GIP: #153
title: Should Gnosis Chain transition into the Ethereum Economic Zone?
author: Friederike Ernst with co-authors Philippe Schommers and Ben Carvill
status: phase-1
type: strategic direction
created: 2026-07-22
1. Abstract
This asks GnosisDAO to align on transitioning Gnosis Chain from a standalone Layer 1 into a ZK-proven Ethereum Economic Zone (EEZ) rollup instance that settles natively on Ethereum. This is not a new chain and there is nothing to migrate to: it is Gnosis Chain, now based on Ethereum, inheriting Ethereum’s security and liquidity directly.
The transition ends the treasury-funded staking subsidy in favor of a fee capture from network activity, unlocks synchronous composability with Ethereum mainnet, and positions Gnosis Ltd, co-architect of the EEZ framework and operator of its first instances, at the center of the emerging market for EEZ deployment and services. The first iteration, targeted for genesis around the turn of the year 2026/27, already delivers 80% of the synchronous-composability unlock for around 40-50% of the total engineering effort, and serves as a stepping stone to the full EEZ specification, expected over the course of 2027.
No funds are requested, this GIP seeks alignment on direction. Aligning early on direction gives the engineering team a clear mandate to design.
2. Motivation: a candid assessment of where we’re at
Gnosis Chain has failed to deliver on its original value proposition. The core value proposition when we started was credible neutrality: a decentralized, low-cost EVM chain run by a large set of independent validators. It proved not to be a good one. Credible neutrality is Ethereum’s home turf, and a smaller chain offering the same qualities with less security and less liquidity gives builders and users no compelling reason to come. Without differentiation there is no usage, and without usage the economics do not close.
The numbers make this concrete. Fee revenue covers only a small fraction of even the minimal cost of security, so security is paid for by the DAO treasury, not by the network. Staking rewards are a dilution offset funded by non-stakers, not yield from activity. Ethereum has the same structure, but at a very different scale: its issuance runs below 1% a year and is partly offset by the fee burn, leaving net dilution even smaller. Gnosis dilutes non-stakers by roughly 2.3% a year. And the subsidy does not stop at security: GnosisDAO also carries the cost of the surrounding infrastructure, from block explorers and RPC endpoints to incentives for third-party protocols. Liquidity has had to be bootstrapped and defended in isolation, and network effects never approached mainnet’s. Every standalone alt-L1 pays these structural costs indefinitely; Gnosis pays them without the scale that could ever cover them.
This is not a failure of engineering: the chain is established, credible, and technically sound. It is a failure of differentiation. Becoming an ordinary L2 would not solve this either: the differentiation problem just moves down a layer. Of the over 100 L2s, most don’t have any meaningful usage and the few that do, don’t differentiate technically but through existing distribution channels.
The Ethereum Economic Zone changes the calculus. The EEZ framework makes it possible to keep everything that works about Gnosis Chain while in addition allowing full composability with Ethereum. This dramatically improves Gnosis Chain’s position from a chain where a fraction of what is available on Ethereum is available to a chain where EVERYTHING that exists on Ethereum, including full liquidity for all tokens, is a single atomic call away. Oracles, on- and offramps, and mainnet liquidity venues can be used directly, as if they were deployed on Gnosis Chain itself; even CEX rails become reachable without bridging.
The opportunity, concretely: speed and cost are the easy part. Gnosis EEZ produces blocks every 2 seconds at sub-cent fees, but faster and cheaper than Ethereum is table stakes; most of the 100+ L2s can claim the same. The singular upside is synchronous composability with Ethereum. No existing L2 offers it, and it is the one axis on which Gnosis EEZ competes alone rather than as one of a hundred interchangeable chains.
This upgrade also comes at a price. We give up what differentiated us so far. Synchronous composability in combination with fast block production is currently only possible in a centralized fashion. There is no version of this upgrade that keeps the large independent validator set at the core of the chain. But seeing that we need to go there anyway, we will leverage it: a chain that is operated rather than maximally neutral can be opinionated about security. It can hold suspect transactions and try to protect users from obvious hacks. The past years of relentless exploits have made it plain that adding layers of security where possible is still very much needed.
3. The upgrade
What is EEZ, and what is Gnosis EEZ?
Two things to hold apart:
- EEZ (the framework) is a way to build rollups that are governed and economically aligned to Ethereum: a credibly neutral public good, with no token, co-led by Gnosis and ZisK, co-funded by the Ethereum Foundation, under Swiss-foundation governance. It is not a Gnosis product.
- Gnosis EEZ (the instance) is a Gnosis-operated deployment of that framework, with GNO economics and xDAI gas, and the transition path for Gnosis Chain.
How it works
Currently, Gnosis Chain is a standalone L1 with its own validators, its own security, and its own liquidity, often bootstrapped courtesy of the DAO. After the transition, Gnosis EEZ produces blocks every 2 seconds against Ethereum’s 12-second slot, proves its state every Ethereum block, and settles to Ethereum L1, using Ethereum block building for execution. Proving starts pragmatic and hardens over time. The first iteration will use an interim proving setup, likely TEE-based, with the concrete mechanism to be selected during technical specification, and moves to real-time ZK proving as the EEZ specification completes. At full specification the instance inherits the complete security assumptions of Ethereum for finalized blocks, with no third-party trust considerations. In the first iteration that inheritance comes with one caveat: an interim proving setup adds an additional trust assumption until real-time ZK proving lands. The direction of travel only ever removes trust assumptions, never adds them.
The mechanism, per the EEZ core protocol: cross-chain state is coordinated through proxy contracts, state transitions are pre-computed off-chain, and ZK proofs verify them on-chain. Each instance registers with a central EEZ registry contract on L1 and appoints its own set of proof systems with a configurable M-of-N verification threshold (this represents a multi-prover design, so no single prover implementation is a trust bottleneck). Verified cross-chain calls execute atomically within a single L1 block, with rolling-hash integrity checks binding every call to the proof that committed it.
At launch, sequencing is centralized: Gnosis Ltd operates the composer that orders transactions, builds blocks, and submits them for proving and L1 settlement. This is a major design choice with consequences for downstream systems. What bounds the risk: every block is proven and settled on Ethereum, so the sequencer cannot forge state, steal funds, or roll back finalized history. The harm a misbehaving sequencer can do is limited to delaying or excluding transactions. We deliberately make no commitment on the future of sequencing here. We will operate the instance, observe what degree of censorship resistance the ecosystem actually needs, and return to the DAO with evidence before deciding whether to keep, constrain, or decentralize the sequencer. Mitigations such as a forced-inclusion path through L1 are options to evaluate then, not launch features.
Synchronous Composability
The unlock is synchronous composability: a contract on the Gnosis instance can call a contract on Ethereum mainnet and use the result in the same atomic transaction: all of it succeeds or all of it reverts. This is what removes the historic trade-off between app-chain performance and shared liquidity and it is something no existing L2 offers.
It is worth noting that at launch, composability is one-directional. Full bidirectional, cross-instance composability follows, as the development of the EEZ protocol progresses, with an intents-based bridge covering the interim and facilitating atomic bridging in both directions.
Consequences of the transition: the Gnosis Chain validator set is sunset, as settlement security moves to Ethereum’s validators, the bridge validator set is repurposed to operate the provers, and the ~350k GNO currently staked (≈27% of circulating supply) is unlocked. For everyone else, nothing changes. Users and dapps keep their addresses, balances, and contract state with full continuity, xDAI remains the fee token, and infrastructure providers run through the transition unchanged, as no redeployment is required outside of simple updates to a configuration.
We do not take the sunset lightly. Making the validator set superfluous is the main regret in this proposal: a large community of independent validators is part of what made Gnosis Chain special, and that loss is real even where security no longer requires them. We intend to find a new role for this community, potentially in the context of Gnosis VPN, where a distributed set of independent operators is exactly what the product needs.
A note on decentralization: We already touched upon this in Section 2, but we want to be explicit about this: Becoming less decentralized is a deliberate position. Ethereum is maximally censorship resistant, and that is exactly why we build on it: censorship resistance cannot be retrofitted, so it belongs at the base. But maximal censorship resistance is a niche, and a limited one. It is incompatible with most financial applications, which need fraud response, compliance, and recourse. Arguably, users should not interact directly on Ethereum at all. What we expect instead is a landscape of less censorship resistant networks on top of Ethereum that deliver the UX and protections security-conscious applications require, while inheriting the base layer’s guarantees where they matter most: for settlement and cross-zone flows. Ethereum becomes the economic operating system; Gnosis, one of its specialized economic zones.
4. Strategic position
Gnosis Ltd is both co-architect of the EEZ framework and operator of one of its first instances. This dual role is the strategic core of the proposal.
Operating the first production instance gives Gnosis Ltd what no one else will have: proven experience migrating a live chain, operating the composer and prover stack, and building the compliance, privacy, and control modules that regulated users need. That makes Gnosis Ltd the natural provider of EEZ-related services as the framework proliferates. This includes bespoke instances for banks and institutions that want on-chain operations with Ethereum settlement but without building a chain, design-partner builds for FinTechs, and instance operation as a service. The framework is a public good; the expertise to deploy and run it commercially is not.
Revenue for the instance itself comes from fee capture at the prover, priced dynamically by route (L2→L1, L2→L2, complex cross-chain flows). It is a volume game where break-even depends on ecosystem growth, not per-transaction margin. The ecosystem strategy targets the audiences that generate the most cross-domain flow such as DeFi protocols (perps, lending, and solvers that gain atomic access to mainnet liquidity), FinTechs and Neobanks (Ethereum’s reach plus the compliance and privacy a regulated business needs), asset issuers (one canonical asset zone-wide instead of bridged wrappers), and institutional operators, the highest-value, longest-cycle audience and the direct pipeline for Gnosis Ltd’s instance-as-a-service offer.
GTM would likely see the chain be embedded within FinTech products, and as such over time may see an SDK being developed to allow scale. But in the early phases we seek design partners to build key modules that enable products to be compliant, or to be privacy enhanced. Also the onboarding experience will be optimized for both humans and AI agents.
Gnosis Ltd’s own products (Pay, Circles, VPN) anchor the consumer layer and gain same-transaction access to L1’s significant stablecoin liquidity.
5. Economics, GNO & governance
GNO after the migration. The first question every delegate will ask: what does GNO do once staking ends? Today, GNO secures the chain through staking, with rewards paid from the treasury. That is a dilution offset, not yield from real activity. Post-transition the subsidy ends, and value is intended to accrue from fee capture on real network revenue instead. The concrete mechanism of how xDAI revenue is tied to GNO tokenomics is deliberately not detailed in this GIP; routes under consideration include a fee-share or buyback tied to instance revenue. A later-stage GIP will propose a specific design once prover economics are observable in production.
Governance: Currently the DAO does not govern the direction of Gnosis Chain, as the validators operate the network, and it is not possible for the DAO to enforce validators to take action. With the validator set being sunset, governance splits as follows:
- EEZ governance (Ethereum-led) governs rollup protocol changes, prover specification, and L1-to-L2 messaging primitives. Governed through Ethereum’s processes, meaning EIPs introduced on L1 will be reflected on Gnosis Chain.
- GnosisDAO governance governs gas token policy for Gnosis Chain, fee allocation, any potential ecosystem treasury, and anchor partner funding. This essentially continues what the DAO governs within Gnosis Chain currently.
- Prover operation: today’s bridge validators take on a new role. Native L1 settlement supersedes the xDAI bridge and its validator committee, but the operators themselves are not discarded: the intent is for bridge validators to run the instance’s proof systems, shifting from validating the bridge to proving the chain. This keeps a known, accountable operator set inside the security model and gives the M-of-N multi-prover design its initial operators. How prover appointments are governed longer term is specified at the second-stage GIP.
6. Budget and timeline
Budget requested: none. The R&D contribution required to scope the Gnosis instance specifically has so far been funded from within the existing GIP-128 envelope. More resources will be requested within the framework of the GIP-128 successor proposal; that funding need exists regardless of whether the EEZ transition happens. The overall infrastructure budget should reduce in the mid term with the EEZ Gnosis instance.
Timeline: genesis targeted for December 2026/ Jan 2027 (validators sunset, first EEZ block produced), conditional on the broader EEZ dependencies landing by summer 2026. Full EEZ specification, including bidirectional composability, nested calls, and real-time ZK proving, is expected to land over the course of 2027. The framework runs on a working devnet today, including end-to-end cross-chain execution.
The first iteration of the Gnosis EEZ instance will already deliver 80% of the synchronous-composability unlock available today, for around 40-50% of the total engineering effort. Much more will be possible in the future when dapps are designed with EEZ interoperability in mind. Gnosis Chain will use the first iteration (atomic L2→L1 calls, interim proving) as a stepping stone to the full EEZ specification while already reaping part of the rewards on the way there.
7. Conclusion
Gnosis Chain as a standalone L1 has run its course. The EEZ transition keeps the chain, its users, and its applications, and upgrades the foundation underneath them: Ethereum’s security inherited every block, mainnet liquidity accessible in a single transaction, a security budget funded by revenue instead of dilution, and Gnosis Ltd positioned as the reference operator in a new category of Ethereum-aligned rollups.
GnosisDAO is asked to commit to the direction, not to a final technical design. Alignment now gives the engineering team a mandate to design against and the ecosystem team a green light to begin partner conversations in earnest.