Bridge insurance and GNO buy-back

The 2 main bridges:

and Omni Bridge:

together currently hold >$100m in stable coins. Before the merge of xDAI and Gnosis the bridges have been modified in a way that unused capital started to earning interest by putting it into the Aave protocol: Dune Analytics

This adds a nice additional source of income for the chain but also adds additional risk to the users of the bridge that they might not even be fully aware of. This proposal aims to bring additional value to both: users of Gnosis Chain and GNO token holders:

The idea is simple: Gnosis DAO will start to offer insurance to funds in the bridge. Meaning, if there is a loss of funds trough either a problem with the bridge itself or underlying mechanisms (like an issue with Aave) Gnosis DAO will compensate users.

The concrete suggestion: use 200k GNO from the GNO vesting contract and send them to a newly created Gnosis Safe as a reserve. Those GNO should only be touched in case of a severe loss that users face from an issue with the bridges. Longterm it is thinkable to even put those GNO partially under external control (e.g. Kleros court).

At the same time: start using all proceeds from the bridge to buy back GNO which should be send to this insurance address. Longterm it is also thinkable to complement the insurance coverage with external insurance providers like Nexus Mutual. At the moment, given the market cap of GNO and the treasury of GnosisDAO it seems possible for GnosisDAO to offer this insurance independently at this point.

8 Likes

I like the proposal.

This path would potentially also allow the consolidation of tokens bridged from different chains. E.g. right now USDC bridged from BSC will result in a different token than USDC bridged from mainnet. If however, GnosisDAO would provide insurance but essentially get access to the underlying funds there could just be one USDC token on Gnosis Chain.

In this case, it would be up to bridge governance to regulate the exposure to e.g. BSC. Bridges could use the funds on BCS and bridge them further to mainnet to put them there e.g into Aave as well.

3 Likes

I support 100% this proposal!

Some ideas about Risk Management:

  • Insurance fund
    In an insurance claim event it would be difficult or not desirable to sell 200K GNO.
    The fund should be composed of GNO+other assets from the GnosisDAO treasury. Ideally yield bearing tokens to minimize idle capital. Not sure if this setup would be too complex.

  • Stablecoins risk management
    Diversify the holdings in reputable stablecoins like DAI, USDC and RAI and deposit them in low risk money markets like Compound + Aave and low risk AMM like 3crv

6 Likes

Something similar to Bprotocol - backstop AMM? (about Bprotocol). I think self-insurance model with employed capital has many benefits