For the last three years, the GHST bonding curve has served as an anchor of stability in the Aavegotchi ecosystem – financially, mentally, and even spiritually.
When we launched the DAI-backed GHST bonding curve in 2020, the future of MakerDAO and DAI was bright – a decentralized USD-pegged stablecoin run by a DAO. The parallels between MakerDAO and what we aimed to achieve with AavegotchiDAO were striking.
Fast forward to today, and the future for MakerDAO and DAI seems less certain than before. The inability of MakerDAO governance to lower the debt ceiling for GUSD, growing exposure to real-world assets (RWA) fraught with potential counterparty risk, and the clear signaling from MakerDAO leadership about planned depegging DAI from the USD raise deep questions about whether or not GHST, the governance token of Aavegotchi, should continue being tethered to an asset with such an uncertain future.
Last week, Pixelcraft Studios kicked off the conversation about whether or not AavegotchiDAO should vote to turn off the curve, which, as expected, led to some of the most intense discussion we’ve ever seen in our humble DAO.
The discussion centered on a few main flashpoints:
- What will happen to GHST liquidity when the curve is turned off?
- How will Aavegotchi assets, currently priced in GHST, be valued in a post-curve world?
- What is the current state of Pixelcraft’s finances?
- How should the DAI collateral in the curve be split?
Discussion on points #1 and #2 is currently happening in the AavegotchiDAO forums, so we want to use this post to address the latter two points – how the DAI collateral in the bonding curve (roughly $20M as of early February 2023) should be split, and what the current state of Pixelcraft Studios’ finances is.
Let’s jump in!
Part 1: Pixelcraft’s Finances
In the original DAO forum post about turning off the bonding curve, Pixelcraft Studios COO Gldnxross laid out his idea for what a possible split of the DAI collateral could look like: 20% earmarked for liquidity provision by AavegotchiDAO, 40% to AavegotchiDAO itself for the general treasury, and 40% to Pixelcraft Studios.
This proposal stirred up some long-standing and healthy discussion about the state of Pixelcraft Studios, so let’s address those now.
As founders, we are very active in the Aavegotchi community, attending twice-weekly meetings to answer questions, drop alpha, and enjoy the product that we are creating together. However, these casual hangouts generally do not delve into finances or long-term vision, two key areas that the community is especially interested in.
Transparency is a key value of the Web3 space, and we try our best to embody this value in our daily lives and the way we run our company. Of course, the Internet being the internet, as doxxed founders, putting any sort of private financial information online invites personal risk, so in the past we have erred on the side of caution with this sort of sensitive information.
However, there are certainly ways to give key insights into the metrics of Pixelcraft Studios without inviting excessive personal risk into our lives. That’s why starting with this post, we will do our best to be more transparent with the financial state of Pixelcraft Studios.
Going forward, you can expect a quarterly summary of the state of our finances published in the first month of every new quarter, including burn rate, liquid and illiquid assets, human resources, and any other significant information needed for a holistic assessment of the company.
While we welcome community feedback and discussion regarding burn rate and assets, we should emphasize that these disclosures are not an invitation for the community to comment on our hiring/firing practices or harass our staff for more specifics.
Finally, we’d like to note that the numbers below may surprise you. Some of you may consider the expenditures extremely high, while some of you may wonder how we can ship so much with such a tight budget.
We are extremely proud of the team we have assembled over the past three years, and the fact that Pixelcraft Studios is one of the few remaining crypto gaming studios in good financial standing after the catastrophic events of 2022 is a testament to our conservative, sensible approach.
With that said, let us get to the meat of this section – an overview of the state of Pixelcraft Studios!
Snapshot of Pixelcraft Studios
As of January 31, 2023
Payroll + Contracted services: ~265k USD
32 Full time Pixelcraftooors (as of January 31, 2023)
- 3 Leadership
- 3 Admin
- 3 Specialists
- 16 Developers
- 4 Design/UX
- 3 Community/Marketing
5 Contracted Services
- 1 corporate secretary
- 2 legal (general counsel & intellectual property)
- 2 recruiting services
Monthly Recurring Software Services (Excluding AWS): ~10k USD
For security reasons, we cannot share the full list of internal services we use, as this would be an invitation for hackers to spoof these services and infiltrate our organization.
In general, these services can be broken down into a few main categories:
- Development / CI
- Blockchain Infrastructure
- Project Management
The total fixed monthly recurring expenditures for services other than AWS was 12,735 SGD.
Amazon Web Services = 20,500 USD (December)
This service hosts the multi-region, multi-instance Gotchiverse. Its cost ebbs and flows but generally ranges from 20,000-30,000 USD, depending on activity in the Gotchiverse. December 2022 was the lowest month in a long time. We are actively working to reduce the AWS bill every month via various optimizations.
Marketing Expenses = ~15,000-30,000 USD per month
This covers all the marketing costs you would expect such as sponsorships, paid ads, videos, giveaways and support for IRL events and associated travel costs.
This is a modest budget relative to competitors in our industry, but Aavegotchi’s compelling story helps us earn more organic media than most.
As of December 2022, the monthly burn rate for Pixelcraft Studios was roughly 315k USD.
Other Major Expenses
- Recent payment of 2021 Singapore corporate taxes (~500k USD)
- Advance payment to Redis for 2022 services (75k USD)
- Cost of securing Aavegotchi intellectual property globally (well north of 100k USD)
- Cost of merchandise production, Verified Fakes, or Shopify
- Upcoming payment of 2022 Singapore corporate taxes (est. 200k USD)
Cash on hand
Liquid Assets (can be sold whenever necessary without significant slippage):
- Stablecoins: ~640K
- GHST: 3.8M
Semi-liquid assets (could be liquidated but with significant slippage)
- Alchemica Tokens: ~$600K
- GLTR (Unclaimed) ~62,000
Illiquid assets (difficult to liquidate)
- Various NFTs, both Aavegotchi and non-Aavegotchi: Priceless
As part of our strategy for ensuring that major crypto ecosystem players are aware of the potential change in GHST tokenomics, we are engaging our business development team to reach out to various participants and invite them to apply for GHST at a moderate discount for a lockup period of 6-12 months, in exchange for USDC.
We are planning to commit 1M of the GHST on our books, and welcome the AavegotchiDAO to also match us in this effort.
After seeing that breakdown, we hope that you have a much clearer picture of the internals of Pixelcraft Studios. We are happy to deliver more specifics about certain areas, as long as it does not violate our employees’ and founders’ right to personal privacy, or pose an OpSec risk to our team.
Now let us address the second main question posed by the DAO – how to split the DAI collateral, if the curve were to be closed.
Part 2: Splitting the DAI
Besides wanting to know the state of Pixelcraft’s finances, the other main questions raised by the DAO were – Why should Pixelcraft Studios receive 40% of the DAI funds being allocated, and what will they do with those funds?
Our answer: Although AavegotchiDAO is quickly coming into its own, we believe that Pixelcraft Studios can put this capital to work more efficiently and effectively than the DAO in its current state, with the goal of maximizing the potential for growth of Aavegotchi in 2023.
As to how we plan to use these funds, that can be broken down into seven distinct categories:
- Ensuring relevant partners have sufficient working capital to maintain deep liquidity on CEXes partnering with Aavegotchi.
- Increasing spending on outreach, tasteful marketing, and growth-oriented endeavors to ensure that our message is heard loud and clear in 2023.
- Equipping our development and design teams with the staff and training they need to deliver on key roadmap items such as the Gotchiverse, Gotchi Guardians, and Gotchichain.
- Derisking from potential stablecoin collapses by diversifying the DAI received into a variety of assets secured on Polygon, Ethereum, and Bitcoin chains, with a small percentage also stored offchain to pay for real-world expenses.
- Starting an Aavegotchi builder’s program to incentivize talent to build on Aavegotchi and fast-tracking the IP licensing process.
- Donating to registered charities that align with the shared vision and mission of the Aavegotchi community and Pixelcraft Studios.
- Sponsoring and hosting IRL events to raise awareness of the Aavegotchi brand and form lasting connections with frens new and old in the meatspace.
Notably, here’s what we would NOT do:
- Use the funds to give bonuses or unnecessary raises to Pixelcraft Studios founders or team members.
- Spend the funds on frivolous, tasteless marketing that does not serve the Aavegotchi brand.
- Spend the funds on any endeavor or product not directly related to Aavegotchi.
Aavegotchi is one of the strongest IPs in the entire crypto space, with a compelling backstory, adorable characters, and an energized community. Pixelcraft Studios is fully committed to telling the story of Aavegotchi and making these DeFi-backed crypto pets a household name in the future!
What if the DAO says no?
If the DAO rejects the proposal to turn off the curve for whatever reason, we are pleased to say that Pixelcraft Studios is in fine financial condition, and our roadmap plans would not be significantly affected by this decision.
All of the items published on our latest 2023 Roadmap, and also on previous roadmaps, are doable with our current treasury and burn rate, assuming that DAI does not experience the depeg we are worried about, and the market does not experience major black swans that massively wipe out all value in the crypto space.
If the DAO votes to turn off the curve but decides not to allocate funds to Pixelcraft Studios, that is also fine with us, but we would hope it has a solid plan on how to handle a post-curve GHST ecosystem.
We hope that this piece has given the community a broader understanding of how Pixelcraft Studios operates and our plan for any funds directed towards us in the event of the Curve closing.
We will continue to monitor the discussion and engage with community members in the DAO Forum and Discord.
Our current plan is to split the Curve proposal into two separate SigProps:
#1 Should the Curve be turned off?
#2 How should the DAI be allocated?
- Original Proposal (20/40/40)
- Another way (new proposal required)
If SigProp #1 passes but SigProp #2 Option B “Another way” wins, we will continue to engage with the DAO to come up with a more optimal solution for fund allocation.
If #1 does not pass, we will consider this matter closed for now and will re-visit in six months.
No matter the outcome, we will commit to the quarterly transparency reports mentioned above, published here on the DAO forum.
Thank you all for your constructive feedback, and we look forward to the discussion!
Stay spooky frens,
Pixelcraft Studios team