What is GHO?
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🟢 The simple version
Plain English — no jargon. Start here.
GHO is Aave's native decentralised stablecoin — users can borrow GHO against their Aave collateral at a governance-set borrow rate, with all GHO interest flowing directly to the Aave DAO treasury (rather than to lenders), making GHO a revenue-generating asset for the Aave protocol.
What GHO is and how it differs from other Aave borrows
When you borrow USDC from Aave, you borrow real USDC that other users have supplied. The interest you pay goes to those suppliers. GHO is different: it is not borrowed from other users. GHO is minted when you borrow it — created from nothing, backed by your Aave collateral. When you repay GHO, it is burned. There is no separate "GHO supply side" — GHO is created and destroyed through borrowing and repayment.
The key implication: GHO interest payments go to the Aave DAO treasury, not to GHO lenders (there are none). This creates direct protocol revenue from GHO borrowing demand. For the Aave DAO, GHO is a revenue stream: every basis point of GHO borrow rate × GHO in circulation = Aave DAO income.
Facilitators — the GHO minting permission system
GHO uses a "Facilitator" architecture: only approved Facilitators can mint GHO. Each Facilitator has a "bucket capacity" — the maximum amount of GHO it can mint. Currently, the main Facilitator is the Aave v3 Ethereum pool (allowing Aave borrowers to borrow GHO against their collateral). Additional Facilitators include the FlashMinter Facilitator (for GHO flash loans) and future Facilitators could include other protocols, chains, or strategies approved by Aave governance.
stkAAVE discount — the staking incentive
GHO borrowers who stake AAVE in the Aave Safety Module (stkAAVE) receive a discount on their GHO borrow rate. The more stkAAVE a borrower holds relative to their GHO borrow, the larger the discount. This creates an incentive for GHO borrowers to also stake AAVE — aligning GHO adoption with Aave staking participation.
Is it legal in India?
Yes. GHO and AAVE are VDAs under Indian law. 30% tax and 1% TDS apply. See India regulation.
🟡 A bit more detail
For when you want to go a little deeper.
The Aave DAO revenue model with GHO
GHO's revenue model is straightforward: the GHO borrow rate is set by Aave governance. At a 5% borrow rate with $500M GHO in circulation, the Aave DAO earns $25M annually from GHO alone. This revenue flows to the Aave Safety Module and treasury — funding development, security reserves, and protocol improvements. The Aave DAO's ability to set the borrow rate creates a policy lever: lower rates to grow GHO supply, higher rates to reduce supply or increase revenue per unit.
GHO launched on Aave v3 Ethereum in July 2023. Aave borrowers with sufficient collateral on Aave v3 can borrow GHO at the current governance-set rate. GHO has been integrated into Curve pools (GHO/USDC/USDT) for efficient stablecoin trading. Several DeFi protocols have listed GHO as a supported asset. The stkAAVE discount mechanism has driven additional AAVE staking — borrowers who also want cheap GHO have incentive to stake AAVE, increasing the Aave Safety Module's security. GHO's cross-chain expansion (to Arbitrum, other chains) via future Facilitators is a key development roadmap item.
The Safety Module relationship
GHO's stability has an important relationship with the Aave Safety Module. The Safety Module is a stake of AAVE and stkABPT (an 80/20 AAVE/WETH Balancer pool token) that can be slashed up to 30% to cover Aave protocol shortfalls. GHO borrowing contributes revenue to the Safety Module, which in turn protects all Aave depositors (including GHO collateral depositors). This creates a virtuous cycle: GHO revenue → Safety Module funds → depositor protection → more collateral deposited → more GHO borrowing possible.
Key GHO metrics: GHO in circulation, GHO borrow rate vs alternative stablecoins (is it competitive?), stkAAVE discount utilisation, Aave DAO GHO revenue, and GHO peg stability (secondary market price relative to $1). GHO's peg has at times traded slightly below $1 due to sell pressure from borrowers — a known challenge for new stablecoins building secondary market depth. Live data: CoinGecko · Aave GHO page.
🟣 The full technical picture
For the technically curious.
GHO smart contract architecture
GHO is an ERC-20 token with a custom minting/burning interface — only Facilitator contracts have the FACILITATOR_MANAGER role permitting them to call mint() and burn(). Each Facilitator has a bucket: (currentLevel, capacity) — currentLevel tracks how much GHO has been minted by that Facilitator, capacity is the governance-approved maximum. The Aave v3 pool Facilitator integrates with Aave's standard debt token mechanism: borrowing GHO creates a variable-rate debt token (variableDebtGHO) in the borrower's account. Repaying burns the variableDebtGHO and burns the GHO. The interest accrual uses the same index mechanism as other Aave debt tokens — the debt balance grows continuously with time at the borrow rate.
Source: GHO documentation. docs.gho.xyz · GHO GitHub: github.com/aave/gho-core
Cross-chain GHO via CCIP
Aave has integrated Chainlink's CCIP (Cross-Chain Interoperability Protocol) for GHO cross-chain expansion. GHO minted on Ethereum can be bridged to other chains via CCIP's lock-and-mint mechanism: GHO is locked in the CCIP bridge on Ethereum and minted by a Facilitator on the destination chain. This allows GHO to be used in DeFi on Arbitrum, Optimism, and other chains without fragmenting collateral — users always borrow against Aave v3 Ethereum collateral and receive GHO wherever they need it.
GHO's peg mechanism relies on arbitrage rather than active PegKeepers. When GHO trades below $1, users can: (1) buy GHO cheaply on the open market, (2) use it to repay Aave GHO debt (which is denominated at $1), earning the difference as risk-free profit. When GHO trades above $1, users can: (1) borrow more GHO from Aave at $1 face value, (2) sell on the open market above $1, earning the premium. These arbitrage forces keep GHO near $1. The mechanism requires GHO to have sufficient open interest (many active borrow positions) so that arbitrageurs can efficiently enter/exit — new stablecoins with limited borrowing activity may have slower peg restoration during stress events.
Key facts
- Type: Aave DAO-owned stablecoin (minted by borrowers)
- Minting: Facilitator system (capacity-limited, governance-approved)
- Revenue: GHO interest → Aave DAO treasury
- Discount: stkAAVE holders get reduced GHO borrow rate
- Cross-chain: CCIP (Chainlink)
- Launched: July 2023
- Governance: Aave DAO (AAVE token holders)