[ARFC] Upgrade Safety Module with StkGHO

Title: [ARFC] Upgrade Safety Module with StkGHO

Author: Marc Zeller - ACI (Aave Chan Initiative)

Date: 2023-11-21

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Summary

This ARFC introduces an enhancement to the Safety Module by integrating a GHO Safety Module. This new category aims to mitigate risks using GHO’s stablecoin attributes for potential shortfall events within its ecosystem. It also reduces the Safety incentives for StkAAVE and StkBPT.

Motivation

AIP-366 was adopted by governance to reduce the safety incentives of StkAAVE and StkBPT, but an implementation bug made the AIP execution impossible. After discussion with DAO service providers, it was decided to bundle the re-run of 366 with the creation of the GHO safety module and the StkGHO asset.

The GHO Safety Module will fortify the Aave Protocol's resilience by adding a stablecoin asset, which is inherently less volatile than AAVE. This strategic move diversifies the Safety Module's capacity to absorb shocks from various risk vectors in case of shortfall events.

The GHO Safety Module will target a liquidity pool of 9M GHO with an APR range of 12-15%, achievable with a daily emission of 35 AAVE/day over a 90-day period. The module will have a slashing rate set at 100%, meaning the entirety of the deposits could be utilized in a shortfall event, with socialized coverage among StkGHO holders. The cooldown period is adjusted to 10 days, which is suitable for a stablecoin.

Specification

Revised Safety Module Emissions Rate:

Asset	Previous Emissions	Proposed Emissions
StkAAVE	550 AAVE/day	385 AAVE/day
StkBPT	550 AAVE/day	385 AAVE/day
StkGHO	N/A	35 AAVE/day

• GHO Safety Module Parameters:
  • Target Liquidity: 9M GHO
  • Target APR: 12-15%
  • Emissions Period: 35 AAVE/day over a 90-day cycle
  • Slashing Rate: 100%
  • Cooldown Period: 10 days

Next Steps

1. If the ARFC snapshot outcome is YAE, proceed to the AIP stage.

Disclosure

The Aave-chan Initiative is not presenting this ARFC on behalf of any third party and has not been compensated for creating this ARFC.

Copyright

Copyright and related rights waived under Creative Commons Zero (CC0).