Overview of Gnosis (GNO), the first prediction market protocol on Ethereum

Early blockchain protocols such as Bitcoin and Ethereum were the starting point of the Web3 industry and are inherently global projects that were not categorized at launch.

Over time, individual segments and sectors have emerged, such as more global ones like DeFi and local ones like MetaFi, SocialFi, blockchain oracle ecosystems, and prediction markets.

What is Gnosis?

Gnosis is a decentralized project focused on the prediction market. It was founded in 2015 and is based on the Ethereum blockchain.

The essence of Gnosis is a decentralized space where users can share and trade their predictions directly on the blockchain. In the early stages of development, the Gnosis DAO community managed the project.

Later, in 2020, the project's second team launched its own xDai network, which was later renamed Gnosis Chain after merging with Gnosis DAO in 2021. This network is, among other things, one of the first Ethereum sidechains. Note that a sidechain is different in principle from second-tier networks such as Arbitrum and Optimism, as they do not rely on the security of an underlying (parent) network such as Ethereum.

The preconditions for creating the sidechain were the well-known problems with bandwidth and scalability of the Ethereum network, which, despite all the updates, such as The Merge and Dencun, are still relevant in 2024 — at the time of writing.

The Gnosis project operates on the principle of a decentralized autonomous organization (DAO), providing infrastructure for creating and developing various types of DApp applications based on the Ethereum blockchain. Until November 2021, xDai and Gnosis DAO operated as two independent communities, but then they merged into one ecosystem called Gnosis Chain.

How does the Gnosis Chain work?

Gnosis Chain initially used a proprietary consensus algorithm called Authority Round, or AuRa, to validate transactions and form blocks. This consensus mechanism is now used in projects such as Parity and Nevermind. AuRa consensus is based on Proof-of-Authority, a mechanism used by VeChain.

However, without authorization, the Gnosis Chain team changed the consensus mechanism to Delegated Proof-of-Stake (DPoS).

At the heart of the Gnosis prediction system is the Conditional Token Framework (CTF) technology, which allows GNO cryptocurrency owners to bet on the outcomes of different events. The CTF mechanism incorporates fraud protection and ensures the accuracy and transparency of predictions created in the market.

Gnosis ecosystem

The Gnosis team was the first to launch their decentralized application based on the Ethereum network. Now Gnosis is an entire ecosystem of decentralized applications, which includes such well-known projects as:

• DuneAnalytics;
• xDai Bridge;
• Chainlink;
• Connext;
• Hop Protocol;
• POAP;
• Biconomy;
• SushiSwap;
• Unicrypt;
• 1Hive;
• Nifty and many others.

The Gnosis Chain ecosystem itself consists of 4 key projects launched by the team itself:

1. Cow Protocol, formerly known as CowSwap and Gnosis Protocol, is a decentralized exchange (DEX) supporting Ethereum and Gnosis Chain. Cow Protocol resembles the well-known DEX exchange Uniswap in terms of interface and functionality;
2. Gnosis DAO — Gnosis Chain ecosystem management platform allowing holders of GNO native cryptocurrency to participate in the development of the project by voting;
3. Gnosis Safe — a popular software wallet with multi-signature support and GNO cryptocurrency trading;
4. Gnosis Auction — a launchpad that allows investors to buy early-stage tokens of Gnosis Chain ecosystem applications;

GNO token

GNO — is the native cryptocurrency of the Gnosis Chain network, used to pay fees, manage the ecosystem via the Gnosis DAO protocol, and for DeFi market transactions:

• liquidity provision,
• trading (swaps),
• lending (swaps),
• NFT exchanges, and others.

In addition, GNO is required for the creation of new prediction markets and the distribution of rewards on the Gnosis DAO platform, which, by the way, cryptocurrency owners can vote for by the entire community.

Immediately after GNO was listed on exchanges in May 2017, the token's price reached a very high $78 and rose to $338 in the first month of trading, reaching its first ATH. This high price was the limited maximum number of tokens, only 3 million GNOs.

As of March 2024, only 2.58 million GNO tokens had been issued — that's about 86.3% of the issue limit. In the same month, GNO cryptocurrency capitalization exceeded $1.1 billion, and the asset was ranked 103rd on CoinMarketCap.

Another token in the Gnosis Chain ecosystem is OWL. This premium token gives its holders access to special features of the platform and grants them privileges such as reduced transaction fees, increased rewards for creating forecasts, and more. However, the CoinMarketCap page does not provide information about either the capitalization or the price of the OWL token.

Conclusion

Gnosis was one of the first and essential projects that focused on solving Ethereum's scalability problems and its expensive and slow transactions. However, it is clear that in this segment, Gnosis has been displaced from its pedestal by giants such as Polygon, Arbitrum, Optimism, and even the newfangled Mantle project.

Nevertheless, Gnosis is also focused on the prediction market. In this segment, the project still holds a leading position with a significant gap from other projects focused on this sector, such as Kleros, Augur, Polkamarkets, and many others. For comparison, the second-largest project, Kleros, had a capitalization of only $34.3 million at the time of writing, while this indicator of Gnosis exceeded $1.1 billion.