This proposal painfully exposes the deep divide at the heart of this DAO and the GNO token.
We’ll be abstaining, because we can’t support a proposal that is so plainly bad for the future of Gnosis, but we also cannot deny holders’ clear frustrations here, and cannot begin to understand why Gnosis’ leadership have so shamefully buried their heads in the sand on this.
Bad Intentions
Before diving into why this proposal is bad for Gnosis and for GNO holders, a quick note on the bad intentions that we observe here.
We’re especially frustrated and disappointed to see this proposal emerge in this way, because the DAO has only just had the opportunity to rectify things with the removal of kpk and appointment of NOCA. We raised precisely this point during the debate on the treasury management RFP, citing various of the frustrations that have led to this redemption proposal as important discussion points to ensure the DAO does not fall to blows again. We were ignored.
And yet, all of the critics who had been so vocal about Gnosis’ failings up to the new treasury manager selection process — and who have since resumed their criticism in the build-up to redemptions — were completely absent and silent throughout this process. You’d be forgiven for thinking that these critics didn’t want to try and resolve and improve things, but instead have been building up to a raid on the treasury for months.
Worse still, Gnosis’ leadership were also completely silent on trying to change things for the better, preferring a swift appointment of a friendly party, hoping to breeze through the difficulties. Only it didn’t work — they’ve fallen right into a redemption trap through a mixture of wilful omission, negligence and laziness.
Bad For Gnosis
Redeeming the treasury at NAV is poor for a project’s ongoing prospects. It undermines the intrinsic value that sits beneath the redeemed assets. It creates a harmful narrative about the value of the token, and forces a marketable value on intangible assets and goodwill at a single snapshot in time which really should be valued against their long-term potential. It removes optionality and runway from the project, limiting its capabilities for the future.
Where proactive buybacks to remove GNO from circulation could help to concentrate intrinsic value in fewer holders at opportune moments whilst also providing positive buying pressure, redemptions just leak value without control or certainty on the project’s direction. We appreciate the proposal is clear that it is dissatisfied with buybacks to date and that the two mechanisms can co-exist. But redemption at NAV is a far inferior mechanism for the project’s interests.
There are a few specific mechanisms about this proposal that are good for redeening holders but poor for the project:
1. Excluding GNO held by Gnosis Ltd as if it were non-circulating inflates the redemption value artificially, even though we understand much of this is due to circulate when paid out to Gnosis Ltd contributors. This means redeeming holders take a disproportionately high share of treasury, while remaining holders are left with less as GNO held by Ltd enters circulation.
2. The treasury NAV methodology doesn’t seem to give any credit for ongoing cost obligations that the DAO has. That means the same amount of costs would be borne by fewer holders and a smaller treasury post-redemption, while redeeming holders walk away with a share based purely on a snapshot in a moment of time. Redemption should be at a *“fair value”* which accounts for all ongoing costs borne by the DAO.
3. The synthetic gLTD-CLAIM token is purely a mechanism to redeem and dump illiquid and intangible value on the secondary market at any price without respect for its reasonable value. Issuing this as a freely-transferrable token does not reflect the underlying economic reality of these assets. Buyers of this token are likely to be stung because they are unlikely to be properly redeemable at any stage, whether Gnosis succeeds or it doesn’t. It’s one last squeeze of the lemon before discarding the flesh.
4. The $200k of costs needed to implement this proposal would be borne by all of the DAO, even though the benefit accrues to only the redeeming holders, meaning they are being subsidised.
Put simply, if this proposal is to be accepted, we think that ongoing GNO holders will be left holding the bag with a significantly worse deal. This creates a big incentive to redeem, and perhaps even a window for market participants to attempt an arbitrage by buying more GNO to redeem.
At worst, we think this could kick off a major death spiral for whatever remains of Gnosis afterwards.
Bad For Holders
And yet, we’re not voting against here, because we feel that this proposal also exposes the really poor deal that holders are getting. We don’t intend to fight to preserve the status quo.
Comms from Gnosis’ leadership shows a complete and willful disregard for this subject, and for tokenholders’ rights more generally: “If needed we are prepared to sit this out until it becomes clear that this approach will not succeed”.
Do they know something that we don’t? Is it certain that this proposal will never succeed because the deck is already stacked? To us, this comment is steeped in irony for an organisation that preaches the values of decentralisation. Coming from the people who claim that all value generated by Gnosis accrues to the GNO token, it’s a horrendous blunder.
Our view is that leadership doesn’t have a choice to “sit this out”. Ignoring this is a willful omission, and exposes a lack of care and interest. Leadership should be the first people into the trenches, firing off blows at this adversary to show that they mean business and will not have their treasury raided. Now is the time to reassure holders of the token’s value and the project’s future. But instead all we get is more heads in the sand.
Gnosis’ leadership have a few options here, most of which are bad for holders:
- They can try to take this down before an outcome. In fact, @Kenk has already been deployed with some governance process bullshit to try to slow this thing down by lining up an invalidity claim (despite a myriad of other proposals with equally obvious floors getting through). This totally undermines confidence in the DAO and ultimately is just more hurdles to buy time. It will only serve to embolden critical holders.
- They can hope that the proposal fails to meet quorum, given this has happened so frequently in recent times. Again, a total failing of the DAO’s operations, but one that this time may help them. They just need to be careful that some large holders don’t tactically withhold until the last minute, when it’s too late for Gnosis’ leadership to intervene. And, even if this does work, they need to be mindful that failed quorum is not an end to things.
- They can try to vote it down with their reserves of voting power. Gnosis’ leadership clearly control a significant amount of GNO. GIP:140 exposed a dormant-yet-aligned trove of 70k GNO that can be drawn on to vote when needed. But taking this option proves that the deck is stacked and the DAO is purely governance theatre, which destroys confidence in the DAO and undermines the credibility of leadership. This could trigger a sell-off in GNO, as holders realise they will never have the control they’ve been promised.
- They can ignore the vote if it does pass, perhaps on some grounds of invalidity or unenforceability. Again, this completely destroys confidence in the DAO and could trigger a collapse in GNO.
There is also one reasonable option that we are stunned to see leadership choosing to forego:
- They could respond and make the case for why this proposal does more harm than good. It’s not a hard one to make, the proposal clearly skews things in favour of redeeming holders. This would even provide helpful justification for voting it down or taking some other action.
But instead holders get the worst possible deal: no communication; no reassurance; no proactive engagement; no effort to protect the token; no shits given.
Whether they redeem or stay, there is little good that comes from holding GNO here.
Best Of A Bad Bunch
This proposal is bad for the project because it raids its runway and damages confidence. But it’s far worse for the remaining holders, who are left with a bad deal from the redeemers and a bad deal from Gnosis leadership.
We seriously considered voting against because all the possible outcomes are bad. But we certainly didn’t want to support any efforts to sweep this under the carpet. We acknowledge that this proposal does provide some value in exposing Gnosis’ flaws and trying to seek some action.
We abstain because we don’t want to stand in the way, we don’t want to take a side, and we’re tired of this drama. If the proposal passes without a word from leadership, we will seriously entertain redeeming all of our tokens, if only because the deal is so incredibly one-sided that it’d be foolish to take the other side.