The Aave Protocol is a fully decentralized, community-governed protocol, managed by AAVE (and stkAAVE) token holders. Token holders collectively discuss, propose, and vote on upgrades to the Aave Protocol through Aave Governance. AAVE and stkAAVE token holders (Ethereum network only) can either vote on new proposals or delegate their voting power to an address of choice.
As GHO is decentralized, it does not have a single concentrated point of control. Instead, GHO is controlled by Aave Governance. The Aave Companies do not have any control over GHO.
The Aave Companies introduced GHO to the Aave DAO on July 7, 2022.
Following a period of discussion, the community voted to greenlight GHO via Snapshot.
The first GHO Development Update was published on October 14, 2022.
The second GHO Development Update (Testnet Release) was published on February 9, 2023.
Aave Governance has the right to determine GHO Facilitators and parameters and to propose changes to the current implementation. Frameworks and processes for Facilitators, caps, and rates are open to community discussion.
Aave Governance has control over the entities that are added and removed as Facilitators. Every Facilitator will have to be carefully audited and reviewed by Aave Governance before receiving mint permissions. Each Facilitator will have a governance-defined limit on how much GHO it can mint.
By carefully approving each Facilitator, Aave Governance can manage exposure to different strategies. Aave Governance may want to attract varied Facilitators in several different ways. This could also include strategies for non-Aave users. If non-Aave Protocol Facilitators are approved by Aave Governance, the possibilities and use cases could be endless (e.g., use within payment applications and e-commerce solutions, purchases of GHO on decentralized exchanges, and use as a store of value during market volatility).
Interest and Discount Rates
Aave Governance can set the interest rates of GHO, the discount threshold (i.e., the maximum amount of GHO that can be generated at a discount), and the discount rate to stimulate the generation (i.e., expansion) or destruction (i.e., contraction) of GHO.
Aave Governance can periodically set the interest rates of GHO based on supply and demand models. Both the interest rate and the discount rate are configurable by Aave Governance.
For more information, please see the Interest and Discount Rates page.
Aave DAO Impact
With the GHO model, 100% of interest paid on borrowed GHO goes to the Aave DAO. Depending on the demand for GHO, this could result in substantial revenue for the Aave DAO. Alongside this, the FlashMint module generates revenue through the fees from the transaction. As mentioned above, there may be various strategies implemented for future Facilitators. It is possible that future Facilitators may also redirect some revenue to the DAO.