[ARFC] GHO Savings Upgrade

Author: @kpk, @tokenlogic and @aci Date: March 26th, 2025

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Summary

This ARFC seeks governance feedback and consensus to define sGHO technical design and the Aave Savings Rate (ASR). It will authorise starting with the final development and security procedures before the final on-chain AIP activation vote. It takes kpk’s technical proposal (Develop sGHO: A Yield-Bearing GHO Vault for Multi-Chain Integration) and incorporates features defined in the previous sGHO’s TEMP CHECK

Motivation

Aave’s GHO stablecoin is growing strongly during 2025 and is the 20th largest stablecoin. Whilst growth to date has been strong, growing from 200M to over 300M presents a different set of challenges requiring a different approach.

The DeFi ecosystem has seen significant adoption of yield-bearing stablecoin vaults, which offer users a simple and efficient way to earn yield on their idle assets. These vaults have become a cornerstone of liquidity provision and protocol integration, setting a benchmark for user expectations. GHO, as Aave’s native stablecoin, has the potential to build on this trend by introducing sGHO, a yield-bearing version of GHO that combines ease of use, cross-chain functionality, and robust risk management.

Key Motivations:

1. Simplified Integration: sGHO will make it easier for external DeFi protocols to integrate GHO, reducing friction and increasing adoption.
2. Competitive Edge: By offering a yield-bearing alternative to existing solutions, sGHO can attract liquidity providers and idle depositors who prioritise predictable returns and ease of use.
3. Multi-Chain Yield Harmonization: sGHO will operate across multiple chains, ensuring consistent yields and reducing fragmentation in the GHO ecosystem. This will make GHO more attractive to users and protocols on different chains.
4. Customer Acquisition: sGHO will serve as a tool to onboard risk-averse users who prioritise yield-bearing assets with low volatility and predictable returns.

Specification

sGHO vault

sGHO will function as a multi-chain solution, enabling yield harmonisation across chains and serving as a customer acquisition tool for risk-averse users and liquidity providers. By creating sGHO, we aim to enhance GHO’s utility, attract new users, and strengthen its position as a leading DeFi stablecoin.

The system consists of two independent, interoperable smart contracts:

1. sGHO ERC-4626 Vault: An auto-compounding vault, offering atomic convertibility with no cooldowns or slashing.
2. YieldMaestro: An independent contract that manages GHO allocated to be distributed, in order to achieve a predictable and stable yield rate.

Integration Between sGHO and YieldMaestro

• The sGHO vault and YieldMaestro work together to provide depositors with a seamless and optimized yield-bearing experience:
  • The sGHO vault handles deposits, withdrawals, and the sGHO balance.
  • YieldMaestro manages the yield, ensuring it remains predictable and aligned with the target rate.

The operational flow will be like this: The AAVE DAO will periodically fund the sGHO yield as a GHO transfer from the Collector to the YieldMaestro. Then the YieldMaestro will manage the rate at which funds can be claimed by the sGHO vault.

From the user perspective, by depositing GHO into sGHO, users will earn the Aave Savings Rate by holding an ERC-20 receipt token, accruing value over time, which is easily integrated with other protocols.

Aave Savings Rate (ASR)

We recommend reading TEMP CHECK for better context on the definitions used in this section.

Across Aave Protocol there are two dominant stablecoins, USDC by Circle and USDT by Tether. USDT is the largest, with an emerging trend of some networks preferring to favour one stablecoin over another. Two fast growing networks, Base and Sonic both exhibit a clear bias for USDC over USDT, of which Base has generated substantial growth for Aave Protocol in recent months.

When comparing the Native Yield of USDC and USDT across various instances of Aave Protocol, USDC was found to exhibit a less volatile and more consistent Native Yield relative to USDT. USDC offers both strong market correlation and lower volatility relative to USDT, both are favourable qualities for deriving a market correlated savings rate.

The chart below shows USDT and USDC Native yield across Core instances on Ethereum, Arbitrum, Avalanche, Base and Optimism.

When specifically comparing USDT to USDC, the chart below provides a clear visual reflecting USDCs smoother Native yield profile relative to USDT.

The Core instance of Aave v3 on Ethereum offers the deepest USDC liquidity and for this reason, the Aave Savings Rate incorporates the USDC Native Yield Rate from the Core instance on Ethereum as its preferred Index Rate .

The Aave Savings Rate definition:

Aave Savings Rate = Amp x Index Rate + Premium

Where,

Index Rate = Representative of market conditions Amp = Amplification Factor Premium = Nominal Amount

A linear function provides sufficient flexibility to curate the yield to be either variable or fixed and to change the Index Rate to which the Aave Savings Rate is correlated to. The Amp can be adjusted to offset periods of low USDC utilisation, whilst the Premium allows for a discrete amount of extra relative yield to be applied.

Whilst the Aave Savings Rate is expected to exceed the GHO Borrow Rate, the differential is to be managed to encourage adoption whilst being insufficient to promote arbitrage.

As the current ARFC defines the sGHO vault /ASR concepts, the specific ASR for each chain will be set in the subsequent sGHO launch ARFCs.

Next Steps

1. Collect community & service providers feedback before escalating proposal to ARFC snapshot stage.
2. If the ARFC snapshot outcome is YAE, publish an AIP vote for final confirmation and enforcement of the proposal

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Copyright

Copyright and related rights waived via CC0.