Proposal to Add GHO/wETH/cbBTC to the Gauge Controller

Gauge Proposals
#1

Summary

This publication proposes adding a TricryptoGHO pool gauge on mainnet. This Tricrypto pool contains GHO, cbBTC, and wETH.

References/Useful links

GHO Links

Website: GHO Borrow
Documentation: What Is GHO? | GHO Document Hub
Github: GHO Core Repository
Discord: Aave Community
Twitter: x.com

cbBC Links

Website: Coinbase
Documentation: cbBTC Whitepaper
Twitter: x.com

Protocol Description

GHO is a decentralized, overcollateralized stablecoin, initially minted exclusively from assets supplied to the Aave V3 Protocol.

GHO’s value is programmatically pegged to the U.S. Dollar, maintained through market efficiencies. The protocol leverages smart contracts to oversee the minting and burning of GHO tokens, as well as to manage the interest rates associated with borrowing GHO.

cbBTC is a wrapped Bitcoin asset launched by a leading American centralized exchange Coinbase. It is backed 1:1 with native bitcoin custodied in Coinbase’s self-managed solution. Users can wrap native Bitcoin into cbBTC or unwrap the asset into native Bitcoin through their Coinbase account.

Motivation

This proposal seeks to integrate the TricryptoGHO pool into the veCRV gauge on the Ethereum mainnet. The TricryptoGHO pool consists of Aave’s decentralized stablecoin (GHO), Coinbase’s cbBTC, and WETH.

The primary collateral backing GHO loans includes WETH, wstETH, wBTC and sDAI. Given the ongoing concerns surrounding the safety of wBTC, it appears more prudent for GHO to migrate the Tricrypto pool from wBTC to cbBTC in order to enhance user security.

Allowing Aave to incentivize this pool with CRV rewards will enable Curve and liquidity providers to benefit from fees generated by swaps.

Specification

  • Governance
    • The Aave Protocol is a fully decentralized, community-governed protocol, managed by AAVE, aAAVE and stkAAVE token holders.
    • Token holders collectively discuss, propose, and vote on upgrades to the Aave Protocol through Aave Governance. AAVE, aAAVE and stkAAVE token holders can either vote on new proposals or delegate their voting power to an address of choice.
    • GHO is decentralized, it does not have a single concentrated point of control. Instead, GHO is controlled by Aave Governance.
  • Oracles
    • The Aave Protocol will always value 1 GHO at the equivalent value of 1 USD, regardless of market price. This helps to maintain stability, creating immediate opportunities to help GHO maintain its peg. Information about the Price Oracle contract can be found in GHO’s documentation.
  • Audits
    • Multiple GHO audits can be found here, with the latest one done by Sigma Prime in July 2023.
    • cbBTC uses the same contract as cbETH. This has been audited and currently holds $486M TVL. This is evidence of low smart contract risk. Thanks to a close collaboration between teams, cbBTC has been clarified as in scope for Coinbase’s HackerOne bug bounty.
  • Centralization vectors

    • As mentioned above, GHO is controlled by Aave Governance which is fully decentralized, community-governed, and managed by AAVE, aAAVE and stkAAVE token holders.

    • Users can be liquidated on their GHO borrow positions, the same as any other asset in the Aave Protocol.

    • cbBTC has the following token contract permissions:

      1. Blacklist - a function enabling cbBTC to be confiscated from an address or not receive it
      2. Pause - a function globally pausing cbBTC transfer (an Unpause function is also present)
      3. TransferOwnership - a function enabling the transfer of contract ownership to other parties
      4. Update functions for blacklisters, minters, pausers, and rescuers addresses are also documented

    • Coinbase is a highly regulated entity with a strong track record of honest and competent operation. While these are significant permissions that would be best avoided, few better entities could hold these roles.

  • Market History
    • GHO now has an established market history. While it initially traded below its peg, the market responded positively to an increase in the borrowing interest rate. The peg is now fully stabilized and has withstood several stress tests over the past year.
    • The asset is live on Base and Mainnet. It is an ERC20 designed by Coinbase and uses the Wrapped Token OS standard. cbETH uses this contract standard, which PrismaRisk has previously reported on. It was launched on September 12th, 2024, with the contract being deployed on August 20th on both networks.

Pool and Gauge

Link to pool: 0x8a4f252812dFF2A8636E4F7EB249d8FC2E3bd77f
Link to gauge: 0x1E4B83f6bFE9dbeB6d5b92a5237E5c18a44176f4
UI: Curve.fi

Disclosure

TokenLogic and karpatkey receive payment from Aave DAO for the creation of this proposal. TokenLogic and karpatkey are both Service Providers and delegates within the Aave ecosystem.