Ways to improve the decentralization of Gnosis Chain

General Gnosis Chain
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Hi! These are some ideas from a simple market analysis on GNO holders and validators.

Turn small passive GNO holders who are active participants in the community or follow our communication channels into validators:
There are around 900 active small users (<200 GNO, out of 1000 users) in our LGNO contract. Does it make sense to bootstrap something like Rocket pool or a fork with these users? This looks like an easy win if we can provide them with a 1 click solution for validating.
https://etherscan.io/token/0x4f8AD938eBA0CD19155a835f617317a6E788c868#balances

Reduce concentration of validators:
2 addresses currently own 50% of validators so maybe we could we do a special program to influence these exceptionally large players into taking some extra steps to improve the network?
Karpatkey currently owns 3% of validators, what’s some good practises we should follow to improve the Nakamoto coefficient in some areas and contribute to the decentralization of the network? Hopefully we could share our lessons learned.

Increase GNO inflation in detriment of large passive whales.
We could propose to increase the GNO staking rewards for validators to make validating more attractive. Even doubling the current rewards should not mean a significant dilution for existing holders. Large megawhales would still be benefited from a healthier network.

I’m curious to know your ideas!

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I don’t know if it’s technical feasible, but if it is giving an extra reward to each node independent of the number of validators running on it would be great. It would make it more worthwhile for small holders to run a node, cause as it is now the rewards don’t cover the costs if you are running just a few validators.

edit: and special incentives for certain areas (Africa and South America) also would be great to get some nodes there.

edit2: just made a calculation of my cost/reward ratio: it wouldn’t be worthwhile with less than 30 validators (glad to have some more). The numbers can be quite different due to different costs of electricity, hardware and most important price of GNO ofc. But having a base income of aprox. 0.3 mGNO/day for each node should be sufficient to attract ppl to go for it. And the number could be reduced, e.g. about 0.05, each year in expectation of rising gno price and also cause ppl can (and should) use the earned mGNO to set up more validators.

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Yes, we should certainly provide easy ways for those holders to become validators.
a) Indeed, something like Rocket poot or Diva (a newer liquid staking protocol, also focused on decentralization)
b) making Dappnode even easier. Right now you have to buy physical hardware. A compromise could be a cloud solution that can be set up in minutes. This would be less decentralized than your own physical hardware but still more then using liquid staking

Those 2 addresses are Stakewise and Kleros. I think for those 2 we should not aim to reduce their absolute numbers - but instead increase the total amount staked so that their relative number goes down. E.g. Kleros holds 19.2k GNO out of in total ~3m - that is merely 0.64%.

The easiest way to do this (without touching the protocol) is to add transaction fees/ MEV (at least after the merge). We could e.g. simply write a contract that can only be called by the “miner” address (the creator of the block). This could even exclude the addresses of the largest known stakers if desired. Such a change would be much easier to do than actually changing rewards on protocol level which would require a hard fork and this always a lot of extra effort for protocol teams.

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This seems a great idea to me, although manually excluding certain addresses imo seems not the best way to go.

Instead we can limit the amount withdrawable from each address, e.g. [total amount in the the pool]/[number of nodes]. Also we need some measurements to reward only nodes that are really running over a certain period of time. Therefore withdraws should be limited to larger time intervals, maybe once yearly.

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It’s currently possible to use Dappnode without buying your own physical hardware. You just have to spin up a VPS running Debian or Ubuntu, SSH in, and run a script. That’s what I’ve done for my Goerli and GC nodes. I can write up the process for the Gnosis Chain documentation site.

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In addition to this we could also force projects that want to have funding from GnosisDAO to use x% of their funding for validators. Maybe also in a locked contract that stakes through Rocketpool/Diva.
For example project gets 100k DAI funding, has to buy GNO with 10% and lock it for 2 years which is then used for validating/staking.

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I like the discussed ideas on how to decentralize the validators to Gnosis Chain, i.e. using cloud solution, incentivizing minority GNO holders with higher rewards. I also agree that we shall also keep in mind he geographical allocation of validators. Maybe it would be worthwhile giving out hardware for free (100% subsidy) in some jurisdictions for a commitment to stake for at least x years (lock period).

In this context I think we should also discuss the decentralization of GNO. If GNO is not sufficient decentralized, it may harm the Gnosis Chain ecosystem in the medium to long-run, either through legal actions and / or price impacts.

Current Situation

Most (> 50%) for voting eligible circulating GNO supply of 1.60M GNO (2.58M circulating supply, less Gnosis DAO treasury holdings (614k GNO), less major bridging funds (0x88ad09518695c6c3712ac10a214be5109a655671) (369k GNO)) is held by 10-15 addresses on Mainnet (ignoring Gnosis Chain here, as most of the GNO there is held by Gnosis DAO). As per my analysis, the main holders are

  • Gnosis Builders (Gnosis VC arm),
  • Consensys Inc.,
  • former xDAI Team,
  • Gnosis Ltd Management,
    holding one or more of these addresses (“GNO Whales”).

Quorum threshold for passing a proposal is 75k. As per my analysis, each of these GNO Whales own more than quorum, essentially giving them power over Gnosis DAO and hence most of GNO’s current value.

In addition, signers to the Gnosis multi-sigs (e.g. Gnosis DAO Parent Safe [0x0da0c3e52c977ed3cbc641ff02dd271c3ed55afe]) are not made public, i.e. are untransparent, and may also move effective control to one ore multiple of these GNO Whales. Signers have been designated upon creation of these Safes by Gnosis Ltd’s Management, which let’s assume that control may still be with these parties.

Starting Point for Analyses (mainnet):
Messari
Deep DAO

Thoughts

First, I’d like to start with acknowledging that sufficient decentralization of the native chain token is not a Gnosis only issue. I think Gnosis has done a better job than most of other DAOs / blockchains so far. Further, Gnosis Ltd’s Management has done an incredible job in developing state of the art Web3 infrastructure thus far, and therefore shall be credited with some trust from the community.

However, on the other side, having four parties essentially determining the future of GNO may harm the ecosystem in the medium to long run. In theory, there is no point for a minority GNO holder (<10k GNO) to see GNO as a governance token, i.e. vote on proposals, as their vote won’t determine the outcome of a proposal. Further, with effectively no power over Gnosis DAO’s treasury, GNO is considered a high risk investment, as GNO Whales would be able to withdraw funds from Gnosis DAO within a short period of time, making staking less attractive to the average minority GNO holder.

Proposal

To further decentralize GNO’s value (respectively Gnosis DAO as major part of GNO’s value as of today), I propose to the community to work towards the following high-level mid-term goals. This obviously means that the existing GNO Whales give up power to some extent.

  • open multi-sig signers on all Gnosis (DAO) Safes. Signers shall be assigned by the community in a transparent process.
  • Limit GNO voting power by party by giving more voting power to minority GNO holders. Happy to discuss the implementation. Two ideas that come to my mind:
    (a) create a voting GNO token that increases the voting power for minority GNO holders,
    (b) limit GNO voting to X GNO by address and ask Gnosis DAO to engage a team that reviews the voting activity to avoid misuse.

Thoughts?

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I like to add:
(c) take the quadratic root of the balance to determine voting power (10000 GNO: 100 votes, 100: 10 votes, 25: 5 votes…)

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This may also be a good argument to lower the threshold to force these majority holders to actively participate in decision making and not only by staying away. It will most likely not change outcome but makes opinions more public.

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Are there any plans for another phase of the GNO incentive program? Maybe excluding recipients from the first round if necessary?

I had 10 validators funded through the program and it’s actually what got me more engaged in the ecosystem outside of just the few dapps I was using at the time. I’m not sure of the timeline of withdrawals being enabled (assuming not for a few months at least) but that would certainly impact the viability of this option.

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The voting power could get split e.g. 50% of the votes from GNO stakers and 50% of the votes from GNO holders who have their GNO tradable on addresses.

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I think it is a good idea to ask the Rocketpool team if they could team up with GnosisDAO. @mkoeppelmann If DAppNode and cloud solution users have the ability to use Rocketpool to stake their 16 mGNO, lots of small users could easily join without setting up “complex” cloud solutions. People who run already various kind of nodes are quite familiar with the technology but a lot of people are not that technically inclined (I helped many investors and companies setting up their GNO validators). Filling up up Rocketpool mGNO validators would be quite easy and it would provide GnosisDAO a scalable and secure solution for further decentralization. Further more would it be attractive for custody provider to use such a solution. We could ask Rocketpool if they would provide a white lable solution for Gnosis Beacon Chain - they could provide the updates and receive a fee from each validator for their development activity.

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Yes! I actually just asked about this the other day. I think a solution like this for staking on Gnosis Chain could be a decent middle ground between directly staking with one’s own validators and Stakewise.

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Via dappnode people still receive 4 validator slots if they buy a dappnode.

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@claberus What are the next steps on this topic?

Actual state of the topic/possible solutions:

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On the topic of improving (and incentivizing) decentralization:

Incentives for non-validator Gnosis Chain nodes (i.e. full-nodes and archival-nodes)!

Pocket Network provides incentives in the form of $POKT to node operators who run blockchain nodes and serve application requests.

Screen Shot 2022-11-30 at 2.23.55 PM
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Source: https://www.poktscan.com/

Over the last month, Pocket Network node runners have served ~34B requests across the 42 different networks and minted 28.4M $POKT from doing that work :money_mouth_face:

At the current price of POKT, that’s about ~1.8M USD in value generated in one month :moneybag:

Screen Shot 2022-11-30 at 2.19.02 PM
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Source: https://www.coingecko.com/en/coins/pocket-network

Check out this proposal to retroactively fund the POKT-powered Public RPC endpoints for Gnosis Chain :point_down:

Gnosis Chain has been handling between 100M-150M requests per day over the last month :exploding_head:

I can follow up in a separate reply with the amount of POKT has been earned by Gnosis Chain node runners within Pocket Network, I’ll need to tally it up manually :+1:

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Here’s a breakdown of the daily traffic and POKT rewards from Gnosis Chain (0027) within Pocket Network over the last month:

Date Chain Relays POKT
10/30/2022 Gnosis Chain (0027) 106,512,008.00 79,524.30
10/31/2022 Gnosis Chain (0027) 96,772,151.00 71,622.13
11/1/2022 Gnosis Chain (0027) 101,171,936.00 72,653.64
11/2/2022 Gnosis Chain (0027) 106,219,511.00 71,634.43
11/3/2022 Gnosis Chain (0027) 101,560,497.00 69,671.56
11/4/2022 Gnosis Chain (0027) 103,932,060.00 71,686.92
11/5/2022 Gnosis Chain (0027) 111,218,778.00 77,034.47
11/6/2022 Gnosis Chain (0027) 109,383,678.00 76,680.66
11/7/2022 Gnosis Chain (0027) 129,187,414.00 91,749.85
11/8/2022 Gnosis Chain (0027) 134,073,290.00 96,456.75
11/9/2022 Gnosis Chain (0027) 110,478,023.00 75,959.04
11/10/2022 Gnosis Chain (0027) 127,641,028.00 84,474.17
11/11/2022 Gnosis Chain (0027) 135,259,438.00 90,686.15
11/12/2022 Gnosis Chain (0027) 138,325,251.00 95,110.38
11/13/2022 Gnosis Chain (0027) 132,792,472.00 90,983.72
11/14/2022 Gnosis Chain (0027) 134,603,053.00 91,205.65
11/15/2022 Gnosis Chain (0027) 142,444,105.00 93,480.38
11/16/2022 Gnosis Chain (0027) 147,385,897.00 96,334.86
11/17/2022 Gnosis Chain (0027) 146,928,807.00 100,167.89
11/18/2022 Gnosis Chain (0027) 146,507,518.00 103,919.48
11/19/2022 Gnosis Chain (0027) 145,063,039.00 101,965.72
11/20/2022 Gnosis Chain (0027) 142,383,470.00 99,538.91
11/21/2022 Gnosis Chain (0027) 136,472,909.00 94,034.50
11/22/2022 Gnosis Chain (0027) 152,633,413.00 105,649.29
11/23/2022 Gnosis Chain (0027) 145,098,488.00 98,966.08
11/24/2022 Gnosis Chain (0027) 144,826,000.00 99,357.21
11/25/2022 Gnosis Chain (0027) 140,644,751.00 96,806.70
11/26/2022 Gnosis Chain (0027) 135,937,570.00 93,731.17
11/27/2022 Gnosis Chain (0027) 129,286,641.00 90,598.72
11/28/2022 Gnosis Chain (0027) 121,450,614.00 81,943.70
11/29/2022 Gnosis Chain (0027) 122,961,033.00 77,936.01
11/30/2022 Gnosis Chain (0027) 99,501,131.00 61,002.11

Putting it all together:

Total Relays Total POKT USD
4,078,655,974.00 2,802,566.55 POKT 179,294.20 USD

If you’re curious about averages:

Average Daily Relays AVG Daily POKT AVG USD
127,457,999.19 87,580.20 POKT 5,602.94 USD

Source: https://www.poktscan.com/

I tallied this by downloading the CSV from POKTscan then uploading it to a spreadsheet and organizing just the Gnosis Chain (0027) into its own sheet.
_

There is also a Relay Chain ID for Gnosis Chain Archival (000C) within Pocket Network, that one serves anywhere between 3M-13M requests per day!

1 Like