Bonding Curve Design
Last updated
Last updated
GHST was initially launched using a “bonding curve” mechanism where GHST was backed by DAI. However, in 2023, the AavegotchiDAO voted to remove the bonding curve and make GHST a free-floating token. Following the removal of the bonding curve, the total supply of GHST token is now fixed at 52,747,802 GHST. The closure of the bonding curve was driven by the perceived unnecessary risk underlying Aavegotchi at that time. The community expressed concerns that the stability of GHST's tokenomics, once considered reliable with the mantra "The Curve is forever," was becoming increasingly susceptible to macroeconomic turbulence within the crypto space. This turbulence raised fears of potential contagion risks for the bonding curve. MakerDAO, responsible for issuing DAI, had historically maintained stability for their stablecoin. However, by 2022, there were growing concerns. MakerDAO struggled to remove the GUSD vault, associated with the bankrupt Genesis, and faced challenges with their "Endgame" plan to depeg DAI from the USD. Moreover, their increased exposure to real-world-assets (RWA) introduced counterparty risks, further complicating their asset pool heavily reliant on USDC stablecoin. The community consensus at the time was that any risk from a potential depegging of DAI was unacceptable and entirely avoidable. This led to the decision to close the bonding curve, reflecting a proactive stance to mitigate risks and safeguard Aavegotchi's stability.
The system featured a convex bonding curve, meaning the price increases at an increasing rate, and operated as a Constant Product Primary Market Maker with an exponential curve. The native token was GHST, while the reserve asset is DAI. The reserve ratio was set at 33%, causing the price curve to grow more aggressively with increasing supply. A reserve ratio lower than 33% would result in a sharper exponential curve, reacting more aggressively, whereas a ratio higher than 33% would flatten the curve towards a linear shape as it approaches 50%. All swaps incur a 2.5% fee, and KYC was required.
