Tech/VC lawyer @ Withersworldwide. Aavegotchi aapprentice/shill. Occasional writer.
After a season of crazy pumps, new projects, and exit scams, the DeFi Summer of 2020 is cooling down. The food is rotting on the vine and the seafood is going stale.
Some yield farmers are throwing down their pitchforks in the face of liquidation risks and impermanent loss, amongst other problems.
I’m not saying that DeFi is over. It’s just that much like the seasons themselves, markets undergo cyclical changes and corrections. And as the frenzied excess of summer gives way to fall (quite literally, for some projects), it’s a good time to rethink how we can continue making gains while contributing to the growth of the system as a whole.
In line with the slower moving energy of fall, perhaps it’s time to look towards a more sustainable form of farming. In other words, trying to build something that will last in the long term, through these seasonal adjustments, and well through the winter.
And what better way to do this than through what the seasons can’t touch — the undead themselves.
Yes, Internet Ghosts.
Unless you’ve been living under a crypto-rock, you might have seen these adorable pixelated ghosts around. These avatars are known as Aavegotchis. You might have also seen certain parts of Crypto Twitter shilling $GHST, the project’s native token, as the next moonshot.
For the uninitiated, Aavegotchis are NFTs (Non-Fungible Tokens) staked with interest generating aTokens from Aave.
Over time, your Aavegotchi helps you accrue value both through generating interest from your staked assets so long as you keep them staked, and through interacting with the larger Aavegotchi metaverse.
This unique combination of Defi and NFTs presents us with another way to continue farming yield and generate gains in the long run. This will both provide profits for the token holder, and contribute to the growth of DeFi through the very accessible means of gaming.
Plus, the art is super cute. Why wouldn’t you want to raise and play with a frenly ghost pet?
Sustainability? But wEn MoON?????
Jokes aside, it’s actually something important to consider. This is because in order for users and investors to derive long term value from any project, monetary or otherwise, there has to be a constant demand for assets related to the project (native tokens and NFTs, amongst others).
In order for that to happen, there has to be a sustainable project ecosystem backing that demand up.
Aavegotchi’s innovative rarity farming, token bonding curve and community building efforts all poise it to achieve this sustainability, and will ultimately help everyone win in the long run.
Generating Value Through Rarity Farming
In addition to allowing you to farm yield through your Aavegotchi, the project incorporates another layer of value through a process known as rarity farming.
One of the ways NFTs derive monetary value is through scarcity. Generally, the rarer the traits your Aavegotchi has, the higher you might be able to trade it for on a marketplace.
When you first summon your Aavegotchi, it is assigned an initial random rarity level through Chainlink’s VRF. Over time, you can continue increasing the rarity value of your Aavegotchi through adding in-game wearables to it and grinding it out in minigames, amongst other activities.
You can also choose to stake your GHST tokens in order to earn FRENS. FRENS are virtual points that you can redeem raffle tickets of varying rarity levels within the metaverse. These tickets can then be exchanged for a wearable of the corresponding wearable level, which you can then attach to your Aavegotchi to increase its rarity level.
The beauty of this mechanism lies in the fact that it makes value more accessible to a larger audience. You don’t necessarily have to be a whale in order to farm value — as long as you have the time and willingness to grind it out, there is at least some degree of profit to be made. It is this increased accessibility that encourages more people to stay on in the larger Aavegotchi ecosystem, and to drive it on.
Unless you’re a simp like me, who might just get too attached to her virtual ghost to trade it on OpenSea or something. Ha. But we’ll see.
Staying Comfy With the Curve (Forever!!!!!!!!)
Aavegotchi uses a bonding curve to distribute its native tokens. I’m not going to explain the intricacies of the curve here, because that would make this post way longer than it already is — you can find a primer here.
But the gist of it is that when you decide to buy GHST, the curve mints your order and increases the total supply. The price of GHST then goes up in correlation with the new supply. On the other hand, when you sell GHST back into the curve, it is burned, thus reducing the total supply and its price. That said, there is no supply cap on GHST.
Through this, the value of GHST rises and falls to reflect demand from the community. Members can sit comfortably on the curve without worrying about price volatility — this means a more sustainable community, given the lower likelihood of individuals being understandably shaken out of or unwilling to join the ecosystem due to attempts at market manipulation or quick pump-and-dumps.
Moreover, community members are incentivized to act in ways that help increase genuine demand for the project — earlier adopters are encouraged to spread the word about the project to more individuals, given that they will be naturally rewarded by the curve for doing so.
The ecosystem continues to genuinely grow, along with demand for its associated assets, and everyone wins in the long run.
Gotchi Gang, Gotchi Gang
Beyond the technical aspects of Aavegotchi, the sustainability of a project also depends on the community behind it. Thus far, the core team and Aaprentices have done an amazing job in developing it. Through the project’s Discord, new community members are encouraged to find out more about the projects through various missions. Members are incentivized to do that as they will ‘level up’ and stand to obtain exclusive Aavegotchi wearables amongst other prizes as they progress. The existing community is also constantly updated through Aavegotchi’s various channels on the work that has been done so far. You can check them out at the end of the post.
All of these efforts contribute to cultivating a genuine sense of investment in the project’s ecosystem, while helping to grow the hype around Aavegotchi, in the lead up to its Mainnet launch.
And the strength of the community shows — just a couple of weeks ago, the project’s GHST token was listed on OKEx, after having won a special user voting event on the exchange.
One Final Shill
Ultimately, for any project to succeed and for gains to be made in the long run, people need to care about it, and to feel like they have a seat at the table. Given that the project is a DAO, it’s all the more important to make sure that this sense of personal investment is built. After all, you’re trying to coordinate thousands of autonomous individuals to act in a way that best brings about collective good.
That sense of personal investment has to align with the collective success of the project; and I’d say that a good way to bring about that alignment is through the creation of an ecosystem that no one feels forced out of. That way, value and profits will continue to flow into the system, and everyone wins.
Maybe it is getting colder out there — it’s hard to tell because timing in the Cryptoverse is a strange thing. But with Aavegotchi, I think that’s hardly anything to be spooked about.
The end of October saw the release of Mainnet GHST staking, and in late Q4 we’ll finally be able to summon our ghost frens when Mainnet goes live. It’s all pretty exciting stuff, and I can’t wait to see where this project goes.
In the meantime, I’ll be summoning my testfrens on the Kovan testnet.
As with anything, DYOR. Don’t trust, verify.
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