GHO is Aave's native overcollateralized stablecoin. It launched on Ethereum mainnet in July 2023 after a governance vote, and it now sits at roughly $584M in circulating market cap (DeFiLlama, May 2026) with a peg holding within a basis point of $1.00. Borrowers mint GHO against supplied collateral inside Aave V3, pay an interest rate set by Aave governance, and stkAAVE holders get a discount on that rate. On the saver side, sGHO (staked GHO) routes a portion of the interest paid by borrowers back to depositors as a savings yield.
This guide walks through every part of the mechanism: how minting works, what controls the borrow rate, how facilitators expand the supply beyond direct Aave borrowing, how the peg holds, and how GHO compares with DAI, USDS, and other CDP-style stablecoins.
What is GHO and how does it work?
GHO is a decentralized, overcollateralized stablecoin minted directly by Aave V3 borrowers. Users deposit eligible assets (ETH, wstETH, stablecoins, BTC) as collateral, then borrow GHO against that collateral the same way they would borrow USDC. Unlike a normal Aave borrow, the interest paid on GHO accrues to the Aave DAO treasury rather than to lenders.
The key design choice: GHO has no on-curve liquidity provider being paid a market-driven rate. The borrow rate is set by governance vote. That makes GHO a policy-driven stablecoin closer in spirit to MakerDAO's DAI than to a market-rate USDC borrow on Compound.
How is the GHO borrow rate set?
The GHO interest rate is a fixed value chosen by Aave governance proposals (AIPs), not a curve that floats with utilization. Holders of AAVE and stkAAVE vote on the rate based on peg behavior and market conditions. When GHO trades below $1.00, governance has historically raised the rate to discourage minting; when GHO holds above $1.00, the rate gets lowered to encourage supply.
Rate changes since launch have moved GHO's borrow APY through several values, from initial single-digit numbers up into higher ranges during peg stress and back down. The current rate is published in the Aave UI and on docs.aave.com under the GHO section, and historical rate changes are tracked in governance.aave.com proposal records.
How does the stkAAVE discount work?
Users who stake AAVE in the Aave Safety Module receive stkAAVE. Each stkAAVE token entitles the holder to a discounted GHO borrow rate on a fixed amount of GHO. The discount is implemented as a percentage reduction on the standard rate, applied per stkAAVE up to a per-token cap on discounted GHO.
So the effective rate paid by a borrower depends on three inputs: the governance-set base rate, the stkAAVE balance, and the per-stkAAVE GHO cap. Borrow more than the discount covers, and the balance above pays the full base rate. The mechanism gives long-term Aave stakers a real economic reason to hold stkAAVE beyond protocol revenue claims and slashing exposure.
What are GHO facilitators?
A facilitator is a contract or entity that the Aave DAO has whitelisted with permission to mint and burn GHO up to a defined bucket capacity. Each facilitator has a distinct mint cap, and the sum of facilitator caps controls total GHO supply.
Two facilitators have shaped GHO's growth so far:
Aave V3 Ethereum Pool — the primary facilitator. Borrowers mint GHO against collateral; this is the path most users take.
GHO Stability Module (GSM) — a peg-defense facilitator that lets users swap fixed-rate stablecoins (USDC, USDT) for GHO 1:1 minus a small fee. The GSM acts as a one-way pressure release: when GHO trades above peg, arbitrageurs mint GHO via GSM and sell, pulling the price down.
Additional facilitators have been proposed and discussed in governance forums, including a Stata Token facilitator (using yield-bearing aTokens as collateral wrappers) and cross-chain bridge facilitators that mint GHO on networks beyond Ethereum mainnet. The model lets GHO scale through purpose-built mint paths instead of relying solely on direct collateralized borrows.
How does GHO maintain its peg?
GHO is not algorithmic and has no rebasing logic. Peg stability comes from three pressures:
Interest-rate policy. Governance moves the borrow rate up or down to change the cost of being short GHO. A higher rate makes minting expensive and reduces supply pressure; a lower rate encourages new mints.
The GSM. Direct 1:1 swaps with USDC/USDT cap how far above peg GHO can drift before arbitrage closes the gap.
Liquidation backstop. Every GHO in circulation is backed by overcollateralized positions inside Aave V3. If collateral falls below the liquidation threshold, the position is liquidated and the GHO debt repaid, removing supply.
This makes GHO closer to DAI's CDP model than to USDC's reserve-backed model. There is no off-chain bank account, no Treasury bill collateral, and no attestation report. Backing is entirely onchain assets locked in Aave V3.
What is sGHO and the savings rate?
sGHO (staked GHO) is the savings-side counterpart to the borrow side. Users deposit GHO into the sGHO contract and receive a yield-bearing wrapper. The yield is funded by a portion of the interest paid by GHO borrowers, routed by the Aave DAO from treasury revenue back to sGHO holders.
The sGHO rate is governance-controlled and typically sits below the GHO borrow rate (the spread between borrow and save is what funds Aave DAO revenue). For a saver, sGHO behaves similarly to MakerDAO's sDAI or Sky's sUSDS: deposit a stablecoin, accrue yield via a rebasing or share-price mechanism, redeem 1:1 for GHO at any time. For a fuller comparison of sUSDS mechanics, see Sky sUSDS yield explained.
How does GHO compare to DAI and USDS?
All three are decentralized, overcollateralized stablecoins with savings products attached. The differences sit in the collateral set and governance posture.
Stablecoin | Issuer | Supply (May 2026) | Savings product | Rate setter |
GHO | Aave DAO | ~$584M (DeFiLlama) | sGHO | Aave governance (AIP votes) |
DAI | Sky (legacy) | ~$4.6B (DeFiLlama) | sDAI | Sky governance |
USDS | Sky | ~$8.7B (DeFiLlama) | sUSDS | Sky Savings Rate (SSR) governance |
DAI and USDS accept a wider collateral set, including tokenized treasuries and RWA vaults. GHO is currently anchored to Aave V3's existing collateral list, which is heavier on liquid crypto (ETH, stETH, BTC, blue-chip stables) and lighter on RWA. That makes GHO's backing more transparent and faster to liquidate but also more correlated with crypto market drawdowns. For broader RWA collateral context, see RWA tokens 2026 guide.
Where does GHO sit in the broader yield stack?
For a stablecoin holder weighing options, GHO via sGHO is one of several governance-rate-driven savings products. Pendle's PT/YT splitting can wrap sGHO into fixed-yield instruments (see Pendle finance explained). Yield aggregators route between sGHO, sUSDS, and sUSDe based on net APY (see best stablecoin yield aggregators 2026). And Ethena's sUSDe sits in a different yield regime entirely, funded by perp basis trades rather than CDP interest (see Ethena sUSDe vs USDe). For a benchmark in institutional credit, Maple Finance offers a related but distinct undercollateralized lending model (see Maple Finance: DeFi lending for institutions).
For Aave-specific architecture context, see Aave v3 vs v4: what changed and why it matters.
What are the main risks of holding or borrowing GHO?
Three risk categories matter most. First, peg risk: GHO has traded below $1.00 for extended stretches since launch, requiring multiple governance rate hikes to restore the peg. Second, collateral risk: backing is concentrated in crypto assets, so a sharp ETH or BTC drawdown can stress the liquidation pipeline. Third, governance risk: the rate, the discount, and the facilitator caps are all parameters Aave governance can change, sometimes faster than borrowers can refinance.
None of these risks are unique to GHO; they are the standard risk profile of a CDP-style stablecoin. The mitigations are the standard ones: monitor the borrow rate, maintain a safety buffer above the liquidation threshold, and follow governance.aave.com for parameter changes.
Methodology and sources
Borrow-rate, facilitator, and discount mechanics are drawn from the GHO section of docs.aave.com. Historical rate changes and facilitator additions are sourced from governance.aave.com AIP records. GHO supply ($584M market cap) and Aave V3 TVL ($14.6B) reference DeFiLlama snapshots from May 2026. Stablecoin comparison figures (DAI $4.6B, USDS $8.7B) come from the same DeFiLlama stablecoins dashboard. No yield numbers are cited as current APYs because governance-controlled rates change frequently; consult the Aave app for the live rate.