Aave GHO Stablecoin Is Getting Closer to Dollar Peg
In decentralized finance, it may take a dictatorship to make something happen. This appears to be true for Aave’s stablecoin GHO.
This week the asset, which has been worth less than $1.00 since August, gained some ground, rising to $0.985. GHO’s volatile profits do not change its reputation as an unstable coin. However, they bring the token closer to the level one would expect for an asset worth $1.00 – not $0.96.
TokenBrice, the DeFi engineer in charge of GHO’s Aave liquidity committee and described by insiders as a “benevolent interim dictator” for GHO, set the higher price. The pseudonymous Frenchman took over the leadership of the Aave liquidity committee, which is responsible for restoring GHO’s dollar peg. He then launched an “ambitious bet” to reach at least half of GHO by November 30th.
GHO is not a stablecoin like other stablecoins. There is no redemption system to ensure assets are kept at a lower limit. Aave governance controls the interest rate, which is another disadvantage for borrowers.
TokenBrice’s strategy aimed to incentivize buying support for GHO on a very specific basis. This was most evident in the DeFi protocol Maverick. It is an Automated Market Maker (AMM) that has more control over pool liquidity than other AMMs.
TokenBrice told AskFX in an interview that “for the first time in the history of Defi, we are using liquidity design in an idiosyncratic way.” He is also an advisor to Maverick.
“We don’t pay for incentives and liquidity anywhere. We pay for a specific type of liquidity that is biased towards the buy side. This helps us create price support to increase buying pressure for GHO and gradually push it higher.”
TokenBrice explained in a committee report on November 23 that Mavericks Boosted Pools joins other DeFi trading companies such as Uniswap in the liquidity generation are superior.
TokenBrice wrote in a report on Maverick: “Far from being a panacea, the new AMM is a solution that will help stablecoins return to pegging.”
Marc Zeller, an active member of Aave and head of the Aave Chan Initiative, explained that the Maverick solution worked well for GHO. He suggested that TokenBrice may have a conflict of interest in implementing a project he recommended and praised.
In an interview, Zeller stated that the GHO reissue was “a great advertisement for Maverick.” “But let’s just say that this is a win-win situation for me and Aave DAO.” He said the situation was like a “double-edged sword”: failure would not have been good for Maverick.
Zeller added that his ACI was also involved in organizing the repeg. “We have coordinated governance and increased lending rates and DAO transactions.”
He said that there is more work to be done on GHO’s path to $1. The first thing to note is that some Balancer pools are overflowing with GHO tokens. This needs to be addressed. The token’s total issuance has been capped at 35 million for months, limiting its growth.
Zeller explained that the DAO could gradually increase the GHO Mint cap once we reach a critical mass of healthy fluid around the pen. This would allow more assets to circulate and create a virtuous cycle of liquidity.
