GHO is a decentralized, overcollateralized USD stablecoin launched by Aave in July 2023. Users can mint GHO by depositing collateral on the Aave protocol.

On July 31, 2023 — just a few days after its launch — GHO lost its peg to the dollar, entering a period of price instability that lasted until January 2024.

By November 2023, GHO had hit its lowest point, trading at $0.95.

At this critical point, the GHO liquidity committee turned to Merkl, among other partners, to help reverse the trend and accelerate GHO’s return to its intended peg — using incentives as a strategic lever.

Aave leveraged Merkl to launch incentive campaigns on Uniswap, aiming to build a liquidity wall and prevent further depegging.

A liquidity wall refers to a large concentration of liquidity within a specific price range, making it harder for trades to move the price beyond that band. This acts as a buffer against volatility by requiring high trading volume to break through the wall.

Incentive campaigns encouraged users to provide liquidity to the GHO-USDC and GHO-USDT Univ3 pools on Ethereum. To create a liquidity wall, incentives were strategically weighted in favor of USDC and USDT, rather than GHO with the following allocation:

• 15% for GHO liquidity
• 80% for USDC or USDT liquidity
• 5% for pool fees

As a results, for the same total liquidity provided, a user who supplied more USDC (or USDT) than GHO would earn significantly higher GHO rewards.

Thanks to the campaign's design, liquidity in the pools was tightly concentrated — enabling trades with minimal slippage and creating strong resistance to price movements.

The USDC and USDT liquidity walls prevented GHO from falling further. At the same time, the imbalance in the liquidity profile made it easier to drive GHO’s price back up, as less buying pressure was required to increase its market value.

With Merkl’s support, the GHO committee successfully initiated the re-pegging process. The stablecoin’s decline was halted; it quickly rebounded to $0.98 just a few days after the campaign launched and fully regained its peg by January 2024.