GIP-19: Should Gnosis DAO burn 715k GNO?

GIP-19

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title: Should Gnosis DAO burn 715k GNO?
author: Friederike Ernst
status: phase-1
type: Meta
created: 2021-12-06

Simple Summary

The very centralized supply of GNO has been an issue for the Gnosis ecosystem for a long time. We propose that 715k GNO vested to the DAO since November 2020 shall be burned.

Motivation

Gnosis minted 10M GNO tokens in early 2017. 4.6% (460k GNO) were sold in a reverse Dutch auction in April 2017. 400k GNO went to Consensys and 650k GNO went to the team over the last almost four and a half years. More GNO was distributed through the ecosystem fund. Gnosis also strategically bought back some GNO from the market over the last years, most notably 71k GNO since May 2021, so that all these movements of liquid tokens happened within a pool of 1.5M of the full 10M GNO.

Of the remaining 8.5M GNO, 500k are vested to Gnosis Ltd over five years (starting Nov 2020) and 8M are vested to Gnosis DAO over 8 years (also starting Nov 2020).

The centralized distribution of GNO has always been the elephant in the room. While it was never the intention of the Gnosis team to release more GNO than needed for operations, we have in the past not acted on burning the remaining GNO tokens to allow us to implement proposals like the xDai merger which now looks slated to go ahead, see the Gnosis and the xDai snapshot votes respectively. For this, the Gnosis DAO will need 285,398 GNO. We propose that the remaining 715000 GNO so far vested to the Gnosis DAO be burned.

Specification

The Gnosis DAO should burn 715k GNO of the 1M GNO vested to it so far. The remainder will be used for the STAKE merger.

Rationale

While it is possible that Gnosis will use some of the vesting GNO for future endeavors, we think the Gnosis DAO should not stockpile liquid GNO.

17 Likes

Pardon my ignorance. But what is the GnosisDAO supposed to do with those funds and why hasn’t it done that? Is it likely, that the GnosisDAO will use the funds allocated for 2022?

This initiative sets a right precedent for the use of the vesting GNO. It empowers current GNO token holders and shows how the GnosisDAO acts in their best interest.

I think we’re on the right path to reduce the uncertainties of GNO. It would also be great to have a plan for the use of all of the remaining GNO supply. Even though nobody knows 100% for sure, a rough estimation would give investors peace of mind.

8 Likes

The fact that Gnosis Ltd retained so many funds after the token sale was owed to the token sale setup [reverse Dutch auction]. Gnosis leadership has been vocal about not “dumping” them on the market, but didn’t burn them either, instead stressing that these funds could be used in the future to grow the ecosystem through mergers or by incentivizing adoption. However, they were not earmarked for anything in particular. To demonstrate the commitment to not “dump” them, we vested them to the DAO over a period of eight years. Now it has become pretty clear how much of that sum the DAO will need for the first year (i.e., the 285k for the STAKE merger). In order to assure people that the DAO won’t dump the rest, it should be burned.

Alternatively, it could be locked until the end of the 8yr vesting period and vest the year following.

3 Likes

Yeah – I agree with the sentiment. However, to say it with Niels Bohr: Making predictions is difficult, especially if it’s about the future. And I would argue that this goes doubly for our ecosystem. Who knows what could happen in the next eight years? Would committing to a certain course of action help though? If there is no immediate use for the GNO they will go back into the vesting pool and just prolong the vesting period? Or half goes back, half is burned?

1 Like

Long road ahead to merge more sidechains and projects, GnosisDAO should keep and re-vest GNO :slight_smile:
Without joke I think original GNO Dutch auction participants in lost in ETH terms, so it will be great show some love to those brave people (addresses) from 2017 who support Gnosis from the beginning and make any step in their directions. Lets say vest 100K of GNO for original Dutch auction participants for next 8 years and 615K GNO re-vest for Gnosis DAO

2 Likes

So you think there should be a drop on the original participants? What percentage of the participants do you think still have access to their old address? What do we do about people who pooled funds to participate? What about people who bought in the token sale at USD 40 and sold in Jan 2018 at 400?

Or do you drop on those who held since the token sale in 2017? How would people go about proving that?

1 Like
  1. Not drop. Create opportunity to claim vested GNO in 8 years terms using same address as original Dutch auction participant address.
  2. Nobody know the right answer. Maybe vested batch of GNO will be never claimed and it is equal to burning GNO. Maybe most of original participants stil keep control and will be able to claim.
  3. It is no GnosisDAO responsibility. When OWL distribution happened nobody answered questions like this.
  4. They are lucky traders. I hope they bought more GNO after successful trade :slight_smile: Not GnosisDAO question. Lets think about original auction participants.
  5. Hmm… interesting view. From my perspective simple answer - original Dutch auction participants eligible to claim vested GNO.

I am clear understand that my proposal is draft and not ready to implement. It is my attempt to view on “burn GNO” question from angle of person who spent ETH in 2017. A lot projects from 2017 ICO wave not existing any more and lost funds. Gnosis delivered a lot and the future looks very interesting the Gnosis DAO, team, ideas are great. Truly Gnosis supporters had a lot of opportunities to contribute to Gnosis work and be rewarded. But the idea to make good wave to original supporters no matter where, how they are now sounds good to me.

2 Likes

As a holder from the ICO, I support “BURN”

3 Likes

I personally think that since the STAKE GNO swap is not done, we should refrain from discussing anything that might impact the price of GNO. It isn’t right.

The agreement to swap was based on conditions as they were when the vote was taken.

3 Likes

Navin makes a good point. Seems that doing any formal vote should happen after the STAKE/GNO swap is complete.

Having said that, it seems that getting a “phase 1” temperature check through this discussion at this time is a good thing.

I lean toward supporting the initial (and measured) token burn, since they were somewhat of an inadvertent outcome of the initial 2017 Dutch auction going so well, and selling such a small percentage of the GNO tokens on offer.

Hi, imho, if such actions/decisions benefit only to original Dutch auction participants, I doubt that the elephant in the room will be killed. Token holders are token holders and should be treated equally. Nobody forced some original Dutch auction participants to sell their tokens (or to buy more). And for those non-original Dutch auction participants who bought GNO tokens on the market and hodl in their wallet, nobody told them in advance that ‘all token holders are equal but some are more equal than others’. I would welcome any solution, provided that it applies equally to token holders.

1 Like

My issue was that STAKE holders had no way to swap when this conversation was happening

Now that swap is live, I think it is fine to take a temperature check.

Having said that, waiting for a day might be even better given that the auction ends Dec 20 3pm CET.

1 Like

With a 165k ETH warchest, it seems that a goodwill gesture of burning a portion of the vested GNO would be hugely beneficial for all holders. In the event there are cost overruns, some ETH can be used to cover them and replenished later with small GNO sales once additional GNO vests (especially in the event of a large squeeze in GNO token price, when Treasury diversification makes the most sense and brings value to GNO holders through additional ETH holdings and yield farming activities). In terms of value accrual, it seems to me that convincing the market that all un-needed GNO will be burned is much more important than potentially controlling that liquid GNO through a DAO. Large supporter of this idea.

3 Likes

I may be missing your point, but I believe that this action does apply equally to all holders regardless of when they purchased GNO. The market is fearful of being dumped on and so is discounting GNO token value as though some portion of the ~7.8mm GNO controlled by the Treasury may be dumped. If the market becomes convinced that the most likely path will result in burning a large portion of those holdings, then the liquid market cap of ~$800mm becomes seen as the fully diluted market cap, rather than the market currently viewing the fully diluted market cap as ~$4.5bn. That would allow the token to appreciate and benefit all holders.

2 Likes

This is especially true given current GnosisDao ETH holdings of 165k ($660mm) mean that in the event we believe all Treasury GNO will be burned the market is currently only valuing CoWswap, GnosisSafe, seed investments, etc at ~200mm.

3 Likes

My point was answering to comments above where a suggestion was made in favor of holders who participated to dutch auction. I beleive token holders should be treated equally. On the proposed solution, I would support a burn of the remaining unused 715k GNO. As the circulating supply is currently around 1.5 or 2.0 million, a 715k is significant part of it. If swapped against any other asset, this is the elephant in the room. To put things in parallel with stock market, a company owning his own shares usually decide to cancel by a reduction of capital because if it flows on the market there is a risk perceived the overflow impact negatively the market pricing.

@ernst Should we move this to phase 2? Seems to have universal support and to my mind is an easy choice with limited downside. Any shortfalls in funding can be covered with ETH, and more GNO unlocks within a year I believe. Then we get to have this conversation all over again.

1 Like

Yes! Agree, I will move it to phase 2.

4 Likes

It looks like we finished Phase 2, so when is the timeline to get this to a snapshot vote (Phase 3)? Apologies, new to the protocol.

2 Likes