Aavegotchi bonding curve shuts down on DAI depeg day

On March 11, Aavegotchi’s play-to-earn nonfungible tokens (NFT) protocol completed the bonding curve, establishing the exchange rate between its own token (GHST) and the DAI U.S. dollar stablecoin (DAI).

The same day, the DAI stablecoin depegged as part of the continuing Dollar Coin instability, which was prompted by $3.3 billion in collateral deposits due to its issuer Circle and the collapsed Silicon Valley Bank.

Users may spend GHST to buy NFT portals, wearables, and consumables inside the Aavegotchi game, to stake to farm rewards, or to engage in DAO governance.

On September 14, 2020, the Aavegotchi bonding curve was established with an opening price of 0.2 DAI per GHST.

When customers buy GHST using DAI, the bonding curve smart contract, powered by Aragon, guarantees that additional GHST tokens are produced, and vice versa.

But, when a GHST token is acquired, future buyers will be required to pay a slightly higher price for each token, resulting in GHST’s market capitalization exceeding its DAI reserve.

The protocol has received a total of 30,3 million DAI in what was basically a multi-year token auction.

Developers first requested in January that the DAI money be allocated 20 percent to protocol liquidity, 40 percent to the Aavegotchi DAO, and 40 percent to Pixelcraft Studios, the studio’s parent company.

Following the elimination of the bond curve, the GHST exchange rate is currently floating freely and is no longer controlled by DAI.

In the previous 24 hours, the token’s value has decreased by 18.09%, falling to $1.12 per token at the time of posting. In the previous twenty-four hours, the price of DAI stablecoin has decreased by 6.76% to $0.9314 per unit.

Due to the DAI depeg, token sale revenues incurred a significant loss despite the fact that they are no longer connected to DAI.