Aave V4: A Vision for 2030

Aave’s roadmap for 2030 includes major upgrades that should greatly improve capital efficiency, reduce frictions and cross-chain complexity for users, and broaden the adoption of the GHO stablecoin. The introduction of the Aave Network, with AAVE as the staking asset and GHO for transaction fees, should be highly accretive to the Aave ecosystem. Within the realm of lending and borrowing, Aave maintains the incumbent position at the top of the hill. Broadening GHO dominance, however, remains the uphill battle. As demonstrated with the chart below, in the current landscape, Aave’s GHO takes up negligible market share amongst decentralized stablecoins. Maker’s DAI at a $5.4B supply is omitted from this chart to avoid skewing the axis.

While incumbents Maker, Liquity, Curve, and Frax enjoy dominant market share amongst decentralized stables, GHO’s dominance has only climbed since inception, reaching 1% market share amongst this cohort. Currently, there is ~60M GHO circulating, with ~50% of that staked in Aave’s Safety Module, earning ~11% in stkAAVE. Given that interest on GHO borrows accrues to the Aave DAO, the DAO stands to benefit from growing GHO dominance.

Understanding that all of Maker’s borrows are denominated in DAI, comparing the supply of GHO to DAI will miss a bigger picture. Examining total borrows on Aave against Maker’s DAI supply, Aave has flipped Maker. Amongst DeFi protocols, Aave is now the largest supplier of loans. 

Much of GHO’s meager debut may be attributable to a few factors, as the DAO has kept training wheels on the stablecoin since inception. The DAO has maintained a borrow cap on the supply of GHO, and has progressively lifted these caps since inception, with each lift being satisfied with increased borrow demand. As liquidity for the stablecoin isn’t very deep, GHO’s early history has demonstrated multiple depegs and a consistent downwards bias. The flows behind these depegging events are explored in greater detail in the community plan for GHO stability.