Aave raised the GHO stablecoin's borrowing rate on Ethereum Core to 4.5 percent, effective Oct. 3-4. The adjustment eliminates a 25-basis-point spread where the DAO previously subsidized GHO acquisition—borrowers could obtain GHO at 4.25 percent and earn 4.5 percent depositing it as sGHO.
The rate hike targets depleted USDC reserves in the GHO Stability Module (GSM). TokenLogic, a DAO service provider, flagged the USDC GSM depletion on Oct. 2. By raising borrowing costs, Aave aims to incentivize repayment through GSMs, directing stablecoin inflows into the module rather than just reducing outstanding GHO debt.
A higher borrow rate alone does not guarantee improved conversion liquidity. GHO repayment can occur without new USDC or USDT entering a GSM. Core's midnight snapshots show 116 million GHO borrowed on Oct. 2, declining slightly to 115.8 million by Oct. 5—a minor shift that does not signal robust redemption liquidity.
Borrowers acquire GHO through two channels: secondary markets or GSM exchanges of USDC/USDT. While secondary purchases support price, only stablecoins entering GSMs replenish inventory for redemptions. The RemoteGSM architecture, detailed by TokenLogic in March, explicitly separates inventory from liquidity—governance-approved facilitators supply preminted GHO to a GhoReserve, while GSMs draw and restore GHO under assigned limits. Robust redemption requires sustained stablecoin inflows.
TokenLogic also proposed adjustments to Prime, pending Risk Council approval. The base rate would increase from 2.75 percent to 3 percent, with optimal utilization APR rising from 4 percent to 4.25 percent. Aavescan displayed a 4.17 percent Prime APR on Oct. 5 at 86.35 percent utilization, indicating divergence between proposals and live implementation.
sGHO vault shares remain instantly redeemable for GHO without cooldown periods, and Aave's documentation states deposited funds are not rehypothecated. However, sGHO holders seeking USDC require a separate conversion process outside the savings mechanism. Additional conditions—including pause states and user-specific withdrawal limits—operate independently from GSM inventory and liquidity mechanics.
