How do we fix the GNO distribution problem?

To me, the biggest challenge this DAO faces is determining how to distribute GNO. Having organic and active participation in the DAO means that people need to be incentivized to participate. What does this mean? Well, simply that they hold GNO, want it to appreciate in value and therefore think actively participating in its future is beneficial to that.

Currently some of the most active governance communities on Ethereum are the likes of Yearn, Harvest, Sushi, YAM and Pickle. In most all of these, 90-100% of the token has been distributed to users of the protocol and the team holds little or near 0 of the total supply.

In GNO’s case, we have a major distribution problem. Here is a screenshot of top holders from Nansen

The reality is, there is very little organic holding of GNO which in turn means there is going to be little organic participation in this DAO.

The good is, the DAO now holds 80% of the supply and can find ways to fix this distribution problem. I propose the question, how do we fix this? Some initial ideas:

  1. Become a large Uniswap LP for GNO/ETH. As people get excited about the DAO and where it’s going, they will want wants to acquire GNO. I think we should be fairly agnostic to what we hold between GNO or ETH so potential impermanent loss doesn’t bother me. On top of that, we’d be bringing in nice trading fees for being the go to liquidity provider for GNO.

  2. Incentivized usage of Gnosis apps such as Safe or Gnosis Protocol. One tricky thing here is, if we want to fix distribution, we need to find ways to make sure new GNO supply hitting the market isn’t just going to previous GNO whales. We could consider something like what Bee2 did around quadratic mining of tokens.

  3. Sell a large chunk at a discount to market (auction). This avenue is perhaps a bit extreme but could be a quick and easy way to get more GNO out there.

  4. Set aside a “community participation fund” that is proposed every quarter, much like Pickle.finance did a few days ago. This gives GNO away but to those helping build out the DAO.

In saying all of this, I do think a yearly supply schedule should be formally laid out once it’s determined how distribution will happen. In that same conversation I think the total supply of GNO should be discussed as well. On the table should also be potentially burning some of the supply we have, if there are not legitimate ways to distribute it.

Lastly, at the end of the day we still need people to want to own GNO. This will rise naturally from the success of the DAO but ways other communities have done this is by passing profits directly back to token holders through profit sharing.

Curious to hear everyone’s thoughts!

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@sky also made a suggestion of a broader, uniswap-style, distribution.

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Yeah, I really like the idea of quadratic rewards for the users of the varios parts of the Gnosis ecosystem.

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Rewarding early users is a good signal to the existing community. MakerDao did the opposite when it decided not to make their users whole when the protocol failed to operate as intended on Black Thursday. I found this to be a backwards way of operating. Early users take risk and put in work to understand the technology. Reward the early users.

As far as what to do with the large basket of GNO, maybe we could first discuss how much of the pie should be up for conversation. AirSwap recently voted in a proposal that considered 30% of the AST to be used for certain activities. So maybe we start talking about what % is up for consideration and what are the details of that percentage. Rewarding users and maintainers makes sense, so does marketing.

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Gnosis - welcome to the same hard problems that almost all current governance token systems face! Happy to see you here asking these questions and working to solve these very common issues.

There is also quite a bit of overlap with the problems that DXdao is trying to solve, but a slightly different model/system at this point.

As @auryn_macmillan mentions, my suggestion of the broader, uniswap-style, distribution gets a community part way there. I still don’t think Uniswap community has the distribution and participation they would like.

At the end of the day, I believe the answer will be to try all sorts of distributions and experiments and strive to keep heading in the direction of your end goal. Some will fail, some will succeed. Learn and lean into what you learn works.

(I sound like Yoda…ha) Luck good!

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I recently shared similar thoughts on the GIP1 thread. Cool to see others are on the same page for a more defined distribution plan as that is GNO’s major issue. Tranches need to be allocated to time periods at a minimum and then we can design more robust and standing distribution plans through the DAO. Happy to help where possible - fun problem to solve

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As I understand it, market making GNO collateralised prediction markets will result in some distribution of GNO, which will operate along with any other distribution mechanisms.

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I think the main goal is broad, active and engaged community.
You suggest that this goal will be achieved by distributing tokens which should give people skin in the game and hopefully consequently make them more engaged.
I generally tend to agree.
BUT
Distribution inherently means dilution of current holders, which bought GNO with their hard earned money and don’t want to see those distributed tokens get dumped on them.

For that to succeed we need to find a way to reward GNO to participants that already showed engagement and commitment in some capacity - hopefully turning them to long term holders.
Broaden the distribution too much and it’ll become a “farming opportunity” -> auto dumping.
Restrict the distribution too much means we won’t achieve the goal in the first place.

I think the discussion should be around the question:
“How we identify valuable community member”?

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I think it would be interesting to experiment with a quadratic yielding system for the further distribution of GNO, perhaps even using some of Gnosis’ products like the Safe CMM app to return GNO rewards, as one pool among many.

However, as stated above, how do we identify valuable community members? I think the above is one way, but also another way is needed to involve those with less funds to invest. Rewarding DAO participation is one idea.

There’s also the recent interesting Circles UBI launch, which built on Gnosis Safe contracts on xDai. I think it would be interesting to do a GnosisDAO organization on Circles or perhaps fork Circles to implement a GnosisDAO web of trust, with or without the UBI aspect. This would also provide a trust graph for the Gnosis community, which would be one way to formalize relationships of participation and allow value to flow along those lines.

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I touched on this subject with my trufflecon talk, proof of attention.

Here is a link to the talk where the concept is explained https://youtu.be/fbP4Ut3TxUE?t=730

Basically, the setup is distributing governance tokens to people who made correct forecasts about the effect/consequence of proposals. It should have the effect of activating or at least encouraging people to think deeply about the consequences of proposals, and assigning governance rights via token ownership to the ones who were correct.

It’s something I would like to do with GnosisDAO but requires first a user interface for conditional markets. Working on a proposal for this.

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I agree with many mentioned points. I believe there should be a predictable and transparent distribution model without significant dilution of existing holders.

Some ideas that come to my mind:

  1. For the revenue earned by GnosisDAO (does not matter from what kind of activity (collected fees from protocols, earned fees from yield farming, etc.) buy ETH and bring GNO tokens from the reserve to GNO/ETH pools (Uniswap, Balancer, etc.). That would help to bring existing funds to the market continuously increasing liquidity.
  2. Make a strategic decision to continuously distribute GNO tokens from the reserve to ecosystem participants every 1-2 years with some limitations. For example, distribute up to 10% of liquid tokens every year to ecosystem participants that would include grants, merkledrops for active users, something else.

I believe it is essential to create proper incentives for the ecosystem participants for at least 10 years. Increasing the liquidity of GNO tokens should be aligned with the value (revenue) generated by the GnosisDAO.

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To the extent that the Gnosis community finds contributions to discussion on this forum valuable, I’d recommend to check out MakerDAO’s sourcecred trial: https://forum.makerdao.com/t/week-25-dai-distributions-sourcecred-funding/5289

IMO it’s been a big win for Maker. More engagement overall, and a new talent pipeline to bring in full time contributors.

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If futarchy ends up being very good at identifying valuable proposals, as hoped, then it will also be important to collect many potentially valuable proposals so that the ones that end up adopted really are great.

A rough sketch of how this might go: Phase 1 of GIP proposals remain the same. For phase 2, submitters stake some collateral when they submit the poll, Collateral is refunded if the proposal goes to phase 3, and proposers receive a payout if it passes phase 3. The payout could even be related to the value of the proposal as forecast by the market.

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I think before the distribution problem can be solved, a clearer operating mission needs to be laid out.

Once we know exactly what the purpose of GNO is, then we can solve the distribution problem.

Because the optimal GNO holders (governors) would be quite different depending on what exactly the purpose of GnosisDAO ends up becoming…

Not every user wants to govern, and no governor is proficient in every field. So, I think distributing GNO before the scope of the GnosisDAO is clearer is a mistake, it’s just going to flood back to the market or possibly be held for speculation.

Once there is a clear direction, the governors that are relevant to that topic will emerge and find value in holding GNO.

A mission is needed. The mission of make money is too wide to attract competent governors.

I think there should be a clear target market for that, and also that it’s less important that it’s wide than competent, as most users don’t vote. Not much of a point to distributing GNO to people that aren’t interested in governing the GnosisDAO.

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I fully agree! I started a separate thread on this as this seems to be a bigger topic and also goes beyond just the distribution issue. Happy to hear your thoughts there and work together with everyone interested on creating a formal mission for the GnosisDAO: GnosisDAO Manifest

Another thing to add here. For the SAFE Token proposal (GIP-2) we have defined a distribution philosophy to guide design decisions around the token distribution. It looks like this:

Distribute the SAFE Token fairly and sustainably across a wide range of relevant stakeholders to foster active governance of the Gnosis Safe ecosystem.

  • “Fair”
    • SAFE rewards must be proportional to the contribution to the Safe ecosystem
    • There should be no way to benefit from insider knowledge or other ways of “gaming the system”
  • “Sustainably”
    • We don’t want to create a pump & dump scheme, so the distribution should be designed with a long-term perspective.
    • The SAFE governance should not be exclusively controlled by early participants, rather future stakeholders should also have means of becoming involved.
  • “Wide range”
    • We want the SAFE distribution to be as inclusive as possible, so the governance will benefit from a wide range of interests and opinions.
    • In order to achieve a plurality of perspectives, different types of stakeholders should become SAFE Holder, including investors, builders and users.
  • “relevant stakeholders”
    • While we want a wide distribution, we don’t want to drop tokens to everyone. So SAFE should only be rewarded to parties that have an actual “stake” in the Safe ecosystem
    • These stakeholders should be aligned with the with the objectives of the Safe ecosystem
  • “Active governance”
    • We don’t want the SAFE token to become a speculative asset. Rather, we want to distribute the token to parties that we think will be interested in participating actively in SAFE governance
    • Our end-goal is to remove Gnosis as a gatekeeper so we are aiming to achieve active governance participation

I think something similar could be adopted for making decisions around the GNO distribution. With some adjustments such as:

  • Future GNO Distribution should not be made at expense of current GNO holders or only if the resulting upside justifies the dilution
  • GNO might also be seen as a tool for future fund-raising for the GnosisDAO
  • GNO should be used to incentivize active participation in the GnosisDAO governance process (something similar to the DAOstack’s “DAOstake”
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On the mentioned points:

  1. There is now significant GNO liquidity in automated market makers: Over 220k of the circulating supply (1500k) are used in liquidity provision.
  2. I like the idea but we are not yet ready for a liquidity incentive program. Once GPv2 would be implemented and ready, this should be considered. The issue with any quadratic mining is Sybil attacks. But there are solutions like using only previously used “old” addresses. Meanwhile, we can consider something like Should GnosisDAO use RabbitHole to distribute GNO to active users of Gnosis ecosystem?.
  3. If we offer open auctions at discounted prices, we would create big arbitrage opportunities to the on-chain GNO AMMs. Maybe we could consider auctioning off locked GNO or alternatively conditional GNO (the condition could be to improve an important DAO metric).
  4. I like this idea too. This proposal is going in a similar direction: Should GnosisDAO use Sourcecred to distribute GNO to active community members? I would suggest continuing the discussion there.
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I think this would also put alot more eyes on GNO and their product. I’m big fan of this style of distribution

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Gnosis has delivered great products over the years, but hasn’t managed to create a community around them. Just look at this thread, half of the people responding are from the gnosis team …

It’s beyond time to add fresh blood to the community.

Gnosis could use the publicly available list of gitcoin donors for an aidrop. Gitcoin has done a great job at making their product (somewhat) sibyl resistant and the users are generally strong believers in the Ethereum ecosystem. The airdropped tokens could be partly vested (time & community participation) to secure long term involvement in the project.

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