Why GHST is the perfect collateral for DeFi
Recently, Aavegotchi Lead Summoner Coderdan created an ARC to list GHST on the Aave Polygon Market, and started a campaign to delegate Proposition Power (PP) to create a governance proposal.
In this blog post, we elucidate why we believe GHST would make an excellent collateral for DeFi lending protocols such as Aave.
As more and more frens are discovering the potential of GHST, it’s a perfect time to share an overview of this unique token — especially as framed through its relation to DeFi. This eco-governance token has been very successful in its role as the cornerstone of the Aavegotchi platform, but GHST also has a strong case for becoming a breakout contender in the world of high DeFi.
In today’s post, we will examine the advantages of GHST as a collateralized asset used for borrowing and depositing.
What Makes a Good DeFi Collateral?
According to the Aave Risk Quantification Criterion, ideal DeFi collaterals have low volatility, high volume, are permissionless, and have long on-chain history, with wide distribution among a large group of token holders.
Although GHST has only existed for a little less than a year, it has already demonstrated excellence in all of the above areas, scoring a solid B under Aave’s Risk Assessment schema.
Beyond these core competencies, GHST also has some unique features that help it stand apart from the thousands of crypto assets currently on the market.
Why GHST is the Perfect DeFi Collateral
Reason 1 — GHST has utility
DeFi markets are built around borrowers — without borrowers willing to pay interest on loans, there is no market for depositors.
As the eco-governance token of the growing Aavegotchi NFT ecosystem, GHST demonstrates strong use cases for borrowing, such as:
- Staking in Aavegotchi Staking contracts, earning FRENS;
- Providing liquidity on DEXes;
- Participating in #BidToEarn Auctions, where getting outbid earns you GHST;
- Staking as collateral within Aavegotchi NFTs;
- Purchasing and trading Aavegotchi NFT assets
This utility will only continue to increase as the Aavegotchi team gets further into its development roadmap, with the launch of the Aavegotchi Gotchiverse and its own decentralized exchange, the GAX.
Reason 2 — GHST has unique tokenomics
The normalized volatility of GHST is 5%, significantly lower than most other non-stablecoin cryptocurrencies.
The reason for this is that GHST is partially backed by DAI, via a permissionless AMM bonding curve. When a user purchases GHST via the bonding curve, the supply of GHST increases, mathematically increasing the price of the next GHST. Similarly, when GHST is sold for DAI back into the curve, the supply of GHST decreases, mathematically lowering the price.
This means that GHST has an unlimited pool of liquidity, while also being resistant to manipulation and cornering by whales.
Why is this good for DeFi collaterals? Large swings in price due to price manipulation can lead to asset liquidations and under extreme circumstances, even asset insolvency. The relative stability of GHST, combined with its upside as the native token of Aavegotchi, make it a superior choice for borrowing and using as a collateral.
Reason 3 — GHST is decentralized
Minting and burning of GHST is permissionless, via the AMM bonding curve described above. The bonding curve itself is governed by AavegotchiDAO, an Aragon-deployed DAO on Ethereum Mainnet. Votes to change parameters of the bonding curve, or even disable it entirely, must first be approved by the Council (Pixelcraft), and then voted on by all GHST holders, with a quorum of 8%.
Bonus Reason: GHST has an amazing community
Although GHST has only existed for a little less than a year, it already has more than 17,000 holders, stakers, and traders, on Ethereum Mainnet and Polygon sidechain. It has been listed on most major CEXes and DEXes, and boasts over a million transactions.
Given the DeFi+NFT DNA of the Aavegotchi project (Aave’s Stani Kulechov is an official advisor!), we have always strived to inject DeFi into our playable NFTs, and the unique makeup of our community is a testament to this.
It’s Already Happening
We are currently applying for a Chainlink price feed for GHST-ETH to make GHST even more accessible for world-class DeFi applications.
GHST has potential not only as the eco-governance token of Aavegotchi, but also as a world-class DeFi collateral. We look forward to building that future together!
- Help support our Aave listing by delegating Proposition Power to coderdan.eth (0xC3c2e1Cf099Bc6e1fA94ce358562BCbD5cc59FE5) on the Aave Governance Portal, and voting YES on our Aave Snapshot Proposal.
- Contact us if you’d like to learn about listing GHST on your DeFi application.
Aavegotchis are on-chain collectible ghosts staked with Aave’s interest-generating aTokens.
Compete for player rewards by earning XP, leveling up, and increasing the rarity of your Aavegotchi fren. Owned by the community, Aavegotchi is governed by the AavegotchiDAO and the native eco-governance token GHST. Summon your first Aavegotchi today and join the future of playable NFTs backed by DeFi!