Aavegotchi

Author: MoonGotchi#1234 GotchiID: 3541 Discourse Thread: https://dao.aavegotchi.com/t/bonding-curve-emergency-plan/4397

Hello fellow GHST enjoyooors,

My post about the Bonding Curve has sparked an interesting discussion about GHST’s future and a potential shutdown of our well-known stability mechanism. While this proposal is certainly related to the discussion, it is NOT a proposal to make GHST a free floating token. Let me elaborate…

Problem

For the people not super familiar with the entire MakerDAO debate, you can get a long-form summary here. In short, there is a lot of uncertainty concerning the regulation of decentralized smart contracts (Tornado Cash) and stablecoins. Since GHST is closely tied to DAI’s value, we need to monitor those developments very closely. If anything happens to DAI, our entire treasury (and GHST’s stability) is at risk.

In this proposal I want to define the potential cases of emergency and the actions the multisig currently managing the GHST Bonding Curve on Ethereum mainnet needs to take to mitigate risks. Again, as long as DAI works as intended, this proposal does not suggest messing with the Curve - that is a completely separate discussion

Emergency Scenarios

1. DAI loses dollar peg: As long as USDC backing is intact, no action needed. Signers should however set alerts for $0.95 and $0.90 to be notified of a potential depeg so they’re able to act immediately as the situation unrolls.
2. MakerDAO shifts away from a dollar backing: Very long-term strategic consideration, will probably take 2-3 years to unfold. No immediate action needed, more relevant for the discussion surrounding a general Curve shutdown.
3. This is the important one. MakerDAO contracts get blacklisted by Circle (USDC) due to regulatory reasons: Signers would have to act immediately to protect the value of GHST’s backing. I propose immediately shutting down the Curve and swapping the DAI for USDC. This ensures that we lock in some of our treasury’s value, it does however remove the main source of liquidity for GHST. To make sure GHST doesn’t enter a free fall, $5M worth of USDC should immediately be paired with $5M worth of treasury GHST in our main Quickswap pool.

Using the current numbers, this would leave us with ~$18M USDC - the majority of which should be used to buy back the paired GHST and build up a larger LP position. The initial LP position would double our current pool and buy enough time to decide on next steps.

Keep in mind that this is a very unlikely emergency scenario. We should be prepared for everything though, getting caught with our pants down could wipe out a large sum of our treasury value and put GHST in a very vulnerable position.