What is this about?

The discussion revolves around the stability and peg of the GHO stablecoin. Since its launch, GHO has struggled to maintain its peg to the US dollar, often trading below $1. The community is exploring various strategies to stimulate demand for GHO and maintain its peg. Proposals include increasing GHO borrow rates, enabling wGHO as collateral, creating a GHO Stability Module (GSM), and implementing a GHO Savings Rate (GSR) funded by liquidation protocol fees. The community is also considering the use of GHO staking to lower borrow rates on other assets and the introduction of a penalty system for staking beyond a discount cap.

How is the community reacting?

The community has shown a mix of support and concern for the proposed strategies. Some members, like Stableghost² and Kene_StableLab³, are in favor of the proposals, particularly the utility of staking GHO to lower borrow rates and earn through liquidation protocol fees. Others, such as 0xTogbe⁴ and ApuMallku⁵, suggest making GHO a collateral at a fixed price to address the peg issue. Josojo⁶ emphasizes the importance of a stable peg over competitive borrowing rates and proposes increasing the GHO borrowing rate to match the sDAI saving rate. There are also concerns about the long-term viability of staking GHO for lower borrow rates and the need for more transparent communication and strategic planning within the community.

Why this is positive?

• Staking GHO could lower borrow rates on other assets, potentially increasing GHO demand.
• A GHO Savings Rate could incentivize holding GHO during volatile periods, contributing to stability.
• Enabling wGHO as collateral might create additional demand and support the peg.
• The community is actively engaged in finding solutions and is open to exploring various strategies.

Why this is negative?

• There is a lack of stablecoin holders willing to buy and hold GHO, which could hinder the success of the proposed strategies.
• Concerns about the long-term growth potential and profitability of staking GHO for lower borrow rates.
• The community has expressed frustration over the lack of clarity and ownership in the GHO strategy, indicating a need for more transparent governance.

Next actions

• The community is still gathering feedback on the proposed strategies.
• A Snapshot vote is planned to take place in the coming weeks to decide on the next steps.
• There is an ongoing debate about the scheduling of an AIP for a 0.5% rate increase, with a need for further discussion in a new ARFC thread.