Gnosis Prediction Ecosystem in 2021

Gnosis is a market prediction ecosystem that provides an open-source framework for prediction markets built on Ethereum.

Mar 6 2021 | articles

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Even though Gnosis was founded in 2015 by Martin Koeppelmann and Stefan George as one of the ConsenSys Incubator’s projects, just recently in 2017, we would see the first commit on the version we know today.

Those unfamiliar with the concept of a prediction market think of the secondary market on the traditional exchange market. Instead of assets or commodities, a smart contract created using Blockchain is forged where users bet on a specific price of a given coin.

There are two main cryptocurrencies currently used on Gnosis - GNO, and OWL, with the first being the most popular.

What is a GNO token?

GNO, also called GNO Tokens, is an Ethereum-based coin acquired during the Gnosis ICO. It’s by far the most common type of token used on the ecosystem’s primary use is for creating OWL tokens via staking.

It’s possible to lock GNO’s for any given period of time (up to a year currently) in order to obtain certain benefits or rewards in the form of OWL.

What is an OWL token?

Previously known as WIZ, the OWl tokens are how users pay fees on the Apollo network (the prediction market). Currently, they are pegged to USD.

OWL tokens can only be created via activating the utility of the GNO tokens. This is done via the smart contract system. It’s worth noting that you can also pay fees with any Ethereum token, but they will be exchanged for GNO and burned.

A GNO token holder “locks” a number of their tokens in a smart contract. Locked tokens can’t be traded, and the lock period can be specified (as we said previously, up to a year as of now). The amount of OWL tokens created will depend on the duration of the lock period and OWL tokens’ availability in the market.

But how does Gnosis work?

To understand the Gnosis ecosystem, one must first learn about the three platforms that run in its architecture, as stated in their research paper, published in 2017 on its Github Page.

Apollo

Apollo is the name of the prediction market, where users can create digital assets on Ethereum. These tokens can represent anything from investment ideas to information or even a real asset.

DutchX

DutchX is a decentralized exchange for ERC-20 tokens based on the Dutch auction principle. It’s both recommended and encouraged to utilize your favorite third-party provider when trading on Gnosis, like OpenDAX Tower to sign transactions while using a Metamask.

Gnosis Safe

It’s always great when a wallet it’s already integrated into the ecosystem. In this case, it’s a Multisignature wallet (MultiSig) that requires more than one private key to do any kind of transaction, which is useful for wallets being used by multiple individuals or an organization.

It’s worth noting that Gnosis Multisig Wallet is supported in the OpenDAX crypto exchange software platform.

The architecture of Gnosis

Now that we are familiar with the three pillars Gnosis stands on, let’s dive deeper into the technical side of the operation while dissecting Gnosis architecture which coincidentally is also divided into three development layers.

Core Layer

As its name suggests, the Gnosis Core Layer is the very foundation that contains the smart contracts that we talked about previously.

These event contracts are governing the outcome of token settlement and creation, and also operate as a market mechanism. The only process that will incur a fee is the outcome token creation, which tops at 0.5 percent and only applies to traders buying outcome tokens from the market maker.

Service Layer

This is the essential layer for any consumer applications thinking about building on Gnosis. It offers additional services complementing its Core, like Chatbots and stable coins. Keep in mind while some applications and participants can interact with Gnosis on the core level, most of its services are located on this layer.

Application layer

Most of the applications on this layer are just front-ends that target a particular prediction market use case or a customer segment. Some of them are proprietary of Gnosis, but most of them belong to third parties. Most of these applications charge additional fees or employ a different business model.

How does Gnosis look like right now?

Sounds great so far, right?

It actually is, but currently, there are two main issues with Gnosis - its reliance on crowdsourced wisdom and GNO Distribution.

GNO distribution is not currently what one would call a smooth process, as presently active participation in the DAO requires incentivization. In other Ethereum coins, most tokens are distributed among users, while in the case of GNO, the team holds over 80% of its digital assets.

The second issue it’s getting individuals or organizations to partake in its crowdsourced wisdom and open source project, a lot of incentives like the Gnosis Ecosystem Funds (GECO) offer up to 100,000$ USD for teams or individuals willing to build on Gnosis.

The success or failure of this platform relies heavily on these actors in order to keep up with other alternatives.

How can I develop for Gnosis?

First thing you need to do is understand how Conditional Tokens operate, which are essentially the basis of Smart Contracts.

They are based on the Solidity language - think C++ meets Ethereum Virtual Machine (EVM).

Solidity is statically typed, supports inheritance, libraries, and complex user-defined types, among other features. As long as you are familiar with Blockchain and EVM, you’ll get the hand of it in no time.

Here is an example smart contract in Solidity:

contract SimpleStorage {
    uint storedData;

    function set(uint x) public {
        storedData = x;
    }

    function get() public view returns (uint) {
        return storedData;
    }
}

The installation of the base project is rather simple since it can be installed directly from Gnosis GitHub using NPM:

> npm i '@gnosis.pm/conditional-tokens-contracts'

Keep in mind, it’s meant to operate with Truffle, the most common testing framework for blockchains using the EVM.

How does the future look for Gnosis?

This is a very exciting time to be working on Gnosis platform. While some issues are clear on the surface, it has a proven track record, and the current Bitcoin boom is already influencing Ethereum markets.

With the recent 1.5 billion USD investment in Bitcoin by Tesla, it’s clear that the adoption of cryptocurrencies into the mainstream market is drawing closer, and sophisticated market tools like Gnosis will significantly benefit from this process.

Sources:

https://github.com/gnosis/research/blob/master/gnosis-whitepaper.pdf https://docs.gnosis.io/conditionaltokens/docs/introduction1/