Aavegotchi bonding curve closes on exact day of DAI depeg

According to the protocol play-to-ear nonfungible token (NFT) Aavegotchi on March 11, the entity closed the binding curve that determines the exchange rate between its name token (GHST) and the US dollar stablecoin DAI (DAI). On the same day, the stablecoin DAI depegged as part of the ongoing destabilization of USD Coin, which was also caused by $3.3 billion in frozen stablecoin collateral deposits owed to the issuer Circle by the now-defunct Silicon Valley Bank.

GHST is described as an “entrance ticket” to Aavegotchi, where users can use tokens to purchase NFT portals, wearables, consumables in Aavegotchi games, stake for reward farms, or participate in DAO governance. The Aavegotchi bond curve was created on September 14, 2020, with an opening price of 0.2 DAI per GHST.

When users buy GHST through DAI, the binding curve smart contract, powered by Aragon, ensures that new GHST tokens are printed and vice versa. However, when GHST tokens are purchased, each subsequent buyer must pay a slightly higher price for each token, resulting in GHST having a higher market cap than DAI reserves.

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

With the bond curve now removed, the GHST exchange rate is now free to float and no longer determined by the DAI. At the time of publication, the value of the token has dropped 18.09% in the past 24 hours to $1.12 each. Meanwhile, the stablecoin DAI price has fallen by 6.76% in the past 24 hours to $0.9314 each. Although no longer related, the proceeds received from the token sale suffered a material loss due to the DAI depegging event. Cointelegraph reached out to Aavegotchi but did not receive a response by press time.