Aavegotchi (GHST) combines gaming and cryptocurrency, where the digital world meets the financial realm. It is the governance token of the Aavegotchi NFT Gaming protocol, giving GHST token holders voting power in the AavegotchiDAO. This oversees all aspects of the protocol, including the Gotchiverse game and Aavegotchi NFTs. Aavegotchis are pixelated ghosts backed by the ERC-721 token standard, with dynamic metadata that changes through user interaction. The value and rarity of an Aavegotchi is determined by its collateral stake, traits, and wearables. The protocol is powered by the Aave protocol, a lending protocol in DeFi, and the name Aavegotchi is a nod to Aave, which translates to “ghost” in Finnish.

Each Aavegotchi NFT manages an escrow contract holding their "Spirit Force," also known as "collateral" or "aTokens," a balance of yield-generating tokens from the Aave Protocol. This balance increases over time due to the yield they generate. Aavegotchis have a minimum amount of Spirit Force that is initially defined by their base rarity score. Upon opening a Portal, ten Aavegotchis are generated with a combination of traits. Users may only choose to summon one of the ten Aavegotchis, while the remaining nine are burned and gone forever. An Aavegotchi’s traits are generated via Chainlink VRF, an on-chain random number generator, and combine to form the base rarity score.

Aavegotchi combines gaming and finance, providing a platform for users to engage in a variety of activities. Users can participate in the Gotchiverse game, where they use their Aavegotchi NFTs as web3 avatars to explore, build, battle, and socialize. The protocol also introduced Gotchi lending, allowing players to trustlessly lend their Aavegotchi NFTs to other players without any risk. The lending smart contract automatically splits any earned tokens per the agreed upon terms of the contract once the duration of the lending period expires. Aavegotchi's governance token became available as collateral on Aave.

Aavegotchi was created by Singapore-based Pixelcraft Studios, with Jesse Johnson and Coder Dan as co-founders. Aave’s founder, Stani Kulechov, was the project’s first advisor. In November 2020, Aave invested in Pixelcraft Studios. The project’s mainnet launch was initially scheduled for Jan. 4, 2021, but was pushed to March of 2021 due to high transaction fees on the Ethereum blockchain. The Aavegotchi community decided to launch the project on Polygon, a side chain to Ethereum. On March 20, 2023, Pixelcraft Studios completed a multi-year long token sale, raising a total of $30 million. The sale of the $GHST token utilized a decentralized fundraising model, DAICO, proposed by Ethereum's founder Vitalik Buterin. It began on Sept. 14, 2020.

GHST, the native token of the Aavegotchi ecosystem, is utilized in incentivizing players and contributors. It serves as the base currency for acquiring various on-chain Aavegotchi assets such as Portals, wearables, consumables, and collectibles. Beyond this, GHST has several other functions, such as staking and enabling players to vote in the AavegotchiDAO. Players need to acquire GHST and utilize it in the process of summoning and training Aavegotchis. A portion of this is transferred directly back to the DAO to continue funding the development of the ecosystem. At the same time, part of the value is allocated as non-monetary incentives for wise governance in the DAO, and as incentives for engaging in rarity farming. This system seeks to align the respective goals of the AavegotchiDAO, GHST holders, and Aavegotchi holders, encouraging greater participation in the Aavegotchi ecosystem.

Aavegotchi has implemented several initiatives to foster a strong and engaged gaming community. One of these is the introduction of the Forge, an upgrade to the crypto collectibles game that focuses on improving Aavegotchi's wearables market. The Forge seeks to bring about more diversity and utility to the wearables market by tokenizing the different economic values of wearables. This allows the AavegotchiDAO to control inflation and introduce deflationary mechanics while still creating new content. Players have the option to repurpose unwanted wearables by combining them with new materials, potentially enhancing the composability of protocol assets. Aavegotchi has established guilds within its community, which serve as platforms for players to socialize and participate in guild-specific activities. The AavegotchiDAO encourages community participation through Aavegotchi Improvement Proposals (AGIPs), a platform where players have the opportunity to vote on various game improvement proposals.

Staking GHST tokens in the Aavegotchi universe aims to provide users with several benefits. One of these benefits is the opportunity to earn GAX Liquidity Token Reward (GLTR) rewards. GLTR tokens serve two main functions within the Aavegotchi ecosystem. They can help players enhance their game experience by accelerating the crafting and upgrading of their installations. Additionally, GLTR tokens are necessary for participation in Wearable Crest auctions. Staking GHST tokens also enables users to take part in the AavegotchiDAO, which provides an avenue for users to contribute to the project's direction. It's important to bear in mind that staking involves committing your cryptocurrency, which could impact the availability of your tokens if the market value of the staked tokens fluctuates.

Aavegotchi conducts seasonal events known as Rarity Farming seasons. These events, generally lasting for eight weeks, strive to recognize players for increasing the rarity of their Aavegotchi NFTs. Players have the opportunity to boost their Aavegotchi's rarity by equipping them with Wearable NFTs, petting them twice daily, and engaging in XP events. The rarity of an Aavegotchi may influence the non-monetary rewards it receives. GHST tokens, the native eco-governance token of Aavegotchi, are involved in these events. For instance, during the seventh season of Rarity Farming, a total of 1.6 million GHST tokens were distributed. The GHST tokens are allocated as non-monetary rewards at the end of each two-week round, based on on-chain snapshots of the leaderboards. The tokens are distributed across different categories, including Rarity, Kinship, and XP. Thus, GHST tokens are involved in these seasonal events, encouraging players to actively participate and enhance their Aavegotchis.

The bonding curve for GHST tokens in the Aavegotchi ecosystem is a mechanism that strives to balance supply and demand while maintaining price stability. When a user acquires GHST via the bonding curve, the supply of GHST increases, which mathematically increases the price of the next GHST. Conversely, when GHST is returned to the curve, the supply of GHST decreases, which mathematically lowers the price. This mechanism seeks to ensure that GHST has an unlimited pool of liquidity and is resistant to manipulation and cornering by large holders. It's important to note that the bonding curve is governed by the AavegotchiDAO, and any changes to its parameters must be approved by GHST token holders. This approach to tokenomics intends to foster a healthy ecosystem that benefits active players and DAO participants, while also intending to provide the GHST token with a foundation for potential value considerations.