Should DXdao partner with Gnosis DAO and jointly work on Omen

Partnership Proposal - GnosisDAO <> dxDAO

This Proposal is also posted on Gnosis DAO forums:

Background

History of collaborations

  • Gnosis together with Daostack bootstrapped DXdao
  • Gnosis launched DutchX and handed control over to DXdao.
  • DXdao and Gnosis together developed and launched Omen.
  • Gnosis developed Mesa/GPv1 and handed control over the interface to DXdao which is hosting it.
  • Jointly pushing forward prediction markets use cases, as well as trading and IDO use cases.

Shared values
Both DAOs strive to empower their communities through decentralized governance and self sovereignty which is in and of itself a possible collaboration area. Both DAOs believe in DeFi and prediction markets as a future globally important infrastructure. Ethereum is the home for both DAOs governance and products.

Motivation

In light of the successful collaboration history and common values, we believe future collaboration will be mutually beneficial. Below are a few points of synergies and advantages:

  • Complementary skills:
    • Gnosis is strong in developing contracts/backends.
    • DXdao is strong in frontends/solidity.
  • Both DAOs are in the need for tooling for decision making and can collaborate to improve DAOs overall.
  • Both share the vision for decentralization.
  • Both have a collaboration with Kleros.

Partnership Proposal

With this proposal we want to get broad community feedback. It will be cross posted on both DXdao and Gnosis DAO forums. Everyone’s opinion is important so please express your opinion even if that’s just agreement / disagreement with a specific part of the proposal.
Once there is a soft consensus on the general structure of the partnership, we can add more details to the product partnership itself (shared product vision, feature roadmap and contribution).

Incentive alignment

Setting up aligned incentives between DXdao and GnosisDAO is important in order to ensure the partnership will thrive for the long term. It will ensure both parties benefit equally from the efforts of advancing a joint product roadmap. While only agreeing on the incentive alignment will not guarantee a successful partnership - as also an agreement on the roadmap vision and the collaboration itself will have to be found - we believe it is key to our long term partnership.

  • Mutual Liquidity Sharing - The DAOs will create a DXD/GNO swapr pool and jointly fund it according to the following schedule
    Day 0 - Deposit: 500k$ worth of each token, Total pool liquidity: 1M$
    Month 3 - Deposit: 125k$ worth of each token, Total pool liquidity: 1.25M$
    Month 6 - Deposit: 125k$ worth of each token, Total pool liquidity: 1.5M$
    Month 9 - Deposit: 125k$ worth of each token, Total pool liquidity: 1.75M$
    Month 12 - Deposit: 125k$ worth of each token, Total pool liquidity: 2M$
    *Total pool size may change according to market prices

    Mutual liquidity sharing creates incentive alignment in few aspects:

    • It binds the token price of both tokens using a liquid bonding curve. Each DAO will benefit from the success of the other
    • It creates a massive liquidity bridge between both tokens on-chain liquidity. Thanks to DEX aggregation, both tokens’ liquidity will be enhanced by allowing GNO or DXD trades to be routed through each others’ liquidity pools.
  • Voting Rights Allocation - Both DAOs will allocate each other voting rights. One suggestion for how it could work practically:

    • DXdao could use GNO in the shared liquidity pool to vote on Gnosis DAO proposals
    • Gnosis DAO will be allocated the equivalent amount of REP
  • Agreeing on a shared manifesto / statement?

Omen Partnership

  • All future product revenue will be split 50-50 between DXdao and GnosisDAO (this includes contract level fee, front-end level fee or any other form of revenue from the product)
  • Agreeing on a product vision (1 page max)
  • Agreeing on a 6 month feature roadmap
  • Agreeing on work and funding contribution for the 6-month product roadmap

We think this is the most relevant product to establish the collaboration on, and hope this will pave the way for more collaborations to come.

Addressing the topic of token price

As we know, both GNO and DXD are now trading below their respective DAO book value. This might raise the general question of if/how to use treasury tokens while the market price of the token is below FV. Each DAO will need to answer this question independently.
Below we list a few possible approaches:

  • One approach will be to just use tokens from the treasury with the current floating market price. This is the most practical approach and especially suitable if those tokens will be used to fund an AMM liquidity pool.
  • Another approach would be to allocate ETH for buying tokens from the open market to bring the price back to FV. Then use the proceeds (with additional treasury tokens if needed) to initiate the partnership.
  • A third approach will be to use the fair value of the token for the swap without intervening in the market. This could be somewhat controversial as the current value of the swapped tokens is at a big discount.
7 Likes

How would DXdao benefit from this proposal? Other that “synergy” and access to the liquidity of a coin that has almost 20x the market cap and much less trade volume than we do.

Decision making would become even more convoluted. Also, this proposal would put us back on a bonding curve…

In the next twelve months DXdao is going to drastically increase it’s revenue via all these amazing new projects. What does Gnossis have going on now or in the future to get excited about?

Perhaps indebted isn’t the correct word, DXdao would not be what it is now without Gnossis and all that Gnossis have provided. I hope these organizations continue to work together, this proposal however is no good.

5 Likes

This is indeed the core question.
Gnosis is actively developing the Conditional Token Framework which is the underlying contracts that enable Omen to work. Gnosis is also closely working together with the Omen squad.
So in my perspective, working together could lead to a much better and more successful product than if we stop collaborating.
But I would rather hear the opinion of the actual awesome people which are working on Omen both from DXdao and Gnosis DAO.
I think they are the ones that should say if / why / how this collaboration is meaningful.

3 Likes

It really depends on how the DXD community values Omen. Omen in its current form has potential but still requires very significant technical changes to turn into a profitable business. The automated market maker used in Omen makes profitable market making a challenge as the liquidity provider has to assume the total loss of funding. So far Gnosis has been the biggest liquidity provider on Omen taking this risk to show the potential of Omen. We think it has been successful enough to continue the development. We are developing the necessary market mechanisms as part of the Gnosis Protocol v2 development to fix this issue. We would be happy to invest more into Omen to allow for full integration and continuous development in regards to smart contract and backend development but this investment can only be justified if there is an upside for GnosisDAO as well. Our proposal should therefore align the incentives of both parties.

4 Likes

Thanks for putting this together @cmagan! You’ve laid out the overarching structure well and highlighted some of the trickier aspects. The mutual liquidity sharing and voting rights allocation are very interesting and could pave the way for other DAO-to-DAO interactions.

For me, this is the most important part to unpack next:

I’ve very excited for Omen on xDai and believe it will push Omen forward in a number of ways, but we need to think about what’s next after that. I think this partnership should be focused on a shared vision (and execution) of a future roadmap for Omen. Agreeing on this and the responsibilities seems like the crucial next step for the two DAOs to find agreement on this partnership.

Excited to explore further - perhaps we should set up a shared doc?

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Yes, that will definitely be the next step.
I hope @geronimo together with @auryn and other contributors, will be able to come up with a draft or at least surface initial thoughts.

Happy to hear any additional feedback or thoughts

2 Likes

Very important proposal. Omen builded by DXdao based on open sourced conditional token frameworks developed by Gnosis, a lot core ideas were developed by Gnosis team to (like market resolution processes), Gnosis the main Omen LP.

LP for Omen markets and conditional tokens trading are the keys for future Omen growing.
It is clear for me that DXdao and GnosisDAO future collaboration are very important for Omen and for both DAOs. The terms of collaboration it is not easy question. Both DAOs should ask own tokens holders for feedbacks and then put some points in draft agreement with clear answer why it is good for DXD and GNO holders . It takes time. After first chats in telegram, keybase etc disscussions are hot. I like this :slight_smile: hope it is good sign

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I strongly agree with @Powers point that the details of the Omen Partnership need to be established. I have a lot of questions here. I think @SlimDelgado cut right to the chase in asking how would DXdao benefit? At the moment, I don’t see a compelling answer to this most important question.

For context, I work full time for DXdao. I don’t work directly on Omen but I am in close touch with the DXdao development team working on it. Those who have followed Omen for awhile might remember my pre-launch post about Omen from April of last year. Something I think most people don’t know is that my company Level K did some development work to prototype a Futarchy App, receiving a grant from Gnosis in 2018, and a pair of grants from Aragon in 2019 to continue the work. This futarchy app was built on the first version of Gnosis’s prediction market framework. My relationship with Gnosis goes back to Devcon 3 in 2017, as does my familiarity with their work.

In looking at this proposal I think any DXdao member (DXD and/or REP holder) should ask the same question @SlimDelgado asks . . how would DXdao benefit? I have some observations that I think are important to note as the community digests this proposal.

  1. DXdao funds a product development team that consists of one full time designer/product manager, 4 front-end web3 developers, and part time support from several others on product testing, communications, and operations.

  2. Omen is built on Gnosis’s Conditional Tokens Framework. If you look at the contributions to the codebase for this framework, you can see it has mainly been developed by Alan Lu, who, fun fact, is also credited with inspiring Uniswap’s constant product market maker design. Alan Lu is also the main developer behind the AMM used in Omen. Sadly for Omen and for Gnosis, Alan has decided to move on from crypto and has left Gnosis. He will be greatly missed! And his shoes will not be easy to fill. Maybe the number two contributor to the Conditional Token Framework, @stefan, will brush off the old keyboard :slight_smile: . . congrats on the inaugural DAOtalk post by the way.

  3. When Gnosis has aided Omen with front-end work in the past, it has been via funding a third party development shop, Protofire, to do the development work. This was important in developing the MVP of Omen that I wrote about back in April of last year. However, even then, this development shop was under the design direction of the current Omen designer @corkus. Protofire’s lead developer, who had the most relevant experience, moved on and Protofire hasn’t worked on Omen in many months. And finally, DXdao could always hire a development shop on its own.

  4. Over the past couple months when I have asked Gnosis how they would hope to contribute to future development of Omen, I have heard two answers.
    One is via the “upgrading” of the Conditional Tokens Framework to use ERC20 tokens rather than the ERC1155 tokens it uses now that even Gnosis isn’t convinced about, and to use Balancer contracts instead of the current custom Balancer-like AMM. While the Conditional Tokens Framework is potentially quite powerful, enabling chained “conditional” prediction markets and potentially futarchy, the current version of Omen utilizes only categorical and scalar markets. It is worth noting that the original version of Gnosis’s prediction markets enable both categorical and scalar markets, and do it with ERC20 tokens. This needs more exploration, but if the only upgrade is to enable ERC20 outcome tokens, then I think the best approach for DXdao might simply be to swap out the original framework for the Conditional Tokens Framework. Additionally, I believe the old one is actually quite a bit easier for developers to understand.
    The second answer is by helping with an integration of Gnosis Protocol V2, which will enable limit orders. Most DXdao members are familiar with the first version of Gnosis Protocol, as it powers Mesa, and most understand that this protocol has not received adoption for trading. With new scalability solutions and with ambitious plans for Gnosis Protocol V2, Gnosis may realize a vision of beating DEX aggregators on price and user experience. And in this case an integration with Omen could be quite useful. I would argue, however, that it is very much in GnosisDAO’s interest to support this integration, whether or not there is a partnership agreement regarding Omen. And therefore, this does not strike me as a unique value add for Omen.

5 Likes

Thank you for your replies @Powers and @JohnKelleher. I agree, we have to work on a concrete roadmap together. We have many ideas and so do you. We have to be aligned on how the future for Omen should look like. I would suggest starting a google doc shared in this forum.

Some comments on the Omen development:

  1. We fully acknowledge the work that has been done and is continuously done on Omen by dxDAO especially Corkus. We see Omen as a great success of this collaboration, that’s why we want to continue.

  2. Gnosis has also spent significant resources on Omen’s development. I have personally led the development for the most part so I am well aware of the time spent on both sides. This includes also hiring Protofire to work on Omen already many months before Omen was demonstrated to dxDAO. Unfortunately, core developers on Gnosis’s and Protofire’s side have left but both companies are sufficiently staffed (Gnosis has over 35 engineers out of which at least 10 have written production smart contracts) to compensate for those losses. The last few months development was split by the team to build the Conditional Tokens Explorer, another part of the infrastructure, which should help to make Conditional Tokens more popular.

  3. This proposal should not be about past contributions but how both, GNO and DXD token holders can contribute to and benefit from Omen in the future. So far both, Gnosis and dxDAO, have only spent resources without incurring any revenue. It is in the best interest of both to change this. We see Gnosis Protocol v2 integration as fundamental to this goal. Gnosis would have an interest in integrating it into Omen regardless of this proposal but the priority and the willingness to share revenue generated from this integration would be different.

5 Likes