Weaknesses of "Gnosis Impact" - can't find a price for something that will never happen

GnosisDAO
#1

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Currently, Gnosis Impact suggests that it would be highly advisable to not implement GIP1. This is because currently, one would be able to sell GNO for $154 under the condition that GIP is not implemented.

Why is no one doing this? Well - mainly since it is an arbitrage opportunity that is not extremely unlikely to occur. One could right now do the trades (and incur gas costs) and end up with a significant paper gain that however will only materialize if GIP1 is not implemented.

Given the current state of voting:
After 48 and ~40k GNO voted 99.9% voted for the proposal it seems highly unlikely that it will not be implemented.

So both assets DAI-no and GNO-no already right now have a value of close to 0 and for those assets the market will not be able to do price finding.

Long story short - market prices for DAI-no/GNO-no and DAI-yes/GNO-yes can only be found as long as it is still open which decision will be made and thus all of those 4 assets have value.

To not confuse voters I suggest changing the “Gnosis Impact” display to only show the prices if changes for the decision being made are between 15% and 85%.

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#2

What would you imagine the app displaying in the case that the odds are outside of those bounds?

#3

To me it seems the current implementation is only really broken in the case where the outcome of the proposal is determined by votes rather than by the markets.

If the outcome were determined by the markets, there would be:

  1. less certainty, so it’s less likely that the odds would push beyond the bounds you mentioned.
  2. a huge profit potential in the “no” positions at their current odds, which would likely push the odds back towards the bounds you described.
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GIP-3: Should GnosisDAO lower the quorum threshold for required YES GNO?
#4

This is partly an issue with fees - you can’t make a guaranteed profit at this point because the 2% fee on top of a 95c share price eats all the potential profit from an each-way trade.

Arguably, if the market prices are accurate, then the lack of information from the market in this case isn’t a huge issue as it the prices say that whatever signal the market sends, the proposal is overwhelmingly likely to succeed. If we find market information is usually inconsequential to the final decision, that seems like a problem but might require a different remedy.

As @auryn_macmillan says, if the outcome were determined by market rather than by vote this combination of certainty and price difference wouldn’t occur.

FWIW I’m actually holding a few “no” shares in the DAI market because I think missing the quorum is unlikely, but more like 5% unlikely than 2% unlikely. Also, given GNO distribution, it’s possible that 1 or 2 dissenters with huge GNO holdings could swing the outcome to “no”, and I think this is about 3% likely on its own.

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#5

Those “no” shares are looking pretty good right no. :joy:

@GraemeB has been talking a lot about this. Perhaps we should build a version of Gnosis Impact that takes into account fees and slippage.

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