The mechanics of GHO issuance and the GHO Stability Module

GHO is a dollar stablecoin that borrowers mint against crypto collateral. Aave governance sets both the borrow and savings rates. GHO supply comes from four approved facilitators: the Aave V3 Ethereum market, a cross-chain facilitator using Chainlink’s CCIP, the GHO Stability Module (GSM), and a flashmint facilitator. On 27 August 2026, debt from Aave markets accounted for 69% of GHO issuance, while 31% came from stablecoin swaps in the GSM. GHO borrow markets are available on Ethereum, Base, Avalanche, Arbitrum, Gnosis, Plasma, X Layer, Mantle, Ink, and Monad. The GSM swaps GHO 1:1 with USDC or USDT. This module provides a floor for the price of GHO. When GHO trades below $1, traders buy the discounted coin and redeem it for stablecoins at par to capture the spread. This arbitrage pressure helps maintain the peg. The module holds the underlying stablecoins as Aave aTokens. GHO is borrowed in three markets on Ethereum: Core, Prime, and Horizon. Core is the main market, Prime is for looped positions, and Horizon is for tokenized real-world assets. GHO is a loan taken out inside Aave against crypto valued above the loan.

Rate adjustments address GSM reserve depletion

Higher borrow rates effectively defend the peg by encouraging repayments. The recent $340 million bad debt socialization vote and shrinking GSM reserves forced changes to interest rates. The GHO Risk Council proposed raising the Core borrow rate from 4.25% to 4.50% APR to match the 4.50% savings rate and remove the incentive for users to mint GHO solely to chase sGHO yield. This adjustment removes the artificial demand created by the rate gap. The Ethereum USDC module is now empty. The USDT module holds approximately 22.5 million USDT. In September 2026, the GSM exit fee was 15 basis points for USDC and 10 basis points for USDT. The Risk Council, a 3-of-4 multisig of Aave service providers, manages these parameters. On 15 September 2026, rates stood at 4.25% on Core, 3.84% on Prime, and 3.00% on Horizon. You should watch the USDT pool closely to see if it continues to shrink despite these rate hikes.

Yield profiles for GHO holders

The sGHO product provides a steady yield for holders via the Aave treasury. Aave provides two distinct products for GHO holders: sGHO and stkGHO. sGHO is a standard ERC-4626 vault on Ethereum that pays a governance-set rate. As of 27 September 2026, 163.6 million GHO sat in the sGHO vault. The DAO pays the sGHO yield from the interest GHO borrowers pay and the yield from GSM backing. stkGHO exists in Umbrella, the safety module. Stakers earn variable rewards, but they can lose principal to bad debt if a market runs up a deficit. Unstaking stkGHO requires a 20-day cooldown followed by a 2-day withdrawal window. Aave V4 introduces a hub-and-spoke architecture with a Unified Liquidity Layer. This version segments liquidity into three hubs: Core, Prime, and Plus. Deposits on the Ethereum deployment reached $200 million in early 2026. The modular design allows for targeted audits and simplified security review. Aave Labs uses formal verification to protect the V4 codebase. Will these new liquidity hubs prevent another depletion of the stability modules?