On February 9, the decentralized US dollar stablecoin GHO, issued by Aave, officially launched on the Ethereum Goerli testnet, allowing developers and community users to access its interface and detect potential issues in its workflow. Currently, the testnet supports four assets: DAI, USDC, AAVE, and LINK.
New facilitators have been added to support FlashMinting mode, which serves the same purpose as flash loans and aims to improve transaction efficiency. This release includes the fourth audit report from ABDK, which, combined with previous reports from OpenZeppelin and Sigma Prime, brings the final audit work for the mainnet launch close to completion. In addition, to support GHO testing, Aave has also released a companion NFT for the testnet, which can be claimed here. Regarding GHO, PANews previously published an explanatory article. For specific details, please refer to the following article. This article focuses on interpreting the updates and phased progress. Extended reading: Aave is also launching a stablecoin! Understanding the decentralized US dollar stablecoin GHO proposal One Step Away: Complete Testnet Functionality According to Aave’s previous plan, GHO was originally scheduled to launch in November last year or January this year. However, it was only after Aave V3 went live on the Ethereum mainnet on January 27 that GHO officially began internal testing on V3, in order to better coordinate with Aave. GHO still requires over-collateralized assets to borrow GHO, maintaining its peg to the US dollar through arbitrage mechanisms. However, in terms of specific mechanisms, there are several innovations: – Facilitator: Any protocol, entity, or project can apply to become a facilitator. Facilitators can determine the methods and strategies for burning GHO themselves. The first facilitator is Aave itself. – Bucket: Facilitators’ GHO holdings are subject to regular limits to stabilize GHO price and liquidity. – Discount: The fee rate is calculated based on stkAAVE holdings. Only stkAAVE holders are eligible for GHO borrowing discounts.In this update, facilitators will see significant progress, as the second facilitator after Aave will be introduced for the first time to test the FlashMinting mode. During the migration from Aave V2 to V3, a major issue was that GHO could not be used in flash loan mode to ensure protocol safety and avoid price de-pegging due to reflexivity issues. FlashMinting provides the same functionality as flash loans, but instead of borrowing assets from a liquidity pool, users can complete the entire process of minting GHO and repaying assets within a single transaction. It should be noted that the proposal to introduce this mode still requires a final vote by the DAO before it takes effect. The establishment of the Facilitator Framework has also been discussed. According to Aave’s vision, facilitators will be the main operators of Buckets. This time, more facilitators will be gradually introduced to build exchange depth similar to Curve’s stablecoin pools, while ensuring flexibility for facilitator customization. GHO’s own Peg Stability Modules (PSMs) are also undergoing preliminary research in parallel. Related functions will be tested during this trial. Considering the asset supply situation behind GHO, it is highly likely that GHO will remain confined within the Aave protocol for now. Whether exchange pools on other protocols can be established remains uncertain. One can refer to the collapse of UST, where liquidity on Curve was drained, and arbitrageurs launched massive attacks, ultimately causing the price to de-peg. The issue with adopting the PSM mechanism is that it may suppress protocol income expansion. However, AaveDAO will be the sole recipient of protocol income, which ensures smooth adoption of this model. Coordinating the incentives of stkAAVE holders and facilitators is the key to promoting GHO liquidity. On the current testnet, users can claim four types of assets—DAI, USDC, AAVE, and LINK—for testing purposes, to experience the process and provide feedback on bugs for subsequent improvements by the team. It should be noted that due to the large number of testnet participants, users may encounter failures when claiming test tokens and need to try multiple times. Additionally, it is worth mentioning that audits have been thorough: GHO has undergone four complete audits to ensure its security.
Taking the latest ABDK audit as an example, functional testing and security auditing were conducted on the entire codebase. Across 85 categories, a total of 6 modification suggestions were proposed. According to GHO’s progress, there will be another security audit before the official launch. GHO Mainnet Launch Update Plan – Re-modify stkAAVE to adapt it to the discount rate model that GHO will implement. – Initially establish the bucket capacity limit and borrowing interest rate framework. This should reflect current market conditions while also ensuring GHO’s price stability as much as possible. – Aave will introduce more AIPs (Aave Improvement Proposals) to ensure the subsequent improvement and enhancement of GHO, such as whether to add more facilitators. – A bug bounty program will offer rewards of up to 250,000 USDC for security vulnerabilities, encouraging white hats and users to report bugs. – The community will have full governance rights, while Aave will participate more as a builder, maximizing decentralization and censorship resistance. Conclusion Aave will explore a new DeFi narrative combining lending and stablecoins. In 2022, after the collapse of UST and USDC’s response to sanctioning Tornado Cash, a new round of decentralized stablecoin models began to take shape: issued by major DeFi protocols to ensure decentralization and use cases, while maintaining an over-collateralized model backed by on-chain assets to avoid the dangers of extreme algorithmic stablecoin models. crvUSD and GHO are among the leaders, while FRAX and DAI have regained vitality and survived the darkest moments. Currently, LSD and stablecoins have also become new growth points in DeFi business, and stablecoins will become an important means for DeFi protocols to consolidate their moats. Disclaimer: The article only represents the author’s personal views and opinions, and does not represent the views or positions of this website. All content and opinions are for reference only and do not constitute investment advice. Investors should make their own decisions and transactions. The author and this website shall not bear any direct or indirect losses arising from investors’ transactions. Disclaimer: This article is only for providing market information. All content and opinions are for reference only and do not constitute investment advice, nor do they represent the views or positions of this website. Investors should make their own decisions and transactions. The author and this website shall not bear any direct or indirect losses arising from investors’ transactions.
