GHO is a fully backed and decentralised stablecoin that is native on the Aave protocol.
GHO’s value is programmatically aligned to the U.S. Dollar, which will be maintained through market efficiency.
If GHO is more than $1, Aave Governance can decrease the interest rate and the market would arbitrage the value back to $1.
In contrary, if GHO is less than $1, Aave Governance can increase the interest rate. Then it would be profitable to pay back debt, and will result in GHO total supply decreasing as when debt is repaid GHO is returned to the Aave pool and burned, so this should help the peg to be restored.
All the interest payments accrued by minters of GHO is directly transferred to the AaveDAO treasury.
GHO based yield farming strategies
To mint GHO tokens, crypto holders must supply their tokens as collateral in Aave V3 on Ethereum.
While still earning yield on the supplied collateral, users are able to leverage GHO tokens and enjoy additional yield.
Borrow GHO on Aave
To borrow GHO, you will need to supply collateral into Aave V3 on Ethereum.
By supplying, stablecoins such as DAI or USDC, you will also earn a variable yield between 4 to 12% approximately depending market conditions. You can also deposit ETH.
Once, you have supplied collateral, you can simply borrow ~80% of the supply amount in GHO at fixed rate between 2.13% and 3.05%.
Thanks to the low yield charged by GHO, you can then swap against an other stablecoins or crypto according to your risk tolerance and start yield farming strategies.
For example, by supplying DAI or USDT into Aave you can earn between 4 to 10% variable yield, and even start some loop:
eg: Supply DAI → Borrow GHO → Sell GHO against DAI → Supply DAI …
Enjoy this strategy with prudence, as you can be liquiditated if you collateral go below the amount borrow. We recommand to always keep your liquidation ratio >1.5 and to setup notification via Hal app.
How to use stAAVE to Reduce GHO yield
Users who stake AAVE in Safety Module (i.e. stkAAVE holders) receive a discount on GHO borrow interest rate.
Let’s take for example that you want to borrow 10K GHO tokens. If you stake 25 Aave in the safety module, then you will be able to benefits 2500 GHO tokens at a discount rate of 2.13% and then $7,5K at 3.05%.
The discount applies to 100 GHO for every 1 stkAAVE held, so the more you stake, the more you can enjoy GHO borrowing at a lower rate.
In addition to reduce you GHO interest rate, by staking Aave, you will also earn additional 6.70% on the Aave you provided.
You have nothing more to do. Once Aave are staked, your rate will reduce automatically.
Due to ETH high fees, this strategy is also recommended with a minumum amount of 10K to start with, in order to be a minimum efficient.
That’s it.
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