What are Gnosis Tokens? — the New Access Based Token Model
Gnosis is a platform. Network effects provide users of the platform with value, and ensure stickiness. As more people and projects build on Gnosis, the liquidity in markets will increase. Higher liquidity means greater platform utility for all users. Our token model should make it as appealing as possible for third party projects to build on Gnosis.
- There is a fixed number of GNO tokens (10 million) . Up to 90% will be sold in an auction.
- There is a 0.5%(*) platform fee for creating predictive assets (requirement for trading).
- GNO tokens generate WIZ (short for Wisdom) tokens . The more WIZ that is used on the platform, the more it will be generated per GNO
- WIZ can be redeemed to pay $1 worth of fees (very similar to KFEE).
- Fees can also be paid with the token that is used in the market (ETH/BTC token/…) . Once they are paid, the fees will be sent to a third party auction contract and auctioned off for GNO.
Instead of building on a rent extracting platform, Gnosis makes it possible to make a one time purchase of a sufficient amount of GNO tokens and then use the generated WIZ tokens to pay for Gnosis fees. At a very basic level, GNO tokens function as fee credit (WIZ) generation machines. As a result, GNO tokens give access to the platform at a fixed cost, comparable to holding a license. GNO and WIZ will be ERC-20 compliant.
Lets dig into some details. In order to get WIZ from GNO, the user needs to lock down GNO tokens. Locking down a token means that the token cannot be transferred during this period. The exact amount of WIZ generated by the locking transaction is known prior to the users decision to lock down the GNO tokens,. This number is determined algorithmically and implemented by a smart contract. The algorithm adjusts the WIZ emission rate constantly to create the right amount to maintain the total at 20 times the average monthly WIZ use. Consequently, when the use of the platform grows, the amount of WIZ generated per GNO grows along with it. When the use of the platform is stagnant, the amount of WIZ generated per GNO remains the same. In this scenario, for every WIZ consumed, one new WIZ is generated. This will prevent hyperinflation of WIZ and thus will give it a stable utility value. The lockdown period can be chosen by the user with options ranging from one month to twelve months. 30%(*) of the new WIZ is generated immediately, and the rest is generated continuously over the locking period. Longer lock down periods receive a slightly higher WIZ/time ratio.
The GNO token and WIZ
If WIZ were the only option to pay for fees on Gnosis someone might think about speculating on and horde WIZ. We prevent this from happening by letting users pay their fee with any token that is used in a prediction market (ETH/ BTC-tokens/ Santander $ or whatever will exist soon). We provide an example below (**).
The fee reduction mechanism
We assume that most fees will be paid in WIZ however, if fees are paid with any other token these fees will be credited directly to an external auction contract. The auction contract will sell the fees for GNO. The GNO acquired in this way will be used permanently to reduce the platform fee via concurrently triggering a linear fee reduction. For instance, if 10% of all existing GNO is held by the auction contract, the fee will be automatically reduced by 10%. If the auction contract were to hold all GNO tokens the fees would be 0. This long term perspective makes Gnosis even more appealing today for users and application developers. Please note that this process will not decrease the utility of the remaining GNO. If the trading volume on Gnosis remains constant, a fee reduction of 10% would mean that 10% less WIZ is consumed and therefore 10% less WIZ is generated as well. The newly generated WIZ would then be distributed to 10% less GNO tokens as the GNO held by the smart contract does not receive WIZ. Consequently, the ratio of WIZ generated per user holding GNO would stay constant. If we assume that reduced fees will lead to increased platform use, we can assume that the WIZ/GNO ratio will go up.
WIZ as collateral
GNO tokens give access rights and those rights are quantifiable and transferable in the form of WIZ. The main reason for us to introduce a second token is to accomplish the described access based token model. A nice side effect of WIZ is that it can be used optionally as collateral in prediction markets. The main requirement of a collateral token is a stable value. WIZ has a clearly defined use case nor speculative elements and is therefore ideally suited for this situation. One of the key challenges for prediction markets is generating enough liquidity to derive meaningful predictions for real life events from the trading activity. One way to guarantee this liquidity is the use of automated market makers. The Gnosis team plans to use parts of the WIZ that we will generate from our own GNO tokens to subsidize those market makers.
In summary the token model allows for incentive compatibility between all parties using the platform. It will be possible to use the platform with a one time cost for token buyers.
(*) We currently expect to use those numbers but as Gnosis is still in an early stage, changes are still possible.
(**) A short reminder first, the basic contract of any prediction market holds money and issues tokens for the different possible event outcomes. E.g. given there is a market asking a yes/no question , the user will first post some collateral and create yes and no outcome tokens.
Basic Token Contact and Platform Fee
If a yes/no type prediction market is denominated in ETH, a user could send 10 ETH which would generate 10 outcome tokens of each outcome (yes/no). In addition the user would pay a 0.5% fee , 0.05 ETH, or alternatively the $ value amount of 0.05 ETH in WIZ. Assuming ETH a current $ price of $10 this is a 0.5 WIZ fee. There are several independent projects working on decentralized $/ETH price feeds and may use one but for now will get this data even more reliably through a decentralized exchange.
GNO tokens are functional utility tokens within the Gnosis platform. GNO tokens are not securities. GNO tokens are non-refundable. GNO tokens are not for speculative investment. No promises of future performance or value are or will be made with respect to GNO, including no promise of inherent value, no promise of continuing payments, and no guarantee that GNO will hold any particular value. GNO tokens are not participation in the Company and GNO tokens hold no rights in said company. GNO tokens are sold as a functional good and all proceeds received by Company may be spent freely by Company absent any conditions. GNO tokens are intended for experts in dealing with cryptographic tokens and blockchain-based software systems.