It’s time to answer your “burning” questions!
Today is the three-month anniversary of GHST token, and with Aavegotchi Mainnet launch looming, now that the “Wen Binance?” question has finally been answered, it’s time to move on to answering the next most important question:
“What happens to all the GHST spent on Portals and Wearables?”
The first Haunt launches on Ethereum Mainnet with 10,000 Portals, each Portal costing 100 GHST.
How this 1,000,000 GHST (and future GHST) gets distributed is crucial to fueling the closed-loop economy of Aavegotchi.
So without further ado, let’s dive in and see some numbers!
The $GHST Circle of Win
Prelude: The Bonding Curve
At the core of GHST’s token economics is the bonding curve — an automated market maker (AMM) that mints and burns GHST on demand, ensuring that our players have always-on access to GHST liquidity without high slippage.
GHST is the literal ticket to everything Aavegotchi, so it needs to be as accessible as possible for a wide audience of players. GHST is currently available on many exchanges and DEXes, but ultimately its supply is controlled by the bonding curve.
One of the more controversial aspects of GHST is its lack of a fixed supply. However, we view this is a feature, not a bug because it allows for an elastic supply of GHST that accurately represents demand for the token at any given time.
This elasticity is also a powerful tool for incentivizing participation in the Aavegotchi Economy via revenue sharing, while also ensuring that GHST does not get devalued over time.
Our approach to revenue sharing balances four goals:
- 🕹 Creating a healthy play-to-earn ecosystem that rewards active players and DAO participants
- 📈 Ensuring that GHST token has a strong foundation for long-term value capture
- 💰 Building a treasury for AavegotchiDAO to use on discretionary spending
- 👨💻 Providing ongoing financial rewards to those developing Aavegotchi
Now let’s explore in detail how these goals will be accomplished.
Part 1: Burn Baby Burn 🔥
Fixed supply tokens generally do not have high burn rates because that would entail rapid deflation of the token.
GHST does not have this problem because the supply increases with demand.
Sending GHST token directly to the burn address (not via the bonding curve) locks DAI within the bonding curve Reserve, essentially creating a rising floor for GHST. This is a net positive for all parties:
- Enables better liquidity for buyers and sellers on the curve (less slippage)
- Lowers circulating supply (less selling pressure)
- Provides stability for the DAICO Tap Mechanism (deeper reserve)
Burning GHST is a deflationary counterbalance to the downward pressure introduced by GHST-denominated gaming rewards (see below). Which is why we’ve earmarked 33% of all GHST earned via Portal sales, Items (Wearables and Consumables) and future REALM parcel sales to be burned forever.
Why not 50%? Or even 100%?
Because burning GHST is only one cornerstone of the Aavegotchi Economy Closed Loop.
Now let’s discuss how players will get rewarded with GHST for playing Aavegotchi.
Part 2: Go Farm Yourself
Rewarding Players is a core tenet of the Aavegotchi closed loop that ensures players have financial incentives for active participation in the Aavegotchi ecosystem.
Joining community activities with your Aavegotchi, voting, interacting with your Aavegotchi, and Rarity Farming are all behaviors we believe should be incentivized to encourage a healthy Gotchiconomy.
To this end, 40% of all earned GHST will be distributed back to players via Player Rewards.
Initially, there will be three categories of Player Rewards.
- Top 100 Rarest Aavegotchis (by BRS, ARS coming later)
- Top 100 Highest Kinship Score
- Top 100 Highest Experience
More categories will be added later as the Aavegotchi game continues to develop.
Player Rewards will be distributed every two weeks via onchain snapshots. Initially, this will be a manual process handled by Pixelcraft, but eventually can be automated by the DAO.
Speaking of the DAO…
Part 3: Just DAO It
Aavegotchi is a community-governed game. The DAO address has access to many functions and levers to control core game mechanics, as outlined in Aavegotchi Governance.
In addition to these permissions, the DAO will also have a treasury to manage, to be used for any initiative it deems worthy.
Initially, 10% of all GHST revenue will be distributed to the DAO treasury. As the DAO matures and proves itself worthy of managing such a large war chest, we expect this percentage to increase.
Eventually, we expect the DAO to grow into an entity fully capable of managing, protecting, and even upgrading the protocol. But until that time comes, we need to make sure we…
Part 4: Feed the Devs
The Aavegotchi core team has watched and participated in numerous food-related farming experiments, and in our opinions, poorly-aligned incentives for protocol developers are a Top 3 Cause for protocol failure.
When protocol developers are paid for their work exclusively in the native token, they are forced to sell the token to pay for expenses, leading to selling pressure and a potential “spiral of death” scenario from which the token never recovers.
However, if developers aren’t paid ANY native token, then incentives aren’t strongly aligned, leading to poor decisions being made.
The Aavegotchi bonding curve solves this problem via a separation of concerns — our community-governed Tap mechanism distributes DAI from the reserve to Pixelcraft Studios (the lead developers of Aavegotchi) every month to ensure a working budget for active development.
Additionally, Pixelcraft will also receive 17% of all GHST revenue, to be used mainly for liquidity incentives, giveaways, and other promotional activities that require GHST.
Every GHST received via sales of Portals, Wearables, Consumables, and REALM Parcels, will be automatically transferred to the corresponding addresses in the following percentages:
- 33% to BURN address
- 40% to Player Rewards address
- 10% to AavegotchiDAO address
- 17% to Pixelcraft address
The Final Touch
The Aavegotchi protocol contracts are upgradeable, which means these numbers can be adjusted if necessary.
As stewards of the protocol, we are especially excited to see the AavegotchiDAO grow in influence over time, to the point at which it can effectively manage a large treasury and govern the Aavegotchi upgradeable contracts.
To this end, every six months we will lead a community initiative to examine the percentages between Player Rewards and DAO rewards and determine if they should be changed. Over time, we expect the Player Rewards and DAO rewards to become equal, as the DAO comes into its own.
What about fees?
Secondary market trading fees can be a strong source of revenue for any NFT project. Initially, the majority of Aavegotchi trading will happen on established NFT markets such as Opensea. These platforms allow us to set a trading fee that is earned whenever an NFT changes hands.
For all trading of Aavegotchis that occurs on established secondary markets, the trading fees (estimated at 2% per trade) will go to the DAO Treasury.
Pixelcraft, the lead developers of Aavegotchi, will deliver a primary market platform for Aavegotchis in Q4 of 2021. Revenue sharing from that future platform has yet to be decided but will likely constitute a revenue sharing model in line with today’s same revenue sharing principles.
The above revenue sharing approach we’re taking is thoughtful and intended to ensure a healthy and growing Aavegotchi community. We’re building for the longterm together as players, developers, and creatives.
We’re extremely excited for the release of Aavegotchi in January, and even more excited to start distributing GHST token rewards to you, our players.
Game on, Aavegotchi fam! 🚀👻🎮