Gnosis Auction: Learnings and the way forward

Gnosis Auction: Learnings and the way forward

Status quo:

  1. Gnosis Auction has attracted many big sales, the biggest raise was SILO finance with a 35M$ raise. In total 131M$ was traded on Gnosis Auction.
  2. Gnosis Auction was also the platform of choice for Ribbon finance’s options trading. Weekly roughly half a million dollars worth of options is currently settled via Gnosis auction.
  3. We are especially proud of the projects that sold a big portion of the total supply via the auction in order to find a fair price for their assets. We see this as the best use case for the platform.
  4. Customers created very different solutions to allowlist their customers for the auctions. Many used normal KYC(e.g. Boson), others required customers to sign special messages(e.g. SILO), and even others were running permissionless auctions(e.g. VITA).
  5. Great vesting solutions have been invented and used (Gnosis Auction)

Learnings:

  1. Gas costs on ethereum mainnet are too high! This is a major hindering factor for small investors.
  2. Users don’t want to buy at market price. The mechanism should allow auctioneers to sell their tokens to individuals at a discounted price. This has two positive aspects: community members will be in happier as they always start “in the green” and the project itself benefits as it was able to build a stronger community with more individuals. See Vitalik’s thoughts for more validation.

Way forward:

  1. Expand to L2 and other L1 solutions: Currently, the project is already deployed on Polygon, Gnosis Chain, Avalanche. This will reduce gas costs drastically. We expect soon most auctions to be run on non-ethereum-mainnet chains.
  2. Allow investing with below market price:
    This can be archived in two different ways for KYC / (proof of personhood) auctions:
  • (Without auction smart contract changes): The projects run a usual auction with a minimum bid size of X. After the auction, there is an airdrop to each individual participant. Each one gets airdropped the same amount. This airdrop effectively means that auction price is reduced, and it’s especially reduced for small buyers, as the ratio between auction proceeds and airdropped amount is for them the highest. Hence, this method encourages community building, as small investor are able to buy in at a discount. Whales are still allowed to participate as usual, but they will pay a little worse rate than individual investors.
  • (With auction smart contract changes): The smart contracts could be amended such that they support a max-funding cap per person. This enables DAO to distribute the shares better to many more users by excludes big whales. Due to the exclusion of whales, buy-demand is excluded from the auction. This buy-demand will provide price upward pressure after the auction, and hence enables buying at a discounted price for most users.

We believe that auctions are better than the currently most active Balancer Pool sales. Besides the unfairness of discriminative prices, this mechanism has many negative externalities, like MEV, waste of user attention, and value extraction by traders. For evidence: During a recent event there was over 1M USD extracted during the sale by traders. Here is one example of such a value extracting trade. They bought GF for 0.5M USDC at the start and then sold it minutes later for > 1M USDC. And here is a more complete list of traders that sold all their tokens before the auction ends and probably only participated to extract value:

Given that Gnosis is currently expanding on many fronts, Gnosis Auction was neglected, especially UI front-end work, marketing, and incentive-wise. If community members are well experienced in DeFi & coding and want to start the journey of DAOizing the Gnosis Auction platform as founders. Ping us!

Cheers, looking forward to 2022.

7 Likes