Question 1

What is GHO, and how does it differ from AAVE?

Accepted Answer

GHO (pronounced “go”) is Aave Protocol’s native decentralized, overcollateralized U.S.-dollar stablecoin, designed to maintain a value close to $1; it is not the AAVE governance token. When users open borrowing positions on Aave V3 with eligible collateral assets, the protocol mints GHO according to its rules. “Overcollateralized” means that collateral value exceeds the value of minted GHO debt, leaving a buffer for collateral-price declines. That buffer supports the solvency of the borrowing position; whether GHO’s market price stays close to the dollar also depends on borrowing, repayment, redemption, and market-liquidity mechanisms, so overcollateralization is not an absolute 1:1 price guarantee.

Question 2

Who creates GHO supply, and what limits govern it?

Accepted Answer

GHO supply is not preallocated in one batch. It is minted and burned within their respective limits by facilitators (supply-execution contracts) approved by Aave governance. Each facilitator has a bucketCapacity (the maximum amount it can mint) and a bucketLevel (the amount already minted); it can mint only when the bucketLevel after the new mint does not exceed bucketCapacity. A channel’s remaining capacity therefore equals bucketCapacity minus bucketLevel. Official materials list four facilitator types: the Aave V3 Ethereum Market, which creates GHO through collateralized borrowing; the GHO Stability Module (GSM), which mints or burns under a predefined redemption mechanism; the CCIP Cross-Chain Facilitator, which handles supply changes across governance-approved networks; and FlashMinter, which simulates flash-loan-like minting and repayment within one transaction. Their limits are independent, and Aave governance can approve or remove facilitators and set their limits.

Question 3

How do I borrow and repay GHO on Aave, and when can I be liquidated?

Accepted Answer

Minting GHO in the Aave V3 Ethereum Market is essentially borrowing GHO against collateral: a user first authorizes and deposits collateral assets accepted by the market, then calls borrowing within the limits allowed by collateral eligibility and that facilitator’s remaining capacity. The Pool facilitator mints GHO to the borrower rather than taking it from liquidity available to GHO depositors. On repayment, the borrower must make the corresponding GHO available to the Pool, and the repaid amount reduces the amount minted through that borrowing channel. Borrowing capacity depends on risk parameters such as the collateral factors of the collateral-asset combination, not just the collateral’s nominal amount. A position’s health factor can be summarized as collateral value weighted by each collateral asset’s liquidation threshold divided by borrowing value; when it is below 1, any address can initiate liquidation. For GHO debt, liquidation can repay up to 100% of that GHO borrowing and obtain corresponding dollar-valued collateral plus a liquidation bonus; consequently, a post-borrowing fall in collateral value or rise in debt value can trigger liquidation.

Question 4

How does GHO maintain its dollar peg, and what does the GSM do?

Accepted Answer

GHO’s peg relies on multiple layers rather than a single promise. Overcollateralization reduces the risk of shortfalls caused by borrower default; when GHO’s market price departs from expectations, the GSM provides a route to redeem GHO against governance-approved tokens at a predefined ratio, with the initial implementation using fixed 1:1 pricing. This redeemability can create conditions for arbitrage and liquidity adjustment, but it does not guarantee execution at $1 in every market or at every time. A separate module instance handles each GSM token pair. The instance can charge buy- and sell-side redemption fees, which go to the Aave DAO treasury; governance also sets a cap on its exposure to the external token it may hold. If the external token’s price departs from the set ratio, the DAO or an authorized freezing mechanism can pause redemptions according to oracle-price ranges; as a last resort when risk rises sharply, the DAO can pause the module and dispose of its external-token balance. These limits are intended to control module risk, and also mean redemption capacity is neither unconditional nor unlimited.

Question 5

What costs arise from borrowing, transferring, or redeeming GHO, and where do the fees go?

Accepted Answer

The direct protocol cost of borrowing GHO is GHO borrowing interest; official materials state that this interest goes to the Aave DAO treasury rather than directly to collateral suppliers. Actual borrowing cost should also be distinguished from two separate fee types: submitting deposits, borrowing, repayments, and other transactions requires network Gas fees; using GSM redemption may also incur that GSM instance’s buy- or sell-side redemption fee, which likewise goes to the DAO treasury. GHO is not an ordinary reserve asset whose borrowable liquidity is determined by supplier funds: its borrowing rate uses a dedicated interest-rate strategy, while minting capacity is limited by the Pool facilitator limit and collateral requirements. Interest rates, borrowing caps, GSM fees, and other parameters can be adjusted through governance; therefore, an annualized rate displayed in an interface or the Gas fee from one transaction should not be treated as a fixed rule.

Question 6

How does GHO move across chains, and does bridging create additional supply?

Accepted Answer

All GHO originally originates on Ethereum mainnet; cross-chain operation does not independently issue unrelated sets of GHO on each chain. Aave governance approved the use of Chainlink CCIP to relay cross-chain messages: when moving from Ethereum to another supported network, GHO on the source chain is locked and an equal amount of GHO is minted on the destination chain after message verification; when returning from another network to Ethereum, GHO is burned on the source chain and locked GHO is released on the destination chain. When transferring between non-Ethereum networks, the process may burn on the source chain and mint on the destination chain. Whichever route is used, users first initiate a transaction on the source chain and then wait for cross-chain message verification before completion on the destination chain; the displayed fee and estimated time are transaction parameters for that route, not fixed properties of GHO itself. Cross-chain movement changes GHO’s network and contract state; it does not create an additional independent total supply for the holder.

Question 7

Who can change GHO’s key parameters, and what changed with the GHO Stewards?

Accepted Answer

Aave governance controls GHO’s core supply permissions and risk parameters: facilitator-management permissions can add or remove a facilitator, while capacity-management permissions can adjust its bucketCapacity; a facilitator can be removed only when its bucketLevel is zero. Thus, new supply channels, the maximum mint for each channel, and their risk boundaries are not immutable token rules. The GHO Stewards established in April 2024 changed the day-to-day adjustment process for some parameters: within thresholds pre-accepted by governance, this 3/4 multisig entity can adjust the GHO borrowing cap and borrowing interest rate, as well as GSM exposure caps, capacity, price and fee strategies, and freeze and unfreeze price ranges. The documentation provides that if GHO’s 30-day average price remains outside the $0.995–$1.005 range, the Stewards can adjust the borrowing interest rate by up to 500 basis points every two days, to a maximum of 25% APR. This is limited adjustment authority, not an automatic interest-rate change at all times or a guarantee of restoring the peg.

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