GHO rate increases manage peg stability

The GHO borrow rate on Aave V3 Ethereum Core shifts from 4.25% to 4.50% APR to match the Aave Savings Rate and manage the depleted USDC GHO Stability Module reserves that failed to hold sufficient funds throughout September. This adjustment follows a period in September where GHO traded below $0.999 for most of the month. The USDT GHO Stability Module currently holds 22.5M USDT to help defend the peg. The Prime base rate moves from 2.75% to 3.00% to maintain the 25 bps discount at optimal utilization. At 86% utilization, Prime borrowers pay 4.17% instead of the previous 3.92%. In August, the GHO borrow rate increased to 4.25% in two steps while the Aave Savings Rate was set at 4.50%. GHO closed near $0.9993 on 1 October. The GHO Risk Council executes these changes through the updateGhoBorrowRate on the Core and Prime GhoAaveSteward contracts. These rate hikes help the DAO replenish GSM reserves if borrowers repay debt by minting GHO through the modules.

Aave yields remain competitive against Morpho

Aave generates four times more fee revenue than Morpho and directs all GHO borrow interest to the DAO treasury. The GHO borrow rate is governance-set rather than utilization-set and remains cheaper than the 4.39% cost for USDC and USDT. The Aave Savings Rate (ASR) provides yield for sGHO holders via the YieldMaestro contract. This ASR uses the supply yield of USDC on Aave V3 Ethereum as the Index Rate because USDC exhibits lower volatility and greater consistency than USDT. The ASR formula uses an Amp factor and a Premium to adjust the yield relative to this index. You should watch the differential between the ASR and the borrow rate to see if arbitrage becomes profitable. If the ASR exceeds the GHO borrow rate too much, users can borrow GHO and deposit it into sGHO to capture a risk-free profit. This arbitrage increases borrowing demand and creates financial strain for the DAO. GHO supply sits in the mid hundreds of millions as of Q2 2026. The V4 unified liquidity layer routes liquidity through a shared layer so different spokes can draw from the same depositor base.

Staking GHO carries slashing risk

GHO stakers in the Safety Module earn emissions-based yield but face slashing if the protocol suffers a shortfall event. Governance can slash staked assets in the Safety Module to make depositors whole when bad debt exceeds the protocol’s reserves. The Safety Module accepts AAVE, ABPT, and stkGHO. There is a cooldown period from initiating unstake to receiving GHO to prevent stakers from exiting ahead of a slashing event. GHO is a CDP-style stablecoin that uses crypto collateral like wstETH instead of fiat reserves. The Anchor module adds a USDC-backed component to the supply, which changes the risk profile of the marginal GHO unit. The Anchor module allows users to swap USDC for GHO at a fixed exchange rate subject to a per-facilitator cap. The FlashMinter facilitator enables atomic mint-and-burn for arbitrage. Users supply ETH, wstETH, or WBTC to mint GHO against these assets. The V4 roadmap positions the protocol as the core technical foundation, but V3 transitions into maintenance mode. If a user supplies wstETH, they face the risk that the collateral value drops too low to cover the GHO debt, leading to immediate liquidation. Can the DAO manage the ASR to prevent significant GHO outflows from sGHO if market volatility increases?