According to play-to-earn nonfungible token (NFT) protocol Aavegotchi, on March 11, the entity closed the bonding curve defining the exchange rate between its Aavegotchi (GHST) token and the Dai U.S. dollar-pegged stablecoin. The same day, DAI lost its U.S. dollar peg due to the ongoing fallout from the collapse of Silicon Valley Bank and the Circle-issued USD Coin depegging. USDC’s depeg was caused by $3.3 billion in stablecoin collateral deposits stuck in the now-defunct Silicon Valley Bank.
In a statement to Cointelegraph, Nigel Carlos, the chief marketing officer of Pixelcraft Studios, explained that the community voted at 2 am 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 in 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. Users can use the token to purchase NFT portals, wearables and consumables within the Aavegotchi game, stake to farm rewards, and participate in decentralized autonomous organization (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 (20%), the Aavegotchi DAO (40%) and its parent Pixelcraft Studios (40%).
With the bond curve 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 had plunged 18.09% in the past 24 hours to $1.12. Meanwhile, the price of the DAI stablecoin has fallen 6.76% in the past 24 hours to $0.9314. Though no longer linked, the proceeds received from the token sale suffered a material loss due to the DAI depegging event.