GNO Utility and Value Proposition

GNO Utility and Value Proposition

With the GIP16 proposal that suggested a merger between xDAI and Gnosis, many questions have arisen about the utility of the GNO token. The Snapshot proposals from both teams, xDAI & Gnosis, have since passed successfully, paving the way for Gnosis Chain.

This post aims to shed some light on the main value propositions and utility of the GNO token beyond governance. The post will be updated periodically. Below are the main use cases for the GNO token within the Gnosis Chain and GnosisDAO ecosystem.

GNO as staking token for the Gnosis Chain

GNO will be the staking token for Gnosis Chain. To understand what Gnosis Chain aspires to be, read this Tweet thread from @mkoeppelmann on what role Gnosis Chain should play in the wider Ethereum ecosystem.

Since xDAI’s inception back in November 2020, the chain has seen a significant amount of activity. Since May 2021, transaction fees have exceeded 200k xDAI every month, with some months seeing fees over 500k xDAI. Until EIP-1559 these fees went to the validators, now they are partially burned and partially paid out to the validators. Burning xDAI leaves “orphaned” DAI on mainnet that are used to buy back and burn STAKE (soon GNO) – this means both the burned and the disbursed part of the fees directly benefit GNO holders.

Significant revenue is also generated by the bridges.

The Gnosis Beacon Chain is live and allows any GNO holder to become a validator. The minimum requirement to run a validator is 1 GNO. Please find a rewards table with different validator scenarios below.


High yields can be expected, depending on the number of validators. If you are interested in running a node, check out the official documentation for more information. If you are interested in the technical details of the Gnosis Beacon Chain, check out the official Github organization. Very soon a DappNode.io package will be released, which will allow a much-simplified validator user experience for everyone.

Airdrops

GNO holders will also benefit from projects incubated within Gnosis that are in the process of spinning out. For example, as a GNO holder, you will be entitled to participate in CowSwap’s airdrop. As stated in the proposal submitted to the GnosisDAO, if the proposal passes, GNO token holders will get up to 20% of the total supply of CowSwap tokens. This 20% can be understood as follows:

  • 5% as a direct airdrop to GNO holders.
  • 5% as a vested airdrop to GNO holders who commit to holding their GNO for 1 year.
  • 5% vested to GnosisDAO and thus under the direct control of GNO holders.
  • 5% as investment options to buy vested COW tokens with GNO at a fully diluted valuation of $150M.

All vesting periods are for 4 years with linear vesting.

For GNO Token holders the snapshot will be taken on January 9th. GNO holdings on Ethereum as well as Gnosis Chain will be eligible for the airdrop. If you want to participate in the potential airdrop of COW Tokens, you must swap your STAKE on January 9th at the latest (you have time until January 9th midnight 24:00 UTC). All GBC validators will be eligible, as well as the following LP Token holders:

  • Balancer v2 (Mainnet)
  • Uniswap v3 (Mainnet)
  • SushiSwap (Mainnet)
  • HoneySwap (GnosisChain)
  • Symmetric (GnosisChain)
  • Swapr (GnosisChain)
  • Elk (GnosisChain)
  • SushiSwap (GnosisChain)

CowSwap had over $3.2 B in trading volume over the last months and is currently on par with ParaSwap. The growth rate CowSwap has experienced in their monthly trading volume is sizeable:

image

It has been proposed by community members that the Gnosis Safe will do a similar airdrop.

It is expected that as a staker on Gnosis Chain, you will be eligible for all airdrops.

A large diversified treasury that doesn’t rely on GNO

The transition of Gnosis from a traditional for-profit organization to a DAO has left the GnosisDAO with a substantial treasury to manage. It currently holds +165K ETH without considering seed investments, making it the largest existing DAO treasury without considering native tokens by https://openorgs.info/. The treasury is currently in two accounts, both controlled by GnosisDAO: Wallet 1, Wallet 2. In the chart below, you can see some of the weekly revenues such a treasury produces.

GnosisDAO’s treasury will be utilized for yield farming activities. The activities yield roughly $1M in income on a weekly basis, making GnosisDAO effectively an index fund for all of the innovation happening around Ethereum. For the last several months, a fraction of the non-strategic farming rewards were used to buy back GNO. 71115 GNO have been bought back since then. For more information about GnosisDAO treasury management read the treasury management proposal.

Current GNO distribution and GNO burn

As outlined in this post, the unknown release schedule for the outstanding GNO, which is over 80% of the total supply has always been a concern for investors. This is why GIP-19 proposes starting burning the remaining unutilized GNO.

Below is a breakdown of the current GNO token distribution and future allocations:

  • 1.86M GNO are currently in circulation out of 10M total supply.
  • 0.5M GNO started vesting linearly in November 2020 to Gnosis Ltd for the period of 5 years.
  • 8M GNO started vesting linearly in November 2020 to Gnosis DAO for the period of 5 years.
  • 285,398 GNO were taken out of the already vested GNO to GnosisDAO to allow the STAKE merger.
  • 75,000 GNO were taken out of the already vested GNO to Gnosis Ltd to pay outstanding debt.
  • The merger proposal also allocates 400k GNO to ecosystem development. This will be taken out of the vested GNO contract to GnosisDAO on an on-demand basis.
  • To pay for the validator rewards on Gnosis Chain, additional GNO has to be reserved. Given a likely inflation rate of 1.32%, it is unlikely that more than 300K GNO will be needed in the foreseeable future (10 years). It might as well be the case that GNO will be deflationary at some point in the future thanks to EIP-1559.

Given these numbers, it seems unlikely that more than 3M GNO will ever be needed to maintain a thriving Gnosis ecosystem (1.86M circulating supply + 0.4M for ecosystem growth + 0.3M for validator rewards = 2.56M). The possibility to burn the remaining GNO should be considered. GIP-19 is the first step in this direction.

This post will be updated to reflect the latest changes to GNO.

37 Likes

Fantastic to see such a clear utility and value proposition that the GNO token. Gnosis has always delivered great products, and has been a significant contributor to the space. Nice to see that more of that will be reflected in the token :smiley:

Regarding the airdrops: is this only for Mainnet GNO holders or holders of GNO on any chain/L2? And what about GNO invested/staked/locked in Smart Contracts in different protocols/networks?

7 Likes

As you speak about ten years I suppose you are talking about gnosis beacon chain, or are there also gno rewards planed for the gnosis chain which will me merged to gbc later on? Also I am interested if the rewards for validators on gbc will be given purely in gno long term or should this be changed to xDai at some point?

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This is correct, the Gnosis Beacon Chain (GBC). The current Gnosis Chain validators are still rewarded in STAKE tokens until the merger with GBC. The return for staking GNO on GBC is currently significantly higher compared to staking STAKE on Gnosis Chain.

Also I am interested if the rewards for validators on gbc will be given purely in gno long term or should this be changed to xDai at some point?

The rewards on GBC will be in GNO long term.

5 Likes

Thanks for clarification. Yes, return on gbc is currently much higher compared to delegating stake, but not that much more compared to validating, which is necessary to participate in gbc. Anyway I will try to set up a validator node for gbc, but imo it would be much better to give also a part of the xDAI rewards to validators in the future, to encourage ppl to participate. If you deduct the maintenance costs from the rewards in the table shown, it don’t look that attractive once we reach 50000 validators.

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There was a question regarding the Airdrop:
GNO held on Gnosis Chain and GNO used for validators will be INCLUDED!

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Thanks for information

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Can you tell, if i bought GNO on cowswap on xDAI and hold there, is that enough for airdrop or i need to move GNO to another chain? Is there also any minimum amount to hold requierement?

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GNO on Gnosis Chain [xDai] counts! No minimum amount (I think – @Anna?) but proportional to your holdings ofc.

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Thanks. Im asking becuse i have bought GNO on xDAI (i swapped on cowswap last week), about $50 of GNO, if thats enough and if xdai is ok.

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Where can i stake GNO please? i read that i can be entitled to all airdrops if i stake

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There are instructions for staking here :ok_hand:.

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“The possibility to burn the remaining GNO should be considered.”

I have to agree, this idea is quiet appealing. That 7M GNO as you state above is most likely not needed, and all it would bring on us is heavy inflation. Instead, we should cut the max supply to the 3M GNO stated above. Even that sounds more than enough for Gnosis to develope forward.
So many ex-stake holders were afraid of holding GNO long term due Gnosis has a lot of inflation that can negatively impact the price. I have a bad mouth taste when I am thinking about that too, as an investor, it simply a lot more appealing, if the 3M GNO max supply cut would happen & get a greenlight by the community. It is truly a good chance to grow the community, and bring back those ex- xdai community members who were afraid of that heavy ~85% inflation on the GNO supply.
Would be wise, to do it asap, before they find something else more appealing. The bigger our Gnosis community, the better goals we can achieve. Waiting is not the best option atm, the more we wait, the less we can bring back, and the whole point was merging the communities too. Great chances to be the ‘canary network for eth’ in the upcoming months!
Btw: This is the best written proposition I ve seen yet. Thank you ernst :slight_smile:

7 Likes

thanks for the reply. I’m also interested in staking my GNO. However, no docker experience here and no idea of how to start.
I think I can do the bridging part as a developer. Is there any validator delegation I could do as a noob?

Can I stake on Mainnet?

2 Likes

Thanks for the post about the utility! For the validator part, do I understand correctly that to be a validator on the GBC a piece of hardware and some technical understanding is needed to do this? Is there some more information about this how to start from scratch (step 1: which hardware do I need).
Are there ideas for some pools so that also the non-technical users can deposit their GNO and be a validator? Or are there more ways to utilize GNO?

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Do we have a timeline for this release? Personally very interested in staking on the GNO beacon chain and would love to use a simplified DappNode program rather than CLI. It would probably also make sense to have DappNode setup a telegram channel for those interested. Avado already has one with people pushing the team there to release a package (although they seem at capacity so one is not imminent)

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Hey @Viszla! The package is already operational and there’s a dedicated channel in the DAppNode Discord Server bridged to the Gnosis Chain http s://discord.gg/ gnosischain server too (can’t put too many links).
You can follow this guide to set it up, but you if you get stuck at doing the deposits, know that there’s a webUI coming up that’s going to make this step easier!

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Hi, is it possible to stake GNO without running a validator? Or it will be only after the merge? Amazing job!

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Amazing, thanks! Looking forward to spinning up many a validator. Love the work being done and really glad to support the chain early.

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Eventually centralized services might start offering staking (ie as coinbase does for the beacon chain) and there could even be decentralized services (like rocket pool) but i believe at this point we are so early its validating on your own hardware or nothing. Feel free to correct if anyone knows differently or knows plans in the works.

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