Aave Analytics | TokenLogic

To protect the GHO peg and maintain protocol stability, the Aave DAO has implemented oracle-based swap freeze mechanisms for both the USDC and USDT Stability Modules that dynamically adjust each module's availability based on their respective real-time market prices using Chainlink oracles. This governance-approved safety mechanism ensures both GHO Stability Modules remain stabilizing forces by preventing GHO issuance backed by devalued collateral, reducing systemic arbitrage risks, and enhancing long-term confidence in the GHO peg.

Mechanism Overview

1. Token Price Deviates Below Lower Bound (e.g. USDC/USDT <$0.990)

When the price of either USDC or USDT falls below their respective predefined thresholds (e.g., $0.990), minting GHO using discounted tokens can introduce undercollateralization risk. The respective Stability Module is automatically paused via its dedicated on-chain oracle trigger, preventing new GHO from being minted with devalued collateral.

2. Token Price Exceeds Upper Bound (e.g. USDC/USDT >$1.010)

When either USDC or USDT trades above their respective upper thresholds, the corresponding GHO Stability Module may allow arbitrage that could lead to supply/demand imbalances. The respective Stability Module is automatically paused via its dedicated on-chain oracle trigger to prevent inefficient or destabilizing redemptions and maintain system stability.

The unfreeze thresholds are also oracle-controlled for both modules, typically requiring each token to return within their respective narrow bands (e.g., $0.995–$1.005) before operations resume.

GSM Oracle-Based Swap Freeze

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