance with the ability to mint and burn GHO tokens. Each facilitator operates under a specific bucket cap, controlling the maximum amount of GHO they can generate. Facilitators play a crucial role in maintaining GHO's stability and integrating it across various platforms and use cases.

The Aave V3 Ethereum Market serves as a primary facilitator for GHO. Users can mint GHO by supplying approved collateral assets into the Aave Protocol and borrowing GHO against them. This process follows standard over-collateralisation practices, ensuring the protocol's security and the stablecoin's reliability. GHO has a discount mechanism that enables holder of stkAAVE (see safety module) to borrow GHO at a discounted rate from the Aave V3 Ethereum Market.

The FlashMinter facilitator allows users to access uncollateralised GHO through flash loans, provided the borrowed amount is returned within the same transaction. This feature enables arbitrage opportunities and enhances liquidity without permanently increasing the overall supply of GHO.

The GHO Stability Module acts as a facilitator to help maintain GHO's peg to the U.S. dollar. It allows users to swap GHO for other stable assets, providing a mechanism to absorb market imbalances and keep GHO's price stable.

Cross-chain liquidity pools enable GHO to be used across different blockchain networks. Utilising CCIP, GHO can be bridged to other chains, allowing users to access liquidity pools on platforms outside of Ethereum. This cross-chain functionality expands GHO's utility and integrates it with a broader range of DeFi applications.

The GHO Liquidity Committee (GLC) was created in October 2023 to focus solely on the liquidity of the GHO stablecoin. The committee was formed through a governance proposal and consisted of a small team. After a successful initial 3-month period, it was integrated into the Aave Liquidity Committee (ALC).

The ALC's main responsibilities regarding GHO include:

The ALC's performance measures and liquidity targets for GHO can be found on the GHO Analytics platform provided by TokenLogic.

More information regarding the role of the GHO Liquidity Committee can be found in Aave's Governance forum.

GHO Stewards is an additional entity created in April 2024 to more flexibly manage GHO market parameters, enabling GHO to be scaled per prevailing market conditions. The source code for GHO Steward contracts can be found on GitHub.

The GHO Stewards determine if and how much to adjust the following, subject to pre-defined and Governance accepted thresholds:

With many liquidity pools being created and rewards distributed across them, it is important that the DAO can swiftly increase the GHO Borrow Cap to mitigate GHO trading above $1. The GHO Stewards can swiftly increase the GHO Borrow Cap to mitigate GHO trading above the peg. The GHO Stewards can increase the GHO Borrow Cap to a threshold of 50M units to a total borrow cap of 100M.

The Borrow Rate must be adjusted gradually to enable the ecosystem to expand safely. If the trailing 30-day average price of GHO stays outside a $0.995 - $1.005 price range, the GHO Stewards are able to adjust the Borrow Rate no more than 500bps per 2-day period, up to a maximum 25% APR.

GHO Stewards consist of members from Growth (ACI), Risk (ChaosLabs), and Finance (TokenLogic + karpatkey) Service Providers and utilise a 3 of 4 multi-sig.

Liquidity pools are vital for providing market liquidity for GHO, enabling users to trade, borrow, and supply GHO across various platforms.

The Aave community, through the Liquidity Committee, may offer incentives to liquidity providers who supply GHO to specific pools. These incentives can include reward tokens or reduced fees, encouraging users to add liquidity and improve market depth. Incentivized liquidity pools help keep GHO readily available and maintain its peg to the U.S. dollar.