Announcing GnosisDAO

Originally Published on November 23, 2020

GnosisDAO uses futarchy (prediction markets) to guide proposals, and anyone can participate by joining the Gnosis Forum.

• After initialization, GnosisDAO is to have effective control over 150K ETH and 8 Million GNO Tokens, with the GNO Tokens vested over 8 years.

• The first proposals to GnosisDAO include distributing GNO to active participants, introducing a SAFE Token for governance, and developing Gnosis Protocol.

• In the GnosisDAO governance process, the final phase opens proposals to two signaling methods using GNO Tokens.

Now for the vision…

“If we have learned one thing from the history of invention and discovery, it is that, in the long run — and often in the short one — the most daring prophecies seem laughably conservative.”
Arthur C. Clarke, The Exploration of Space (1954)

Gnosis was founded in 2015 with the aim to build prediction markets that enable worldwide access to accurate information. Five years later, our technology powers decentralized prediction market platforms¹, and we’re ready to embark on the next giant leap of the journey: GnosisDAO.

The phrase prediction markets could belong to the realm of science fiction. Yet today, prediction markets can be used to forecast elections, wager on deadlines, and model public confidence during pandemics. Just as markets act as price finding mechanisms, prediction markets can excel at finding accurate information through providing economic value to those who possess it.

When we began at Gnosis, the potential of prediction markets as a public good was clear. Today, it is a necessity. Amidst a sea of disinformation campaigns, decentralized and unstoppable prediction markets will prove a critical counterforce. Prediction markets can, however, go one step further. Rather than only surfacing information, prediction markets can be used to guide decisions on the events they propose.

In 2000, a short manifesto by Robin Hanson appeared on the curious term of “futarchy” and how we might improve human governance. The text suggests combining prediction markets that accurately inform policy decisions with conditional metrics based on public welfare. By using prediction markets to guide governance, an organization can combine their objectives with public expertise and at the same time, enable a broader community to share in their successes. While acknowledging markets could introduce some biases for the ones they replace, they hold the potential to more transparently align public interest with economic value over time. This form of governance known as “futarchy,” or governance by prediction markets, is at the heart of why they are important to us at Gnosis.

The road to futarchy has been long, but steady. An integral part of the futarchy hypothesis rests on prediction markets being permissionless — that is, open for anyone to participate. For this reason, we have spent the last five years working on the necessary technical building blocks to enable permissionless prediction markets. While we have seen the Ethereum ecosystem bloom, it has been clear that core components needed development. To date, our core product suite has addressed the issues of prediction market conditionality, liquidity, and fund management.

In addition to developing our core products, we have substantially supported infrastructure required for prediction markets. This includes utilizing:

• Reality.eth, a crowd-sourced oracle;

• Kleros, a dispute resolution layer;

• xDai, an Ethereum sidechain designed for fast and inexpensive transactions;

• OpenEthereum, the fast, light, and robust client for Ethereum;

• Last but far from least, the DXdao organization, a successful proof-of-concept project to enable decentralized finance projects to exit to community governance.

Now that it’s 2020, we’ve assembled the puzzle pieces of core infrastructure, and bringing a new synergy to our product suite, we’re ready to move on to our most ambitious innovation to date: GnosisDAO.

GnosisDAO and the Future of GNO

What if a community could share in an entire ecosystem’s success? With the rise of decentralized finance on Ethereum, we’ve seen users share in the growth of decentralized protocols. The successes of both Compound and Uniswap in progressive decentralization have been inspiring, and it has become clear that it is equally important to decentralize both technical and governance layers for products in the web 3.0 ecosystem.

Gnosis has taken a different approach to a similar end — with decentralization maximalism at its heart from the beginning. In 2019, we initialized the DXdao, a decentralized organization with over 400 stakeholders that develops, governs, and grows decentralized finance protocols and products. After initializing the DXdao, Gnosis stepped back, and we have seen a flourishing community grow in our wake. Today, the DXdao describes itself as a sovereign collective, and they maintain leading decentralized finance applications on Ethereum, including Omen Prediction Markets and the Mesa trading dapp. The DXdao validated our hypotheses that communities are ready to develop, govern, and grow the software they use, and that a governance token can be successfully leveraged to support a decentralized organization.

Today, we are happy to announce the natural next evolution in our roadmap: not only to progressively decentralize Gnosis through community participation, but to use the very products we’ve built to bring decentralized governance to our token ecosystem.

GnosisDAO is the prediction market-driven collective. The mission of GnosisDAO is to successfully steward the Gnosis ecosystem through futarchy: governance by prediction markets.

While the history of electronic prediction markets for corporate governance dates back decades, GnosisDAO’s application of permissionless prediction markets to organizational governance will set precedents for their use. This means, however, testing the mechanics and establishing cultural norms of decentralized futarchy will take time, which is why the initiative will begin in the form of a minimum viable futarchy network. GnosisDAO will use our prediction market technology to transparently guide decisions on development, support, and governance. Let’s dive into an overview of how the futarchy mechanism works.

Every proposal begins as a post on the Gnosis Forum, and every successful proposal must pass through three phases. For each proposal in the final phase, prediction markets will surface the projected price impact on GNO if the proposal is accepted. In practice, this means two prediction markets corresponding to the proposal will be funded by GnosisDAO:

1. Prediction market on the proposal collateralized in GNO

2. Prediction market on the proposal collateralized in a stablecoin

From these two prediction markets, the projected price impact on GNO if the proposal is accepted can be calculated, by expressing the difference between projected prices of GNO if the proposal is accepted or not as a percentage. While this may sound complex, Gnosis has created a simple to use tool precisely for this use case called Gnosis Impact. The Gnosis Impact app displays the projected price impact of an event on a correlated digital asset, derived from prediction market prices on the Omen platform. For example, we can look at two prediction markets currently on Omen, which differ only in their collateral:

• Will Ethereum 2.0 Phase 0 launch before 2021? This prediction market is collateralized in (W)ETH, which is correlated to the development of Ethereum.

• Will Ethereum 2.0 Phase 0 launch before 2021? This prediction market is collateralized in USDC.

By entering these markets into the Gnosis Impact app, it can easily display the projected price impact on ETH of the Ethereum 2.0 Phase 0 launching before 2021:

The predicted impact on ETH is calculated to be 22.84%. To learn more about the concept behind how Gnosis Impact works, check out the Gnosis Impact: Explainer blog post. This app can be used by anyone as a futarchy plugin on the GnosisDAO Snapshot space to facilitate governance by prediction markets. The first proposal to GnosisDAO using Gnosis Impact is live here: GIP-1: One-time 5% GNO airdrop to active GnosisDAO participants.

Like in the example above, GnosisDAO will use this app for each proposal in the final phase, by creating the corresponding prediction markets and embedding the Gnosis Impact app directly in proposals. These prediction markets will be funded using a new GnosisDAO Gnosis Safe Multisig, which will initially hold 1,000 ETH and 20,000 GNO from the Gnosis treasury.

Using prediction markets, GnosisDAO participants can apply the projected impact on GNO as a futarchy metric to guide their decision-making. The projected price impact of proposals informing decisions serves to strongly correlate the value of GNO with the activities of GnosisDAO. However, not only does using Gnosis Impact align development with GNO, funding prediction markets will also be one means of progressively distributing GNO, potentially rewarding community participants for signaling in prediction markets. GnosisDAO will decide how to progressively decentralize control, as well as how to further implement a robust, well-tested futarchy mechanism over time.

How to Participate

GnosisDAO is a living entity that will evolve over time. Launching as a minimum viable futarchy network, it utilizes existing governance tools optimized for frictionless community participation in addition to our product suite.

To start participating today, it’s as easy as joining the Gnosis Forum and getting involved in proposals’ comments discussion.

The GnosisDAO governance process is primarily conducted using the GnosisDAO category on the Gnosis Forum, and every successful proposal must pass through three phases, including, in the final phase, using the Gnosis Impact app described above and a GnosisDAO Snapshot poll. The governance process is permissionless, with the only requirement that community members hold a minimum of 1 GNO to participate in the GnosisDAO Snapshot poll that decides a proposal’s outcome. To jump start the conversation, GnosisDAO has launched with three pending proposals:

• One-time 5% GNO airdrop to active GnosisDAO participants

• Should Gnosis establish a governance token for Gnosis Safe?

• Should Gnosis Build Gnosis Protocol v2?

To start participating today, it’s as easy as joining the Gnosis Forum and getting involved in the comments discussion. For a more detailed overview on all aspects of how to participate in GnosisDAO, check out the GnosisDAO Governance Process post and the Governance Tutorial post. While we hope these initial proposals prove fruitful, we also encourage Gnosis community members to participate by submitting their own proposals. These could address topics such as: On which Ethereum Layer 2 solutions should GnosisDAO focus development? What role should OWL play in Gnosis products? How should GnosisDAO forum moderation be decided? Last but not least, what are the cultural values of GnosisDAO?

Not limited to Gnosis products, proposals can extend to the broader ecosystem through support, establishing a correlation between GNO and portfolio projects. Ultimately, GnosisDAO will test the limits of what the world’s first decentralized, permissionless, and prediction market-driven collective for resource allocation can do. After initialization, GnosisDAO is to have effective control over on-chain assets, including:

• 150k ETH (~83% of the current ETH treasury)

• 8Million GNO with an 8-year linear vesting period to maintain a predictable supply (~93% of the current GNO treasury)

The remaining treasury funds not allocated to GnosisDAO will be used to finance the operations of Gnosis Ltd. for two years, during which Gnosis Ltd. will continue developing software to support GnosisDAO. This includes 0.5Million GNO with a 5-year linear vesting period allocated to Gnosis Ltd., partially for staff incentivization. Given Gnosis Ltd.’s reputation for engineering expertise, it only makes sense that the team will be well-suited, as a contributor amongst many decentralized contributors, for delivering on GnosisDAO proposals. After this two year period, Gnosis Ltd. will rely on GnosisDAO for further funding.

Permissionless innovation is at the heart of our values, and we believe the progressive decentralization toward an autonomous GnosisDAO will support the cultivation of an equitable, adaptable, and ambitious community over time.The conversation with our community doesn’t end here. Join our Gnosis Discord Server and the Gnosis Forum to take part. 🦉