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Risk Management and Mitigations

Collateral Asset Risk

The Aave DAO controls the collateral assets listed in the Aave pool as well as their configuration.

Risk contributors provide world-class risk management services to the Aave DAO including consultation and advanced market simulation data to inform the Aave DAO’s decisions. The Aave Protocol has historically taken a conservative and effective approach to managing and setting the configurations around the assets that are used for collateral on the protocol.

Flash Crash Conditions

The exposure and risk of a flash crash exist in all markets; however, the Aave Protocol has proven to be a resilient market through abrupt, severe volatility in the past. With the same collateral requirements, liquidation process, and liquidator community, GHO inherits key risk mitigation properties from the Aave pool.

Smart Contract Risk

GHO has been developed with security as a top priority. GHO has been reviewed as thoroughly as possible before being activated by Aave Governance. There is an active bug bounty where any security vulnerabilities can be reported and awarded the bounty if the criteria are met.

The system has been designed to be safe and secure and to meet the highest security standards. The GHO smart contracts have been developed following responsible development practices, which include both internal and external code reviews and formal verification from auditors and community contributors.

Smart contract risk can never be eliminated completely; however, through conservative development processes, it can be reduced.

The audit reports and formal verification for GHO can be found on the Resources page.

Stability Mechanism

The following stability mechanisms have been implemented to ensure that GHO is stable:

  • Locked oracle pricing
  • Governance set interest rates

Please see the "GHO Implementation" page for explanations of the stability mechanisms.