This is an archive of our post on Aave governance forum. Read the full thread here.

Summary

LlamaRisk supports the creation of a GhoDirectMinter facilitator smart contract and believes that it will serve as an efficient tool to directly mint and deploy GHO on Aave’s lending pools in different markets where GHO is deployed as a supply-and-borrow asset.

The minting amounts would be agreed upon via the governance in dedicated ARFCs. This Facilitator would then deploy the pre-agreed amount of GHO fully or in parts, as deemed fit by the GHO Stewards. This process would enable controlled GHO deployment while achieving desired market outcomes.

Minting GHO Directly to Aave’s Lending Pools

While this newly created Facilitator would mint unbacked GHO, the stablecoin would only reach the open market when borrowed using provided collateral. Therefore, the stablecoin would become liquid only if backed by collateral at an over-collateralized ratio. This process is de facto equal to the usual on-demand mint of GHO as executed on the Ethereum market.

Flexibility for GHO Stewards

This facilitator structure would enable GHO Stewards to deploy pre-agreed amounts of GHO with full flexibility:

1. Fully or in parts, using the mintAndSupply() function;

2. Only when market conditions are suitable for it, contrary to minting and deploying as soon as the corresponding AIP is executed;

3. Timed to achieve needed market effects, e.g., respond to a sharp increase in borrow interest.

In addition, GHO Stewards could also use withdrawAndBurn() if such a need is presented. All of that would ensure a risk-balanced strategy to be applied with the consensus of GHO Stewards.

Bucket Capacity Limit

Although GHO Stewards would have full flexibility in deploying the capital, the amount of GHO to be deployed would still be pre-determined through dedicated ARFCs before activating a corresponding GhoDirectMinter. This ensures complete transparency and discloses the rationale behind any proposed GHO minting.

Disclaimer

This review was independently prepared by LlamaRisk, a community-led non-profit decentralized organization funded in part by the Aave DAO. LlamaRisk is not directly affiliated with the protocol(s) reviewed in this assessment and did not receive any compensation from the protocol(s) or their affiliated entities for this work.

The information provided should not be construed as legal, financial, tax, or professional advice.