GIP-100: Should Gnosis DAO conduct a large-scale buyback program?

Governance GIPs
22

I applaud the initiative @Nay and the discussion by the community. Each end of the debate raises very valid and persuasive points about the strategic priority for the DAO’s assets (which if you squint enough starts to look like value versus innovation).

The only point that I would add is that perhaps the “large-scale” nature of this draft GIP is a deterring factor. The arguments about developing a long-term framework for possibly unlimited buybacks apply equally to a smaller trial initiative. It may be helpful to evaluate what a sort of “minimum viable product” would look like, that could appease both sides.

5 Likes
23

It’s a very interesting discussion with different opinions but with the same basic thought: See Gnosis, its ecosystem, and its token succeed for the good of the whole community.

The buyback idea is an interesting one, especially when you consider that it’s not just GNOs that will be stored without doing anything with them, they could also be used for investment, partnerships, protocols, farming etc.

But it’s true that all this discussion raises several points

What’s the best strategy?

Many retails can see the GNO price going up, and are therefore interested in the token and the ecosystem, so this is a very good thing in favor of buybacks.

BUT you also have to take into account the retention rate of your assets and the use of your ecosystem.

And to increase this rate for the ecosystem, we need to develop our ecosystem even further.

So yes, there are already some incredible existing products, and this is just the beginning.

But for example, the comments about liquidity on the GNO lending markets are real.

The situation is still too problematic with the current conditions, it has to be a priority.

We’re talking about being in a phase where we need to attract users to join Gnosis, but if these users don’t have sufficiently interesting products in quantity, what’s the point of them staying? For the price only?

So, in that sense, buybacks are appreciable.

But otherwise I think it’s still too premature, and that it’s much more important to do on-chain with precisely this cash, to launch products, platforms, protocols to show the interest of being on gnosis, buying GNO and keeping it.

It’s a difference of opinion and a different way of going about things, even though we all want the same thing at heart.

This vote will surely pass in the majority, as people think first about the direct return on their price/investment.

But is this how gnosis should be understood? The question is open

Or maybe the buyback amount is too big and could be reduced?

There’s a lot we could still talk about, so I’m not taking a position on this vote, but here are my open thoughts

3 Likes
24

Hello everyone, thank you for your valuable feedback and engaging discussions. We are getting close to moving this proposal to a snapshot vote.

Before we proceed, we need to clarify some execution details that were not discussed in the original post, particularly regarding the Gnosis DAO’s asset utilization for financing buybacks. We propose using a mix of ETH, stablecoins, SAFE, and other cryptos. Given that SAFE constitutes a significant portion of our total treasury, it seems prudent to utilize it for approximately 40%-50% of the total buyback value. This approach would set a precedent for Gnosis DAO to sell a modest portion of tokens from aligned projects for the benefit of its holders. To minimize price impact, we suggest gradually selling SAFE over several months, aligning with the extended timeline of the buyback program, instead of trying to secure all $30 million at the start of the program.

This leads us to the question of how to sell SAFE and potentially other cryptocurrencies to fund the buybacks. Transactions can be executed on-chain via CoW TWAP orders, but there might be more efficient methods. For example, Karpatkey could seek an OTC buyer, similar to its approach for the Safe <> Gnosis DAO joint treasury, or engage with market makers.

Furthermore, the execution of the non-TWAP $15 million portion could be carried out on CEXes, either through market makers or via an account with a service provider like Fireblocks, if available to Karpatkey.

Please share any comments or suggestions so we can discuss them further and proceed to the Snapshot vote.

4 Likes
25

Valid questions, but cause I am against buybacks I can’t give my opinion on this. In the first place I am interested to know what kind of assets had been used for the buybacks that already happened and how these were done. Please @Karpatkey, elaborate if you can and are allowed to.

2 Likes
26

There are several pros and cons to conducting a large-scale buyback program and communicating it in the way that is being done now.

The main advantage is signaling to the market a value accrual mechanism for GNO from the DAO investments. This is a strong first step towards Gnosis 3.0.

On the other hand, announcing a well-defined, time-constrained buyback program is prone to attract speculators that might front-run the DAO. At the same time, it provides exit liquidity for short-term traders, while long-term investors are left with a smaller treasury and will not see benefits if they do not exit their investment.

This proposal is outside of the scope of GIP-58, which remarks that karpatkey should conduct buybacks with the DeFi earnings of the exercise. For this reason, we will abstain from it, though we will undoubtedly execute it with the proper professionalism if it happens to pass.

In this regard, if the proposal goes through, we want to commit to doing as much as we can to avoid offloading large amounts of assets on the secondary market. We will undoubtedly negotiate OTC and Market-Making deals to unlock capital efficiency.

4 Likes
27

I don’t see front-running as a strong argument against the buyback. In fact, it’s an expected and logical reaction. Do speculators front-run when Apple conducts buybacks?

Nevertheless, as I mentioned before, I believe it would be better to have a permanent tool for automatic purchases when GNO is trading below its book value. This requires a precise estimate of the book value.

I am currently developing a real-time dashboard that tracks all assets held by GnosisDAO, both on-chain and off-chain. Additionally, I aim to map all expenditures and other significant data within the Gnosis ecosystem, such as the number of users of Gnosis services.

Once we have an accurate understanding of the book value, we can create a permanent tool. My vision is for GnosisDAO’s liquid assets to be continuously placed in limit orders on CowSwap, ready to purchase whenever the price trades significantly below the book value (e.g., at a 20-50% or more discount).

If this tool is implemented correctly, I am confident that the open market will not allow the price to reach such low levels.

One thing I don’t understand is why GnosisDAO, when trading clearly below book value (as it is right now), has $25 million on the wstETH/GNO pair on Balancer. If the GNO price drops against ETH, it effectively conducts buybacks, but if the price rises, it sells accumulated GNO on the open market, diluting GNO holders when the token is trading below book value! This seems very counterproductive to me. Why aren’t we only doing limit buys through CowSwap and zero sales? I guess the goal is to have better liquidity for Aave, Spark, etc., because they need to efficiently liquidate positions during liquidations. Limit buy orders would serve this purpose just as well. Am I missing something? If GNO is trading below book value, we should only be buying GNO on the open market.

3 Likes
28

Hello all,

Please accept my apologies in advance if I have a fundamental misunderstanding about any of what I’m about to say, but that is part of the reason that I’m putting this out here;

I. Token buy-backs should not be equated to stock buy-backs done by public companies.
a. Stock is retired by the corporation, proportionately enhancing the equity of all remaining shareholders.
b. In this proposal, the DAO would buy GNO on the open market, which may temporarily boost the price, but the DAO would continue to hold the GNO on its balance sheet and would benefit from an increased number of votes on all proposals.

II. Holding GNO does not entitle anyone to the assets or income of the DAO treasury. The DAO always owns 100% of the treasury assets, regardless of the amount of GNO kept by the DAO.
a. The DAO already possesses more than 51% of GNO tokens in circulation, allowing it to unilaterally pass proposals.

If these assertions are correct, having the DAO acquire more voting power seems counter-productive to the decentralization goals of the DAO.

Wouldn’t burning existing GNO from the DAO treasury be better for token holders?

Am I thinking about this all wrong?

1 Like
29

Fair point, we excluded the voting rights + potential consequences for future votes or the control of the DAO. You would have to transfer the GNO from the buybacks to the users, but I don’t know how you can implement something like that without the whole thing being gamed.

Well you could take a snapshot of all the GNO holders before this proposal was created (maybe you also must have hold the tokens +6 months?) and distribute the GNO tokens proportionally.

Something like dividends would be a much easier solution, because you don’t change the voting/control situation of the DAO.

30

Hi everyone, the Snapshot vote is now live!

https://snapshot.org/#/gnosis.eth/proposal/0x17e22a4292b52a638fb956447d7ca9a0adbd51d36dc6fc7dd10ae97dff6f878a

I can’t edit the initial post to update the tag to Phase-3.

1 Like
31

I hope this is a misunderstanding: the GNO holded by the DAO shouldn’t be able to vote (who should be allowed to place these voting rights if all GNO holders are proportionally to their holding represent the DAO?)…but I must admit: I haven’t checked this onchain.

1 Like
32

that’s correct, they don’t. I think making these GNO participate in the governance process is one of the goals of the delegation program which was proposed by Karpatkey on this forum a couple of weeks ago

1 Like
33

In a few hours, the GIP-100 proposal will conclude. Currently, it appears we won’t reach the necessary quorum, as we are short by approximately 20k GNO.

Undertaking buybacks is the right course of action. The market is undervaluing GNO, pricing it below its book value by several tens of percent. Given Gnosis’s substantial assets, this presents a prime opportunity to act. The logic behind buybacks below book value is straightforward: we are effectively purchasing $1 for $0.70. Following the buyback, each GNO holder benefits by owning a larger portion of the assets. This represents a risk-free, immediately profitable investment. If we bypass these lucrative, risk-free investments, why would we invest in anything with more than 0% risk?

Regrettably, numerous holders are encountering technical difficulties with voting, and without these issues, the proposal would have passed. I recommend postponing any further voting until these problems are resolved. Additionally, Snapshot is not displaying all votes, presenting another technical challenge.

34

I’ve not heard any sentiments about voting difficulties. I am sure that we would have heard about them on this very forum if that were the case. Perhaps votes are not coming through because the proposal lacks enough support from the community, especially from larger holders.

35

Perhaps votes are not coming through

This is literally one of the most voted on proposals by average holders.

Number of votes on past proposals from users with a balance between 100-10,000 GNO:

GIP Votes
GIP 95 9
GIP 96 9
GIP 97 8
GIP 98 11
GIP 100 43

This proposal boasts a 460% higher participation rate among average voters. However GNO whales have yet to cast their votes. The community’s voice is clear.

3 Likes
36

The proposal has passed, and we have already executed the first batch of buybacks in this tx: it’s a $2.5m worth of wstETH, 1 month long TWAP, that will be swapping every 5 minutes in Gnosis Chain. As we keep conducting these buybacks, we will keep posting updates in the forum.

9 Likes
37

The proposal states $15M TWAP over 6 months ($83,333 daily buy pressure) and $15M at Karpakey’s discretion.

So with a $2.5M buy out of the gate, does that mean that Karpatkey has exercised $2,416,667 of its $15M discretion already?

38

based on the onchain data it is a TWAP (~300$ every 5min) to swap stETH for GNO. Nice buying pressure (with a perfect dip market lol)

4 Likes
39

Can you give us an update? It’s been over two months since this program started.

40

We will post a more detailed analysis soon. In the meantime, we can provide a Dune dashboard showing executed buybacks

2 Likes
41

3.5 months out of 6 have already passed, and not even 10 million has been spent yet, if I’m not mistaken. Why aren’t the buybacks happening in a linear manner?
Additionally, they haven’t been happening at all in the last 3 days.

1 Like