[ARFC] GHO Steward: Agile Parameter Changes

Title: [ARFC] GHO Steward: Agile Parameter Changes

Author: @AaveCompanies

Date: 12th July 2023

Summary

This ARFC proposes implementing the dedicated GHO Steward as a dynamic parameter change mechanism to ensure efficient risk management and support the peg of Aave Protocol’s native multi-collateral stablecoin GHO during the initial stages.

Motivation

Introduction

As the Aave DAO prepares for the introduction of GHO, it is crucial for the community to consider implementing a mechanism that offers greater agility to adjust risk parameters in the initial stages of launch.

To support the maintenance of the peg, the proposed GHO Steward multisig acts as a dynamic parameter change mechanism. It enables swift adjustments to risk parameters in the form of scoped governance delegation where the full governance process could potentially be time-consuming and hinder timely response to evolving circumstances.

By employing this mechanism, the Aave Protocol ensures transparency and enables flexible parameter changes through decentralized governance. This approach reinforces commitment to preserving the peg and effectively addressing market challenges that may arise upon the launch of GHO.

Key Terms

The “bucket capacity” refers to the maximum amount of GHO that can be minted by a Facilitator. The ability to adapt the bucket capacity by adjusting supply supports stability by ensuring that available supply meets demand.

The “borrow rate” refers to the interest rate paid when borrowing GHO. The borrowing rate may also be used to support stability because of its impact on demand.

You can learn more about GHO in the docs here.

GHO Steward Permissions

Aave V3 provides a high level of granularity around permissions. Building on the concept of Risk Stewards, it is proposed that a dedicated GHO Steward multisig be introduced to support the initial GHO governance risk mechanism to enable the implementation of agile parameter changes in the form of scoped governance delegation.

The GHO Steward multisig would be 2/2 and would include the DAO’s risk providers Chaos Labs and Gauntlet.

The GHO Steward would be capable of adjusting predefined parameters including: increasing the bucket capacity (by up to 100%) and changing the borrow rate (by up to 100 basis points in either direction) in a single change. Parameter updates could only occur once every 5 days per the parameter.

It is proposed that the GHO Steward would be deactivated 90 days after the passing of this proposal. However, the DAO can vote to renew the GHO Steward for another 90 days if deemed necessary. The DAO can also vote to remove the GHO Steward at any time.

Governance Process

This proposal emphasizes the importance of decentralization and community involvement in the decision-making process, fostering a robust and inclusive ecosystem. The GHO Risk Steward would enable agile parameter changes for GHO; however, decisions shouldn’t be made in isolation and should go through a lean governance process.

The proposed lean process is as follows:

1. Proposal on the Governance Forum explaining the rationale of the proposed action.

2. Snapshot requirements:

   a. 24-hour duration starting from the posting of the proposal

   b. Quorum 250,000 AAVE

   c. A minimum of 70% of votes FOR the change

3. Change can be enacted as soon as the proposal passes Snapshot.

Conclusion

In conclusion, the GHO Steward serves as an initial agile parameter change mechanism driven by decentralized governance. It highlights the Aave Protocol’s commitment to maintaining GHO stability and addressing market challenges during the launch period.

While the proposal acknowledges the potential for a more dynamic rate-changing governance model in the future, the current framework allows the DAO to effectively manage GHO’s parameters in the short term.

Specification

Capabilities:

1. Capacity Increase: It can increase the bucket capacity by up to 100%. This is strictly an upward adjustment; the capacity cannot be decreased by the GHO Steward.
2. Borrow Rate Adjustment: It can adjust the borrow rate by up to 1%, either upwards or downwards.

Configuration:

1. Permissions: The GHO Steward is granted PoolAdmin in the Aave Protocol and BucketManager for the GHO token.
2. Risk Council: This Multisig is solely responsible for triggering actions through the GHO Steward contract. The address of this entity cannot be changed.
3. Execution Time Delay: Any parameter change made by the GHO Steward contract, such as increasing bucket capacity or adjusting the borrow rate, is limited to once within the time delay period. e.g.,GHO Steward can only change a parameter once 5 days have passed since the last parameter change for that specific parameter.
4. Lifespan: The GHO Steward contract will initially only have a lifespan of 90 days. The lifespan is designed to ensure regular review of the necessity of this approach.
5. Steward Lifespan Extension: The DAO can extend the lifespan of the GHO Steward for additional 90-day periods as many times as it wants.

Disclaimer

N/A

Links

• Codebase: GitHub
• Audit Report: GitHub

Next Steps

If the Snapshot outcome is YAE, this proposal will be escalated to AIP stage.

Copyright

Copyright and related rights waived via CC0.