Friday, October 16, 2020

Aavegotchi: Making your Virtual Pets work hard for you!

Post submitted in fulfilment of Aavegotchi Mission 9.

Disclaimer: Vested in GHST Token and volunteering as an aapprentice (moderator) for the Aavegotchi project.


Remember Tamagotchi from eons ago? Those cute little handheld virtual pets that need your love and care? You have to feed them, play with them, and clean up after them. It was a joy to see them grow, as they mature from a baby to adulthood.

Then the craze ended. Zero. Zilch. Nada. Never to be heard of again except in stories of yore.

No longer do we need to reminisce about the past. Aavegotchi, a crypto gaming/savings project, is here to soothe your nostalgia.

The Aavegotchi project is a recipient of an Aave Ecosystem grant. Aave is a money market protocol on the Ethereum blockchain. Users of Aave include both depositors and borrowers, with depositors receiving interest income from lending out their cryptocurrencies and/or stablecoins to borrowers. Using smart contracts to manage borrowing/lending and automatically liquidating defaulting borrowers is a novel use case in its own right. 

The Aavegotchi project expanded on this concept further...........what if the stream of interest income could be embedded in a game?

The lines are now blurred:

  • Huh? You can now play games with your bank?
  • Wut? Your virtual pets are making your money work hard for you?

How it all works

Your Aavegotchi frens are summoned through portals. In turn, portals are purchased using the GHST Token, the native token of the Aavegotchi ecosystem. Besides the GHST token, gamers are required to provide a collateral in the form of an aToken from the Aave ecosystem. This ensures that your Aavegotchis are constantly generating interest income for you, which I have shared above.


The game is still not available yet. It will be out sometime in Q4 2020 or Q1 2021.

Investment Merits & Risks

Analysis of Aavegotchi as an investment could be approached from multiple angles. First, the aTokens themselves accrue interest income from borrowers. The interest income fluctuates depending on borrowing demand and the supply of liquidity, with each currency exhibiting a different interest rate profile. Over the long haul, yield compression will continue as the low/zero/negative interest rates from TradFi (Traditional Finance) pushes investors towards Decentralized Finance (DeFi) on Ethereum. 

Second, GHST Token price will increase in lockstep with the growth of the Aavegotchi Ecosystem. Participation in the Aavegotchi Ecosystem (be it as speculators, investors, gamers, artists, etc.) require GHST Tokens to be bought off the bonding curve. The bonding curve was mathematically programmed to increase the price of the GHST Token whenever purchases are made from it and vice versa. While it is possible to acquire GHST Tokens off the secondary markets, new issuance and subsequent circulation of the token is only possible through interaction with the bonding curve. This will facilitate a gradual rise in the token price as the community grows.

Third, Aavegotchis and their wearables (hats, sunglasses, etc.) are collector's items. Aavegotchis themselves come with randomly-and-fairly generated levels for each of their traits (aggressiveness, intelligence, transparency, etc), with each trait excelling in particular mini-games. In a similar fashion, Aavegotchi fashion are collectibles too, with some wearables available in limited quantities.

Finally, did I mention this is a game? There will be mini-games to be played by your Aavegotchis, with rewards to be earned.

Now, let's talk about the risk. With all things crypto/blockchain, there will be risks. The term "money legos" is a frequently used term in the DeFi sphere. What this means is that newer technology is built upon the shoulders of existing technology. 

This is all fine and dandy when everything is working well. What happens when problems arise at the lower layers? I will enumerate a couple of risks for each layer.

  • Ethereum: Failure of Ethereum risk, Blackswan risk, Network Congestion/Spike in transaction fees
  • Aave: Failure of Aave Ecosystem risk, Smart Contract exploitation risk, Liquidity risk
  • Underlying currency of aToken: Failure of underlying currency risk, Debasement of underlying currency risk
  • Aavegotchi: Smart Contract exploitation risk, Risk of Aavegotchi not catching on
I have some more stuff to say, but nah, don't wanna leak investment alpha. =P

I shall leave readers with two highly entertaining youtube videos by Daniel Mathieu, the CEO of Aavegotchi. Besides being a CEO, he is also a youtube celebrity:

For those who are interested in Aavegotchi, the following links will be helpful: