Aavegotchi bonding curve closes on exact day of DAI depeg

According to play-to-earn nonfungible tokens (NFT) protocol Aavegotchi, on March 11, the entity closed the bonding curve defining the exchange rate between its namesake (GHST) and the DAI (DAI) U.S. dollar-pegged stablecoin. The same day, the DAI stablecoin depegged as part of the ongoing USD Coin destabilization, which was, in turn, caused by $3.3 billion in stuck stablecoin collateral deposits owed to its issuer Circle by now-defunct Silicon Valley Bank. 

In a statement to Cointelegraph, Nigel Carlos, CMO of Pixelcraft Studios, explained that the community voted at 2am UTC today to end a two-and-a-half-year contract sale of its native GHST token and “derisk from DAI.” Carlos stated: 

The vote closed a smart contract (bonding curve) that provided liquidity for the minting and burning of GHST, the Aavegotchi ecosystem’s base currency and governance token that has a market cap above $76.6 million and a total supply of 54.6 million. Which was bound to DAI and has DAI treasury in the smart contract.

According to Carlos, GHST is now a fixed supply token and the $33 million DAI tokens that were spent to mint GHST in the contract is “planned to go toward developing the gaming protocol’s ecosystem.” GHST is described as an “entry ticket” into Aavegotchi, where users can use the token to purchase NFT portals, wearables, consumables within the Aavegotchi game, stake to farm rewards, or participate in DAO governance. The Aavegotchi bonding curve was created on Sept. 14, 2020, with an opening price of 0.2 DAI per GHST.

When users purchase GHST via DAI, the bonding curve smart contract, powered by Aragon, ensures new GHST tokens are minted and vice versa. However, when a GHST token is purchased, each subsequent buyer will have to pay a slightly higher price for each token, leading to GHST having a higher market cap than its DAI reserve. 

In what was essentially a multi-year token sale, the protocol has received a total of 30.3 million DAI. Developers first proposed in January that the DAI funds should be distributed for protocol liquidity, the Aavegotchi DAO, and its parent Pixelcraft Studios on a 20/40/40 basis. 

With the bond curve now removed, the exchange rate of GHST is now free floating and no longer determined by DAI. At the time of publication, the token’s value has plunged by 18.09% in the past 24 hours to $1.12 apiece. Meanwhile, the price of DAI stablecoin has fallen 6.76% in the past 24 hours to $0.9314 apiece. Though no longer linked, the proceeds received from the token sale suffered a material loss due to the DAI depegging event. 

when this shitstorm is over i fully expect all of the mainstream crypto news to writes articles on how @aavegotchi somehow picked the EXACT DAY OF DAI’S DEPEG to close the $GHST bonding curve

holy shit what a story

— coderdan.eth | aavegotchi (@coderdannn) March 11, 2023