What is this about?

The discussion revolves around a proposal to increase the GHO borrow rate from 3.00% to 4.72%, which is intended to align with the proposed sDAI rate. The motivation behind this proposal is to address the declining peg of GHO and its increasing supply by reducing the borrowing discount of GHO relative to other stablecoins. The proposal was put forth by TokenLogic, in collaboration with MatthewGraham and ACI's MarcZeller. The community has been invited to provide feedback before the proposal moves to the Snapshot ARFC stage and potentially to the AIP stage.

How is the community reacting?

The community's reaction is mixed. There is support for the proposal from users like Josojo, Gauntlet, and ChaosLabs, who agree with the adjustment and believe that it does not add excess risk. However, there are also concerns and opposition, particularly from Chippervan, who argues that increasing utility would be a better approach than raising borrow rates. They suggest that market conditions influence GHO's peg and propose integrating GHO into other protocols as a more sustainable solution. EzR3aL and 0xTogbe also contribute to the discussion, discussing the impact of interest rate changes and the need for driving liquidity demand through incentive programs and fast-tracking GHO utility.

Why this is positive?

• Raising the GHO borrow rate is expected to slow GHO growth and help return GHO to its peg.
• The proposal does not introduce additional risk to smart contracts, as indicated by Gauntlet and [ChaosLabs.

##](https://governance.aave.com/u/ChaosLabs.

##) Why this is negative?

• Increasing borrow rates could punish early adopters and reduce the number of new minters of GHO, as argued by [Chippervan. -](https://governance.aave.com/u/chippervan. -) There is skepticism about the effectiveness of raising interest rates to maintain the GHO peg, with concerns that it may not be a sustainable solution.
• The strategy of raising interest rates has been criticized for potentially harming early adopters and not addressing the core issue of GHO's lack of utility.

Next actions

The next steps include gathering community feedback, then escalating the proposal to the Snapshot ARFC stage, and if successful, to the AIP stage.