AavegotchiDAO was summoned as a 100% on-chain DAO in September 2020 via the deployment of the GHST Bonding Curve. This proposal is based on a diligent risk assessment of the Curve and concludes that there is a strong case for closing the GHST Bonding Curve and depegging GHST from DAI token
When Stablecoins aren’t Stable
“The Curve is forever” is a shorthand way of expressing how reliable GHST’s tokenomics have been up to this point. However, starting in 2022 turbulence in the macro crypto space has been growing, and our beloved bonding curve is potentially at risk of contagion.
While MakerDAO, the issuers of DAI, have delivered a stable stablecoin til this point (DAI has never had a significant depeg from the USD) there is no guarantee that such success will continue indefinitely. Recent red flags include an inability for MakerDAO to remove the GUSD vault (a stablecoin issued by the recently bankrupt Genesis), the “Endgame” plan to depeg DAI from USD, growing exposure to real-world-assets (RWA) fraught with counterparty risk, and a general overexposure to (and vulnerability of) the USDC stablecoin in the MakerDAO asset pool.
Even if one concludes that DAI’s risk is only low to moderate, we must soberly assess whether such risk tolerance is acceptable to our DAO. Today, I put forth that not only is any risk from DAI’s depeg unacceptable, but such risk is also entirely avoidable. AavegotchiDAO has matured to such an extent that it is increasingly apparent the GHST Bonding Curve has already outlived its initial purpose.
The Maturation of AavegotchiDAO
Operating as a continuous DAICO, The Curve provided a trustless way for AavegotchiDAO to bootstrap development funding and provide initial liquidity for the GHST/DAI pair. With nearly 20M DAI in the curve, there is sufficient funding to continue development and enable deep liquidity. We believe that the DAO has matured to a point where it can manage its own liquidity provision and funding, via such vehicles as the AavegotchiDAO Foundation and other elected task forces.
This can securely be done because AavegotchiDAO has proven itself trustworthy over a significant period of time. Evidence for such can be seen across a variety of metrics including a massive migration of GHST to Polygon Network, reliably high engagement on Snapshot, the organic formation of numerous task forces, and the passage of over 50 Aavegotchi Improvement Proposals (AGIPs) including the recent vote to form the AavegotchiDAO Foundation.
It is along this backdrop that I propose a vision for a post-curve GHST.
This proposal is for us to close the GHST Bonding Curve in a controlled, methodical way by following these steps:
- Pass an AGIP on Snapshot confirming AavegotchiDAO’s intention and terms.
- Migrate the required 8% of total GHST supply back to Ethereum so we can reach quorum in our Curve’s on-chain voting system (long established on Aragon contracts).
- Complete the Aragon-based vote. It is at this point the Curve will immediately close and any DAI collateral shall be transferred to all multisig wallets in accordance with the original Snapshot’s terms.*
- The Curve is dead, long live the GHST!
- The AavegotchiDAO Foundation and Multisig must be setup before step 3 can happen.
Allocation of the Curve’s DAI
Turning off the Curve is an opportunity to secure significant funding for our ecosystem while dramatically simplifying GHST tokenomics.
So far, the DAI in the Curve’s contracts has only served one purpose: to provide liquidity for the creation and destruction of GHST tokens. After the Curve’s closure, whatever DAI remains in that contract will be freed to go to work on behalf of the Aavegotchi protocol.
There are three distinct wallets that make sense to manage a portion of this DAI:
- AavegotchiDAO Liquidity Provisions (20%)
20% of the Curve’s collateral should immediately be directed to a DAO managed multisig specifically tasked with deepening liquidity on an agreed upon platform to help prevent extreme volatility in the moments following the closure of the Curve. There needs to be one or more places for people to enter and exit GHST with healthy liquidity.
AavegotchiDAO will have to decide which platforms make the most sense to deploy on. I suggest that we consider creating a task force empowered to manage this liquidity while the decision of where to initially direct that liquidity could be signaled by the greater DAO at the same time. Examples include decentralized platforms like Quickswap and Uniswap but there is a case for traditional CEXs as well. In either case, Pixelcraft Studios can help to introduce AavegotchiDAO Foundation to trusted market makers or decision makers at the platforms being considered.
- AavegotchiDAO Foundation (40%)
The 9 members recently elected to sit on the AavegotchiDAO Foundation host the most obvious multisig wallet to receive and secure DAI on behalf of our DAO’s treasury.
Whether all the DAI stays there or transfers to other asset management specific wallets could be worked out in this forum or saved for separate votes. Still, a brief example may be decentralizing some of this 40% into other task forces or even yet-to be-created specific use case multisigs (long term holdings). Regardless of what wallets are responsible for securing the bags, risk diversification out of DAI exclusively makes a lot of sense given the backdrop of stable coin storm clouds and a fast moving regulatory environment.
- Pixelcraft Studios (40%)
Home of the Summoners of AavegotchiDAO, Pixelcraft Studios prides itself on being frugal and good stewards of the funds entrusted to it by the community.
Our vision for 2023 and beyond is clear – to make Aavegotchi a well-known brand in the NFT gaming industry, and beyond that, an IP recognized around the world.
We have always been quite conservative with our marketing budget, preferring less “sale” and more “ship”. But with big product launches coming this year, we believe it’s time to turn up the volume on marketing and ensure that Aavegotchi is part of the larger conversation. A portion of the curve funds will be used for this purpose.
Besides increasing our marketing spending, we will also double down on pursuing the best talent we can find in a very competitive hiring environment.
Finally, a portion of the funds will be diversified into fiat or gold to prepare for what we call the “crypto apocalypse scenario”, where multiple stablecoins depeg, Ethereum and Bitcoin sink to new depths, and the larger cryptosphere goes into a deep winter. No matter what happens in crypto, we want to ensure that the Aavegotchi IP stays alive.
If this proposal is found to have support, then it is logical that we proceed as quickly as reasonably possible to close the Curve.
That is why I suggest we designate February 2023 as “GHST Independence Month” and immediately begin the task of removing GHST’s reliance on the Curve. The process is actually quite straightforward.
After a full week of discussion, I will publish a SigProp based on the feedback received in this forum. As usual, Pixelcraft Studios will refrain from voting in any Snapshot votes.
Assuming the SigProp passes, we shall upgrade to CoreProp and proceed accordingly.
This is the heavy lift, token holders will need to rally at least 8% of GHST back to Ethereum in order to vote on Aragon. Because the CoreProp would have passed, Pixelcraft Studios is able to contribute to this cause with the GHST on our balance sheet.
The Aragon vote is passed, closing the curve. Pixelcraft Studios has already invested our solidity team’s resources into simulating the process to confirm how this process is to play out. Once the Curve closes, the funds will need to be directed in accordance with the term’s agreed upon in the CoreProp. The 20% Liquidity Provision would need to be the most time sensitive and need to be managed swiftly.
Close the Curve, Open the Chain
The closure of the GHST Bonding Curve marks the beginning of a new chapter for GHST token and our Aavegotchi protocol. With GHST’s utility soon expanding to secure its own supernet blockchain, I can think of no better time to take this bold step.
GHST will continue to serve as our governance token, ensuring Gotchichain validators will be aligned for the long term as AavegotchiDAO stakeholders. We should welcome this opportunity for new strategic partners to join us in what I metaphorically call GHST 2.0.
GHST has always served a dual mandate as an “eco-governance” token; our governance token but also a default currency for all things Aavegotchi. While that may continue to make sense for teams who prefer to accrue governance power, it makes less sense to continue to enforce this arrangement as a rule.
In August 2022, Moon kicked off the first formal discussion on turning off the GHST Bonding Curve (Turning off the GHST Bonding Curve). In it, Moon took time to highlight a potential flaw with GHST as a currency, in that its exclusive use adds friction to adoption of Aavegotchi games. In the initial post Moon states,
“[because of GHST prereq, people]… will never enter the broader Aavegotchi ecosystem either - no Gotchis, no Wearables, no Land, nothing. This means that the Curve doesn’t just decrease potential demand for GHST as a token, but the broader ecosystem as a whole. Very few people are willing to dive deeper into the Gotchiverse if GHST is unworthy of an investment anyways, the attention span of the average market participant is lower than that of a TikToker…”
Since GHST and the bonding curve were originally designed to underpin the ecosystem and maintain stability, turning off the Curve could lead to volatility in the valuation of Aavegotchi protocol assets. This is a challenge we should consider carefully.
It’s worth noting that a more volatile GHST token awaits us in the post-Curve world. It’s also established that GHST as a currency doesn’t always serve Aavegotchi adoption or Pixelcraft Studios’ operating costs. So this is a great time to revisit past and future utilities of GHST. I see:
- Governance token (YES, stronger than ever)
- Ecosystem token: (would likely be reduced if Curve is turned off)
- Cryptocurrency (limited, case by case)
- Gas token (soon with Gotchichain’s launch!)
- Game token (can certainly be a great incentive, such as the recent Gotchiboard competition)
After two plus years of maturation, AavegotchiDAO is entirely capable of standing on its own with the GHST Bonding Curve having served its purpose well. Indeed, the argument that Aavegotchi’s success should not be reliant on any protocol outside of the Polygon Network itself, holds more water with each passing success.
Therefore, I propose a vote to shut down the Curve, effectively decoupling GHST from DAI, fixing its supply, and making it a free-floating token all while transparently distributing the Curve’s DAI to a variety of predetermined multisig wallets with predetermined allocations.
Thank you for your consideration and feedback.