Simple Summary
This AIP proposes to increase the GHO borrow rate from 4.72% APR to 5.22% APR.
This aims to support the GHO peg and align borrowing costs closer to industry market rates.
Motivation
Following AIP-349, which allowed for 50 bps increments in the GHO borrow rate, the peg remains off-target at ~0.965 avg price. This increase is part of the direct-to-AIP process to incentivize repayment and help restore the peg.
Specification
- Current Borrow Rate: 4.72% APR - ~4.83% APY
- Proposed Borrow Rate: 5.22% - ~5.35% APY
- New Discounted Borrow Rate: ~3.7% - 3.75% APY
The proposal also authorizes ACI to continue with up to 100 bps incremental increases every 7 days if required up to 9.5% APR if the monthly avg price of GHO stays outside a 0,995<>1,005 price range.
Comparative analysis with other stablecoins on Aave V3 shows that GHO's current borrow rate is lower, which may contribute to its underpeg. The following table illustrates average borrow rates:
| Stablecoin | Average Borrow Rate |
|---|
| USDC | 6.39% |
| USDT | 7.29% |
| DAI | 6% |
| GHO | 4.83% (APY) |
Given this discrepancy, it is unlikely that the current rate is sufficient to restore GHO's peg.
References
Copyright
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