Algorithm Design for Aave Stablecoin via Reputation

Based on comprehensive research across academic repositories, Aave governance forums, technical documentation, and social media, **no specific "Algorithm Design for Aave Stablecoin via Reputation" document exists** that outlines a reputation-based mechanism for GHO. The current GHO architecture remains strictly overcollateralized through governance-approved facilitators with no reputation integration. ## Current GHO Mechanism: Overcollateralized Facilitator Model **GHO's core design** ([Aave Documentation](https://aave.com/docs/ecosystem/gho)) operates through a facilitator system where: | Component | Function | Governance Control | |-----------|----------|-------------------| | **Facilitators** | Contracts approved by Aave Governance to mint/burn GHO | FACILITATOR_MANAGER_ROLE | | **Bucket Capacity** | Maximum GHO each facilitator can mint | BUCKET_MANAGER_ROLE | | **Interest Rates** | Set by AaveDAO, currently ~5% base rate | Governance voting | | **Discount Mechanism** | 0-100% rate discount for stkAAVE holders | Governance parameters | The system requires **overcollateralization** where users must supply assets (ETH, wBTC, etc.) exceeding the GHO minted, with all interest payments flowing to the Aave DAO treasury [Aave Governance](https://governance.aave.com/t/introducing-gho/8730). ## Reputation Framework Research Findings While no GHO-specific reputation algorithm exists, several relevant reputation systems were identified: ### zScore Framework (Zeru Finance) - **arXiv:2503.05718**: "zScore: A universal decentralised reputation system for the blockchain economy" - **Approach**: AI neural network models analyzing on-chain wallet behavior across 40+ blockchains - **Aave Application**: Tested on Aave V3 lending data, showing **strong correlation** (858/1000 score) between high zScore and healthy borrowing/repayment behavior - **Potential**: Enables undercollateralized lending proposals but **no GHO-specific implementation** ### PageRank for Lending Protocols - **ResearchGate Reference**: "A Reputation Scoring Framework for Lending Protocols Using the PageRank Algorithm" (inaccessible/paywalled) - **Concept**: Graph-based ranking of borrower trustworthiness in Aave/Compound/MakerDAO - **Limitation**: No stablecoin parameter adjustments or GHO integration documented ### Reputation DAO Integration - **Historical Integration** (2021): Oracle transparency widget for Aave's frontend showing Chainlink data feeds - **Goal**: Move toward undercollateralized loans through reputation data [Medium](https://medium.com/@ReputationDAO/reputation-dao-integrates-aave-aef115644e9b) - **Current Status**: No active GHO integration or reputation-based facilitator ## Governance and Academic Verification **Aave Governance Search Results** (2019-2026): - 0 proposals for "reputation facilitator" or "reputation-based GHO" - 0 mentions of zScore or PageRank in GHO context - All GHO parameter adjustments handled through standard governance voting **Academic Repository Findings**: - No document titled "Algorithm Design for Aave Stablecoin via Reputation" exists on arXiv, SSRN, ResearchGate, or Google Scholar - Zeru Finance's GitHub shows general DeFi reputation scoring but no Aave GHO-specific implementations - All identified papers discuss theoretical DeFi reputation concepts without GHO parameter mappings ## Conclusion **No reputation-based algorithm exists for Aave's GHO stablecoin**. The system remains fundamentally overcollateralized with governance-controlled parameters. While academic research (particularly zScore) demonstrates the technical feasibility of reputation-based undercollateralized lending, and Reputation DAO has expressed this as a long-term goal, no concrete implementation or mathematical mapping for GHO exists in any official Aave documentation, governance proposals, or peer-reviewed research. The search query appears to reference a hypothetical or proposed mechanism that has not been implemented or formally documented within the Aave ecosystem.