Gnosis | Now you Know

If you, like me and many of my friends, woke up this morning to see the 60% growth of Gnosis which is now trading at around $350 and thought, why don’t I know more about this platform, then this information may save you some time and research.

What/Who is Gnosis

Gnosis is a decentralized prediction market that operates on the Ethereum blockchain. Lead by a notable development team with Martin Koppelmann as CEO and with loose ties to Etherium Co-Founder Vitalik Buterin, this project has got a lot of investors and speculators very excited recently. You can find their Whitepaper here.

What is a prediction market

Prediction markets themselves are not a new concept, having been proposed in the early 90’s, however, they are yet to attract mass adoption. Prediction markets are exchange-traded markets created for the purpose of trading the outcome of specific events, with these events being effectively anything from the outcome of an election, the results of a sports game or whether the weather will be good tomorrow.

In prediction markets, individuals bet for or against the outcomes of these events and as such the platform allows huge potential for traders, analysts and gamblers to turn a profit, however, perhaps the most novel element of these markets is how they can be used as a measure of crowd wisdom, market sentiment or as a collective decision-making tool.

Touted as one of the most disruptive innovations in capital markets and data science since the beginning of the Information Revolution, now with the utilisation of powerful, peer-to-peer computing technologies such as Ethereum and Bitcoin, the scientific exploration these mechanisms can proceed uninhibited and at a rate and scale previously unimaginable.

More about Gnosis

The Gnosis platform provides for the implementation of various models and markets and In theory, the potential scope of applications are endless. Examples (taken over from the Gnosis website) are prediction markets for celebrity and media gossip, for pre-auction art valuation, financial markets predictions and sports betting. In order to ensure the use of multiple and various applications Gnosis has designed its platform to be modular and customizable and allows users to create both their own markets and tokens for use therein.

The Gnosis platform will consist of the three layers: Core, Services, and Application.

In the Core layer

The general Gnosis applicability is built: event token creation and settlement, a market mechanism, oracle, and a management interface. This layer is and always will be free and open to use.

In the Services layer

Additional services on top of Gnosis Core will be offered via a trading fee model. These services will include a state channel implementation, new market mechanisms, stablecoin and payment processor integrations, open source template applications, application customization tools, and the oracle marketplace.

In the Application layer

Front-ends for a particular prediction market use case and or a market segment will be deployed. Applications in this layer can be built both by Gnosis and third parties.

Gnosis Tokens GNO & WIZ

The token sold during the token launch is known as the Gnosis Token, or GNO. This is the only time that these tokens can be created, and therefore the total supply of GNO is fixed.

Fees, similar to those of a trading market, will be charged to participants on the Gnosis Services and Applications layers (but, not the bare-bones Core layer). These fees will initially be denominated in cryptocurrency, namely BTC or ETH. Gnosis seeks to not only create interesting software, but, also a community of those interested in sharing their wisdom on Gnosis markets. To do this, they have looked to create a model that lowers the barrier to entry for repeat users (e.g. having to pay BTC/ETH repeatedly). Therefore, in addition to paying this fee in BTC or ETH, Gnosis ecosystem participants will be able to pay the fee in Wisdom, or WIZ, tokens.

Gnosis Wisdom (WIZ) can be used to pay platform fees on the Services layer, subsidize the fees of other participants, provide initial subsidies for markets, or for market trading. WIZ will be pegged to $1 USD worth of fees. In this way, WIZ acts as a coupon for $1 of use within Gnosis.

Gnosis tokens (GNO) are the generators for Wisdom token (WIZ) creation. WIZ can only be created via activating the utility of the Gnosis (GNO) tokens. This is done via a smart contract system.

The smart contract works as follows:

GNO token holders agree to “lock” their tokens in a smart contract (30–365 days). A multiplier is added for longer lock durations. The smart contract determines the user selected lock duration and applies that duration to a formula that is designed to regulate the supply of WIZ tokens currently in use. Prior to locking their GNO tokens in the smart contract, users will be able to see exactly how much WIZ they will receive as a result of executing the smart contract. Once users execute the contract, 30% of their WIZ will be distributed for immediate use, and the remaining 70% will be distributed proportionally over the locked duration. Once the lock duration expires, the locked GNO ceases to generate WIZ and the GNO becomes freely transferable by the holder. There is no limit (other than duration) for how many times GNO tokens may be used to create WIZ.

I hope that this article has shed some light on Gnosis, and, if it has peeked your interest in prediction markets, I would definitely check out Agur as well.