GIP 16 - Gnosis Chain - xDAI/Gnosis merge

GIP-16: Gnosis Chain

  • Let’s do this!
  • Make no changes

0 voters

GIP: 16
title: Gnosis Chain - xDAI/Gnosis merge
author: Team members of xDAI and Gnosis
status: Draft
type: <Meta>
created: 2021-11-08

Simple Summary

The Gnosis and the xDAI community should merge their tokens and together develop the xDAI Blockchain under the name “Gnosis Chain” with an ambitious technical roadmap.

Abstract

The xDai Chain serves an important role in the greater Ethereum ecosystem. Over the past 3 years, many projects have used xDai for scaling, stability, green deployments, and interoperability (TokenBridge was the first widely available bridge in production). xDai has a unique and passionate community of advocates and users, and offers a complete and feature-rich toolset for devs. While other chains have mainly attracted clones of existing Ethereum projects, xDai has more forward-thinking projects and native-built applications flourishing within its ecosystem.

Examples of unique applications on xDai are:

  • POAP
  • Dark Forest
  • Circles
  • Ethereum Swarm
  • CLRFund
  • Perpetual Finance
  • Nifty Ink
  • CryptoStamp from Austrian Post

…and many more projects on https://www.xdai.world/

While many projects leverage xDai during the build phase, they often consider it as a staging ground and look to other chains for long-term migrations or multi-chain deployments. We want to expand the scope of xDai and turn it into a destination chain and permanent home for these and many more projects in the future.

What is required?

Social signal

The narrative that xDai is a “Comprehensive & Complete Chain” requires a strong branding initiative. Changing the name to the “Gnosis Chain” advances this narrative, aligning the Gnosis brand with the chain and larger ecosystem.

Collecting commitments from projects launching on Gnosis Chain (GC) to stay on Gnosis Chain is also important. Commitments create strength in numbers - as projects recognize other projects planning long term deployments on GC, they know they can rely on infrastructure maintenance and development. We believe a strong commitment from Gnosis in combination with a comprehensive technical roadmap discussed with major stakeholders will create this signal.

Bold Technical Roadmap

While we believe the xDAI Chain provides a lot of value as is, a technical roadmap will encourage long-term commitments from projects. Key points (in order):

  • tight Ethereum compatibility with migration to Ethereum 2 security model
  • extremely inexpensive using advances in rollup technologies
  • as decentralized as possible
  • as trust minimized as possible

Low cost and Ethereum compatibility are the two primary required selling points. Given these, we will strive for decentralization (e.g. beacon chain with a large and diverse as possible validator set) and eventually trust minimization (e.g. bridges controlled by constructions like ZK-EVM).

Specification / Token Merger

STAKE token

Total Supply of STAKE + accrued emission until the end of merger is available to swap. Supply is defined as ~8,653,872 STAKE (number updated daily based on emissions) + a maximum 15% rewards accrued from all staked tokens only. For reference, there are currently ~1,856,500 STAKE tokens staked in the POSDAO and EasyStaking protocols. The maximum yield is 15% and effective yield is 10%. Assuming all stakers keep all STAKE in these protocols during a 6 months merger period (unlikely, as some holders will exit and migrate STAKE to GNO), the maximum additional accrual would be ~92,825 STAKE, resulting in a theoretical max realized supply of ~8,746,697 STAKE. https://dune.xyz/maxaleks/xdai-staking

The token exchange rate will be pre-determined by assessing a 14 day TWAP (Time-weighted average price) GNO (Binance) to STAKE (Huobi) prior to posting the proposal on the forum for discussion. The rate has been measured at: 0.02966 GNO/Stake. We suggest an additional 10% on this rate which will set the exchange rate in this proposal to 0.0326292707 GNO/STAKE. Holders of STAKE token will have 6 months to swap STAKE to GNO inside a swap contract following the deployment and announcement of the swap contract. The swap will happen on the Ethereum Mainnet and on xDai.

Given the above discussed theoretical maximum of 8,746,697 the amount of GNO that GnosisDAO needs to allocate for this proposal will be 285,398 GNO which equals ~19% of the current circulating supply of 1.5M GNO and would set the new circulating supply to 1,785,398 GNO.

EasyStaking staking and POSDAO staking will continue to receive emissions from staking until xDai merges into the beacon chain where the GNO token is a staking token. After that, POSDAO staking rewards will be turned off. EasyStaking will work indefinitely but rewards will be turned to zero when the swap expires.

xDai token and transaction fees

Planned EIP-1559 activation on the Gnosis chain will directly impact the xDai stablecoin. When EIP-1559 is implemented, xDai base fees will be burned within the protocol. This will result in a discrepancy between the xDai balance on the network and the DAI balance from Ethereum locked in the xDai bridge. To fix this imbalance, the corresponding amount of DAI on the mainnet will need to be used as well. This DAI will accumulate and can be used in a TBD fashion to support chain operations. One initial idea was to use this DAI for buy back and burns. Alternative use could be subsidizing bridging costs.
Since its early days (dating back to 2018) xDai chain has operated with the recommended gas price of 20 gwei. However, users are usually able to make a transaction even with the gas price of 1 gwei. Midterm those very low gas prices are not sustainable and thus the chain will target a 100 GWEI gas cost ($0.01 == 100k gas). For applications (e.g. games) that need even lower fees rollups (e.g Arbitrum) on Gnosis chain will be recommended.

Incentives to develop Gnosis Chain ecosystem

GnosisDAO will reserve 400k GNO to develop the Gnosis Chain ecosystem and incentivize usage. Applications native to the Gnosis Chain (e.g. Circles and DappNode) will be prioritized to create a unique value proposition.

UBI/Circles

It is Circle’s goal to establish a new global currency that is distributed continuously equally as UBI. This can be a perfect way to onboard new users. It allows users to create a wallet and immediately have tokens (Circles) they can use to interact with on-chain (buy NFTs, buy into tokens, DAO participation, etc).

While Circles is purely p2p in its current form we can establish another “group layer”. Those groups can have their own processes on how to become a member (e.g. through an identity verification call). Those group Circles that are Circles of trusted groups can be used to apply incentives at scale in an effective way. GNO would be used to provide liquidity for those “group Circles”. Users will acquire Circles (group Circles) that will have immediate real value/liquidity.

At the same time it will allow these groups to become instrumental in running the infrastructure of Gnosis Chain as validators. Dappnode offers the framework even for groups with only some technical expertise to contribute to the decentralization of the chain.

DeFi

CowSwap

Currently the liquidity on xDAI is limited. It is not possible to do e.g. a $100k trade without incurring significant slippage. While paying large amounts in incentives to attract even larger amounts in TVL has been an approach used by other chains to attract required liquidity, Cowswap can offer an additional route. In Cowswap professional market makers can be integrated directly. For the top ~30 tokens GnosisDAO can establish liquidity without requiring enormous amounts of capital.

Other DeFi protocols

Gnosis DAO can consider adding liquidity to the various DeFi protocols of interest on the xDAI chain to support their adoption.

In-house builds

Gnosis Chain will support an in-house team to complement and expand the existing ecosystem through open-source protocol deployments. Incentives will be prioritized for these protocols, co-opting similar strategies that have proven successful on other chains (e.g PancakeSwap on BSC).

Non-Defi

  • Gaming
  • NFT projects and marketplaces
  • DAOs
  • Storage
  • Analytics
  • Carbon offsets
  • Public goods

In total, Gnosis DAO is ready to provide 400,000 GNO (~$190 million) in the form of various incentives to help develop the Gnosis chain, attract new protocols, and grow the user base.

Public goods

Gnosis Chain will allocate 5% of its incentivization funds (20,000 GNO) as permanently locked staking tokens for projects aligned with the overall mission of Gnosis Chain.

These projects will satisfy publicly drafted criteria submitted to GnosisDAO that pertains to providing public goods, either related to the Ethereum ecosystem as well as more broadly aligned initiatives. Projects can use these permanently locked staking tokens to earn staking rewards and participate in network governance.

This model borrows from Regen Foundation’s Community Staking DAO program.

Core infra

Gnosis Chain will look to attract core Ethereum infrastructure projects that are currently unavailable on the xDai chain. Gnosis Chain will cover the costs associated with such deployments. Examples include (note these projects are included for illustrative purposes only and have not yet been approached or committed to deployments) :

  • Etherscan, Beaconcha.in
  • Infura, Alchemy, Covalent
  • Nansen
  • Zapper, Zerion
  • Opensea, Zora

Product Strategy

xDai Chain

  • xDai Chain will be renamed to Gnosis Chain.
  • Gnosis Chain will be merged into the upcoming Gnosis Beacon Chain as a shard. The chain will be secured by Gnosis Beacon Chain validators instead of xDai POSDAO validator set.
  • xDai token will remain a native token of Gnosis Chain.
  • POSDAO Staking on xDai will be deprecated, Gnosis Chain validators will have the opportunity to become Gnosis Beacon Chain validators.
  • Delegation on POSDAO Staking will be deprecated. Delegators can continue to participate in Beacon Chain consensus.
  • Gnosis Chain will continue to focus on delivering infrastructure for various protocols to cover all popular niches: DEXes, Lending and Borrowing, Staking, Compounding, Insurance, Prediction Markets, Gaming, UBI, NFT, DAOs, Analytics etc. and supporting tooling such as bridges, explorers, wallets, clients, node providers, etc.
  • Gnosis Chain adoption requires an additional push in terms of business development and marketing.
    • A new marketing-focused resource will be created to drive business development and marketing activities of the Gnosis Chain. Such activities will include attracting well-performing and well-known multi-chain protocols to launch on the Gnosis Chain.
    • Onboarding experience for new projects and their users shall be further improved with upgrades to on-ramps, bridges and developer tooling.
    • Gnosis may consider adding liquidity to various DeFi protocols of interest on the Gnosis Chain to support adoption.

Easy Staking

EasyStaking rewards will be turned to zero, in alignment with the expiration of GNO/STAKE swap.

BlockScout, Bridges, New Products

BlockScout Block Explorer, xDai Bridge, Omni Bridge, NFT Bridge, and zkBob can undergo a spin-off with distribution of protocol tokens to GNO token holders.

Brand Strategy

  • xDai Chain will be rebranded to Gnosis Chain.
  • Gnosis Chain will adopt Gnosis :owl: brand vision.
  • Stake Beacon Chain will be rebranded to a new version of Gnosis Chain, e.g. 2.0.
  • xDai token will be the native token of the Gnosis Chain.

Decision process

Steps to initiate the merger:

  1. Buy-in from GnosisDAO/GNO holders. Current Proposal will be published for discussion and voting by GNO holders following the Gnosis governance process. Snapshot voting and public discussion will be used for signaling.
  2. Buy-in from STAKE holders. Current Proposal will be published for discussion and voting for STAKE holders following the xDai governance process. Snapshot voting and public discussion will be used for signaling.

Communications Plan

Once the Snapshot voting is completed, an official announcement will be made within 1 month.

Press Release will be prepared and sent out to interested parties as a part of the official announcement.

Deal Timeline

  • Both sides will follow their own governance processes (xDai / Gnosis). The proposal will be presented to both communities as a forum post and open for a three-weeks-long public discussion.
  • Following the three week discussion period, a snapshot vote will follow to measure community sentiment. Each team will have it’s own vote where STAKE and GNO holders can participate. Voting will last for 7 days.
  • If the proposal is supported by both communities, work on the merger will be prioritized by both teams.

Amendments

  1. Guaranteed Stake/ETH ratio
    The current proposal suggests a GNO/Stake ratio of 0.0326292707 GNO/STAKE . In addition to that GnosisDAO will guarantee a minimum Stake/ETH ratio.
    We are suggesting to guarantee a ratio of 0.003915512484. The offer will be implemented using Gnosis Auction filled with 20k ETH to buy GNO.
  2. Distribution of GNO through other Entities
    If a DAO would form that is controlled by current projects on xDAI some of the GNO for growth incentives could be delegated to this DAO. This DAO would have the mission to use the GNO only for growth incentives of Gnosis Chain but could establish an independent process of allocating those. An Ecosystem DAO was formed last week and an official proposal of this DAO to GnosisDAO is expected.
  3. Conditional Execution
    The proposal will only be executed if the corresponding snapshot proposal posted in the xDAI organization is accepted by a simple majority. There should be no hostile takeover.
24 Likes

I like the idea. I think xdai is a great chain but they missed marketing when it was time. Rebranding it to Gnosis Chain and introducing it to all gnosis users will be amazing for the projects on this chain.

6 Likes

Sounds interesting but also risky to invest in revamping a sidechain when Validium solutions are approaching, which are supposedly more secure at similar costs versus general sidechains.

Are there any specific value propositions or product-market fits targeted with Gnosis Chain?

1 Like

Why buy a sidechain at the end of 2021 ???
Don’t you think that rollups will completely dominate the market in 2022?

Gnosis DAO Community Call Slides with GIP-16 proposal

2 Likes

i voted NO because i think Xdai Stake should be it’s own thing and this sounds like xdai faithfuls are being robbed

8 Likes

this is not a merge, is in an adquisition, there’s no way xdai community will accept the stake swap as it is considered very undervalued. A token swap would just eliminate the potential profits of a more realistic valuation for the xdai network.

12 Likes

So far we can see a lot of positive feedback from the Gnosis community. Also, DAPP on xDAI have so far reacted postive. Negative feeback comes from some Stake holders. Here the main concern is not the merge generally but the concrete ratio of GNO/Stake.

Here it is very important to have a few information about GNO.

Generally we agree that Stake (xDAI) has been undervalued so far! Though the same is true for GNO. We believe my merging the 2 projects (and tokens) we will together reach the critical mass to build a chain that is widely recognised as a good place for DAPPs.

A few useful to know facts about GNO:
GNO controls GnosisDAO - GnosisDAO controls assets of >150k ETH.
So the 1.5m GNO control 150k ETH - so the value from those assets alone would put 1 GNO at 0.1ETH. This was roughly the price of GNO in ETH during the TWAP period.

Now - Gnosis has built many many applications with Gnosis Safe and Cowswap currently the 2 most prominent ones, followed by https://gnosis-auction.eth.link/ and Zodiac. For the Safe and Cowswap, there are proposals on the table to spin out from Gnosis and issue their own tokens. So GNO token holders can expect to both get SAFE and COW tokens.

Here are 2 dashboards showing the success of Safe and Cowswap.

Some have argued with the total supply of GNO. Here it is very important to note that >90% of the non-circulating supply (8m GNO) are controlled by GnosisDAO and thus GNO holders. So basically this GNO will only be used if current GNO holders approve it. Thus any dilution that is against the interest of GNO holders is unlikely to happen. But powerful proposals that put the GNO to good use like potentially this proposal are possible.

2 Likes

Regarding the valuation of the two projects what should be stressed on the Gnosis side is also the following

  • The circulating supply of GNO is 1.5m. Of the remaining 8.5m, 8m belong to GnosisDAO and 500k are vested to Gnosis Ltd over the next five years. Depending on how conservatively you look at this, the circulating supply is thus either 1.5m or 2m – the 8m controlled by the DAO (i.e. the GNO token holders) have to be discounted. This reduces the total diluted market cap put forward by some of the critics by a factor of 5.
  • Gnosis DAO controls assets in excess of 150k ETH (mostly in ETH, some other liquid tokens). GNO consequently trades just above book value.

I would also agree that STAKE is currently undervalued! In my books the same goes for GNO, so the proposal seems fair to me.

1 Like

Oops, Martin was faster :woman_shrugging:

xDAI holders are getting ROBBED BLIND by this proposal. VOTE NO if you hold STAKE, or get robbed of a 100x. Gnosis devs are cashing out at the expense of loyal stake holders. SHAME

9 Likes

When reading this, my mind immediately went to BrightID as a way to add legitimacy to group Circles that want to become validators.

1 Like

I agree. This is straight up theft. Why on earth did we hold stake for all this time just to get stabbed in the back like this??

7 Likes

Agree with the proposal. xDai basicly have no voice in this year, and it should not. Gno have a great community and eco-systerm(dao + cowswap + launchpad), I think this merge could combine the commity and user from GNO and the solid tech infra from xDai to make eco-systerm better. I vote yes, and I think you should if you want both GNO and xDai have a better future.

1 Like

The xdai chain is very good.

1 Like

I voted no. xDai and $STAKE have so much potential. EIP-1559 will solve stake’s price and popularity problem. Leave it alone please.

10 Likes

I think it’s an awesome idea. xDai is one of the most under appreciated side chain that deserves more ans more attention and use cases. I have used most of the side chains and L2s I can say xDai has the best community and infrastructure.

Being a part of Gnosis will give xDai a huge rebranding and trust in the industry.

:tada::tada::tada::tada::tada::tada:

4 Likes

100%!
Integrating Circles and BrightID more closely is long overdue. If this proposal will be accepted Gnosis will put a significant focus on Circles and those integrations should be on the top of the list! Generally, we envision this to become a chain of digital identities. Circles can offer a compelling reason to get an identity but brightID is the more general version of it so that all Dapps that want to use identities connected to a Web of Trust can benefit from it!

2 Likes

I my opinion there is a big lack of transparency between the xDai dev team and the community. They promised us eip1559, rebranding, SBC and much more in the last weeks and months. And suddenly this proposal comes out of nowhere, just a few days before the first big update is going to happen, without any statement from the team, but a cryptic statement of igor on twitter.
The community wants and deserves a explanation of the plans and past decicions.

  1. What happend to the rebranding plans? Did Raidguild make a Branding Campaign? And if yes, will it ever going to happen? Or what happend to the plan?

  2. What are the plans with SBC? If the merge will happen, and $STAKE doesn’t exist anymore, how do you plan to run a node? With GNO? How much? Also 32 GNO? This would be against the acutal plan to make it possible for many people to run a node….

I think many oft he negative comments here are because of that communication problem and many people could change their opinion about the merge if the team will make a detailed statement about past and future plans.

6 Likes

Under the new proposal, it would be 1 GNO. It is definitely a big goal to enable as many as possible to become a validator and specifically incentivize smaller individuals that run their own physical hardware.
On this note: both - the collaboration with Dappnode and the idea to start its own beacon chain have been things that were initiated by Gnosis.