Gnosis Chain is Dying – Are We Going to Do Something About It?

[N0xyGen]

TL;DR: If we don’t act now, Gnosis Chain will die - for real.

First: Sorry for the bait title.
Second: No, this is not a bear market or FUD post. I’ve been in crypto for 10 years and I couldn’t care less about price action; I am “dead inside” already. But I truly believe Gnosis Chain - though perhaps not Gnosis the company - is dying. Slowly but surely. As a heavy Gnosis user and private validator, this is very concerning to me, as it should be for every validator.

The main question really is: Are there enough people left in the Gnosis ecosystem who actually care about Gnosis Chain and its vision, or not?

What is this about?

I will highlight a few main pillars of why Gnosis Chain is dying in my view and offer suggestions on what we can do to at least have a chance to save it (and no, the solution is not just incentives for mercenary capital). This should be an open discussion for everyone. I hope this can serve as groundwork for future DAO votes to take action rather than just letting it happen.

Why is Gnosis Chain Dying?

I know and respect what Gnosis has done for the infrastructure of the Ethereum ecosystem. However, the past has shown that this isn’t enough to drive Gnosis Chain itself forward or attract capital. You can’t survive on “pats on the back” and respect alone. There is almost nothing left to do in DeFi on-chain, and the current pivot toward a multichain approach (e.g., Gnosis Pay, CowSwap integrate feature faster for other chains thand gnosis, etc.) is doing the rest.

Gnosis Chain isn’t in “heavy use” as it is, but soon there won’t be any transactions left to validate. The blocks will be completly empty. What is the point of being a validator on this chain then, other than casting the occasional DAO vote and hoping the treasury isn’t eventually looted by greedy third parties?

VERY SHORT analysis of the Main TVL Contributors

1. RealT:

RealT is a leftover from the xDAI Chain era and is on Gnosis Chain somewhat by accident. Currently, RealT is facing a liquidity and trust crisis that could lead to its failure. This is triggered by management errors regarding Detroit properties, which make up a lion’s share of their portfolio.
The Good News: Based on current information from ongoing court proceedings, blatant fraud seems unlikely, as it would have been flagged by now.

My Thought: RealT contributes a significant portion of Gnosis Chain’s TVL and helps fill the blocks. Their RWA (Real World Asset) model is unique and provides long-term value.
Proposal: We should task the new Treasury Manager to contact RealT, analyze the situation, and present a concept to the DAO. The DAO can then decide if further support for RealT is a worthwhile investment to secure this pillar.

2. Sky/Maker:

DAI (and sDAI) is a primary anchor for Gnosis Chain. However, the pivot from DAI to USDS - along with the restructuring of the underlying assets and the move away from decentralization - creates dangerous dependencies and risks.

• My Thought: Gnosis needs more alternatives and diversification. The exploration and onboarding of alternatives must be accelerated. The Gnosis team often mentions “in-house” stablecoins, but I haven’t seen a concrete roadmap or design. Even if those come, options like sGHO should not be excluded. Stablecoin yield is the cornerstone of any chain, especially if we want to position Gnosis Chain as a “Stablecoin Chain.”

3. Aave:

With the failure of SparkLend, Aave remains the only lending protocol on Gnosis Chain and the backbone of liquidity. There is a significant risk that Gnosis Chain could be offboarded by Aave because we are currently unable to provide enough liquidity (and fees). The Gnosis team hinted in an FAQ that a “fork” would be possible if that happens, but that wouldn’t be enough in my view, would weaken Gnosis chain further and likely be the final nail in the coffin for Gnosis DeFi.

• My Thought: The Treasury Manager should develop a concept to acquire AAVE tokens. This is explicitly not about a “DAO attack” on Aave (Gnosis treasury is too small for that anyways - so nobody would see it like that), but about securing a seat at the Aave table long-term. I am aware of the internal struggles within Aave DAO, but I see no other way to maintain relevance there. Without Aave, there is no Gnosis Chain DeFi.

4. Gnosis Pay:

Gnosis Pay is the only “hope” Gnosis has right now, as it’s the only project showing relative success. However, it’s becoming harder to see how Gnosis Pay brings long-term value to Gnosis Chain specifically, rather than being an independent project.

• The Issues:

1. A multichain approach is being pushed as I understand it. If Gnosis Pay goes multichain, it means even fewer transactions for Gnosis Chain validators.
2. Basic DeFi integrations are still missing. The Zeal app had this from day one. Why isn’t this a priority? Integrating DeFi would be a win-win-win: Capital stays in the Gnosis ecosystem, transactions increase, Gnosis Pay gets swap fees, and Aave TVL increases.

• The Sustainability Problem: Gnosis Pay hasn’t proven it can survive without incentives. Both the GNO cashback and the CRC cashback (which is artificially price-supported) mean growth is currently “bought.” While necessary for marketing now, no sustainable alternatives have been presented.
• Proposal: A DAO vote to task Gnosis Pay (as an independent entity) with prioritizing DeFi integration.

Honorable Mentions

• Balancer & Gyroscope: Recently hacked, shattering trust. It’s questionable if the TVL will return.
• BackedFi: Sold to Kraken; practically no liquidity or relevance left on Gnosis.
• Seer: Prediction Markets are the hot topic right now. I haven’t seen a concept of how they plan to catch up to Polymarket or Kalshi.

Final Thoughts

These points are meant to kickstart a discussion. Depending on the feedback, I am prepared to work on formal proposals for DAO votes in the coming weeks, going deeper into the specifics.

[DubiLetto]

Personally, I have two bank IBANs linked to a Gnosis wallet. I can pay bills between these IBANs or receive payments in the wallet using the assigned IBAN. And soon, I’ll be able to add it for instant payments.

When you talk about USDS (or sDAI) and say it’s dangerous, what are you getting at ?
That there’s a danger ?

Your discussion is a bit alarmist, as if Gnosis Chain is going to disappear. What happens to our money on the Gnosis Chain through our Ledger-linked wallet ? Is it no longer secure ?

Here we’re really talking about the L1 blockchain, not a structure with its own cryptocurrency. It’s not the same discussion when you’re being alarmist; RealT can disappear and the cryptocurrency world can continue to thrive. A blockchain can disappear and an entire ecosystem is jeopardized; we’re not talking about the same scale at all.

[N0xyGen]

Thank you for your response. I believe there is a misunderstanding here between the technical security and reliability of the Gnosis Chain and its economic viability.

1. Your funds are not unsafe on Gnosis. I’m not talking about technical security risks to your ledger or a hack. When I say “die,” I’m referring to economic activity on the Gnosis Chain. If a chain generates empty blocks and has no DeFi ecosystem, it loses its reason for existing.

2. Gnosis Pay is not Gnosis Chain: I use Gnosis Pay too and am pretty happy with it despite its current flaws. But my point is that if Gnosis Pay becomes successful but does not bring any transactions or liquidity to the Gnosis Chain, then nothing is gained for the chain. Especially if Gnosis Pay itself goes multichain.

3. Of course, RealT can disappear without any problems. The chain will continue to exist. The question is rather whether Gnosis Chain can afford to do so economically, given the current status of the DeFi ecosystem within the chain. RealT has one of the last use cases remaining on the chain. If the main TVL drivers of the chain are lost (RealT, Aave, etc.), the incentive to secure the network as a validator will also disappear.

My post is an attempt to start a discussion (and then, based on that, to persuade Gnosis to take action, since it certainly has the means to do so thanks to its treasury) before this becomes a ghost chain, which currently seems highly likely.

[SadoMaso]

Totally agree with you dude…2 millions/year + commission has just been granted without any negociation

This looks like the gnosis chain treasury is going to get milked… mooooooo

[ernst]

Yes. We have been debating just this for a while. I just started a new thread to discuss a way out here: The L2 debate

Tl:dr – if Gnosis were to become a synchronously composable L2 on Ethereum Gnosis Chain could become economically viable in the mid-term.

[clement]

@N0xyGen

• Seer: Prediction Markets are the hot topic right now. I haven’t seen a concept of how they plan to catch up to Polymarket or Kalshi.

Seer

For Seer the plan is not to compete with Polymarket and Kalshi.
Both of those are basic prediction markets (allow people to bet on world events). This is the simplest form of prediction markets (and they needed to be successful for people to take prediction markets seriously).
Now that we got basic prediction markets with Poly and Kalshi, I think the market is ready for more complex ones which provide highly valuable information. Poly and Kalshi actually made our job easier, as it is now easier to convince people to use prediction markets for information as we do not need to convince them that prediction markets work in the first place (as it is now well proven).

The goal of Seer is not to take a small share of Polymarket on “gambling-like” markets, it’s to become the most important source of information for decision making in the world.
This goes from making macro governance decisions (Gnosis just voted on a pilot on this, using futarchy.fi built on top of Seer) to micro decisions on markets mainly traded by AI agents (See the DeepFunding pilot with significant funding from Gitcoin and the Ethereum Foundation).

TL;DR; The goal is not to get a small share of the “gambling-like” market ($300–700 B of revenue) but a large share of the decision making market (~$40–$60T+ of spendings, or 30 to 100x the gambling one).

Seer is built on top of the Gnosis Conditional Token framework. And is basically the continuation of the original Gnosis project (as per its whitepaper). For those new here, Gnosis was originally a prediction market project which ended up pivoting as its side projects ended up with more traction than its PM Omen (now rebranded as Presagio and being traded only by AI agents).

Feedback using Gnosis Chain

Advantages

Bridge to mainnet, low fees and xDAI as a the base token (+ the yield of sDAI) are the two most interesting features.

Drawbacks

Not being a L2 (or in process of becoming a L2) did harm the attractiveness of Gnosis Chain. Indeed, for the deepfunding experiment with a 50k$ grant of the EF, we were asked to do it on a L2 and we deployed on Optimism for this purpose (if Gnosis Chain was a L2, this business would have been on Gnosis).
Those days, having a bridge to Ethereum mainnet is not sufficient to be Ethereum aligned.

It’s weird to see Uniswap as the 4th biggest dapp on Gnosis as it was never properly supported. It was indeed deployed, but Gnosis chain is not supported by the front, so it didn’t seem usable to us.
We are using Swapr which despite a reactive team, doesn’t seem to be updated and had some downtime lead to LPs almost not being able to withdraw in time (we did manage to prevent losses of funds by instructing them on how to remove liquidity by calling the contract directly, but we went pretty close to losses).

[N0xyGen]

Thanks for the detailed breakdown of Seer’s positioning. You categorize Polymarket and Kalshi as “gambling-like,” but isn’t it true that their accuracy (e.g., during the US elections) proves they are already serving as massive “truth seeking” engines for decision-makers?

What exactly distinguishes your information-seeking markets from what Polymarket or Kalshi offer? If Polymarket decides to natively integrate agent betting - which seems like a trivial technical step for them - why would deep-funding projects or governance structures choose Seer over the platform with the deepest liquidity?

You mention moving into a niche that isn’t yet fully defined. Is the TAM for these “pure” information markets large enough to attract the liquidity necessary for high-signal accuracy? Without the “noise” of retail speculators, do you risk these markets being too thin to be reliable?

L2 Question
As a non-technical observer, I’ve always struggled to understand why projects find it more attractive to launch on a centralized L2 rather than a highly compatible, decentralized chain like Gnosis.

[clement]

@N0xyGen

You categorize Polymarket and Kalshi as “gambling-like,” but isn’t it true that their accuracy (e.g., during the US elections) proves they are already serving as massive “truth seeking” engines for decision-makers?

I agree, my characterization is indeed relative. For me “gambling-like” is a spectrum (“The history of financial regulation can thus be roughly summarized as everything being banned as gambling (or usury) until an exception was granted for some newly legitimized higher purpose.” Robin Hanson).

@N0xyGen

What exactly distinguishes your information-seeking markets from what Polymarket or Kalshi offer? If Polymarket decides to natively integrate agent betting - which seems like a trivial technical step for them - why would deep-funding projects or governance structures choose Seer over the platform with the deepest liquidity?

“Agent betting” isn’t an issue, you do not even need to integrate it as agents can access smart contracts and even websites.
Polymarket and Kalshi do not support advanced markets (conditional, scalar), are both permissioned and there isn’t any indication that they would be interested nor have the vision to move into those kind of markets (and I do not think they should, as it would go too far away from their current communication style).

@N0xyGen

Without the “noise” of retail speculators, do you risk these markets being too thin to be reliable?

Currently, liquidity is brought by liquidity subsidies (both in Polymarket and Kalshi), and since no one pay for this information (Polymarket just added a market subsidie feature but it is unclear if anyone paid outside of people who got confused with the UX), those platforms have to pay the whole cost of liquidity.
We get liquidity through a mix of our own token subsidies and information seeker subsidies (people who pay for the information).
Information seeker subsidies can be direct (ex: EF paying 50k$) or indirect (Gnosis putting 100k$ of liquidity which will likely result in a small loss due to impermanent loss).
With AI agents, the information can be brought with a way smaller liquidity.

@N0xyGen

You mention moving into a niche that isn’t yet fully defined. Is the TAM for these “pure” information markets large enough to attract the liquidity necessary for high-signal accuracy?

The TAM of this crazy. Like it is easier to list what is outside of this TAM than what is inside. So what is outside is: Decisions on terminal goal and moral values.
Everything else is fair game (we can play a game of you giving me a topic and I tell you on how to make it better with PMs, but let’s do that on another thread to avoid hijacking this one).

@N0xyGen

L2 Question
As a non-technical observer, I’ve always struggled to understand why projects find it more attractive to launch on a centralized L2 rather than a highly compatible, decentralized chain like Gnosis.

There is some reasonable expectation that on the medium to long term those will decentralized and be more resistant to alternate chains. It’s also a question of community (if you are a L2 you get to be part of the whole Ethereum community, invite to confs, people nice to you because if you were to succeed that is good (even if marginally) for their bags).

[Sora]

Addressing the RealT and treasury situation: we have to be extremely careful here. @SadoMaso is concern about the treasury getting milked is completely valid if we don’t apply strict governance parameters to our funding.

RealT is an important RWA pillar for Gnosis, but bridging physical assets on-chain effectively demands highly robust data coordination and verification systems to prevent the exact trust crises they are facing now. If the DAO decides to step in and support RealT—or any other major TVL driver—it absolutely cannot be a blank check. Any treasury deployment must be hardwired to a strict governance infrastructure that enforces accountability and protects the chain’s economic base.

Furthermore, regarding @N0xyGen is point on Gnosis Pay: instead of bleeding the treasury on liquidity subsidies that vanish the moment the incentives stop, the DAO should fund the integration of native DeFi primitives directly into successful consumer-facing apps. If we build a seamless, secure architectural flow between payment layers and yield-bearing assets, the economic activity will naturally stay on Gnosis.