Gnosis, founded in 2015, is a decentralized prediction market in the Ethereum blockchain, and it is open-source. Its founders and the current team are familiar names: Martin Köppelmann as CEO and Ethereum founder and Chief Scientist Vitalik Buterin on the advisory board. The first thing that comes to mind as a “prediction market” is mentioned is sort of a marketplace, where the main aim is not to trade assets but trade the “outcome of events.” It was thought that cryptocurrencies hold the power to decentralize the marketplaces that we know of.
And this is the exact idea that opened the path for Gnosis – allowing people to exchange cryptocurrencies that reflect the outcomes of events within the Blockchain network. Moreover, depending on the outcomes of those events, the Gnosis token’s value change.
Today, we are here to share with you everything you need to know about Gnosis.
- Gnosis is a prediction-based, decentralized, permissionless, and decentralized platform that works through the use of smart contracts.
- Gnosis hosts three separate platforms named
- Gnosis is launched on the Ethereum network, supporting all crypto assets using any of ETH, ERC20 (Tokens), and ERC721 (Collectibles) protocols.
- Gnosis includes three layers, namely core, service, and application.
- Gnosis launched two native tokens that are used in the platform for fee structure and staking, named GNO and OWL.
What Exactly Gnosis Is
As mentioned in the introduction, Gnosis is a prediction market on the Ethereum network, characterized by being an open-source and decentralized one. Thanks to the Ethereum protocol’s characteristics, it is a secure and transparent prediction market. A good prediction market needs to facilitate the user’s predictions about future events. The ultimate goal of Gnosis is to provide a solid and reliable protocol to shape the prediction markets ecosystem and to set a global standard for them.
Gnosis includes three interoperable lines: prediction market tooling, wallet solutions, and decentralized exchanges. Those three products use different layers to provide the promised features and experiences to their users. It will become more apparent as we go through how it works.
How Gnosis Works: 3 Separate Platforms
Gnosis operates three separate platforms to build the open-source and accessible marketplace it targets. One of them is the prediction market, one is the decentralized exchange, and the other is the cryptocurrency wallet. We will examine each in detail.
Gnosis Prediction Market Guide: Apollo
Gnosis’s prediction market is named Apollo Market. In Apollo Market, it is possible to have a market for any kind of arbitrary event that can be speculated. In this context, users have the opportunity to purchase and sell positions in that arbitrary event. In almost any event, some outcomes will have more chance to become true, increasing the value of the related token or tokens.
When the event is “not arbitrary anymore” (when it’s finalized), the tokens indicating the eventual result are given the entire worth of the best, whereas the tokens reflecting the alternative outcomes are rendered useless.
While making the predictions, Gnosis uses “crowd-sourced wisdom.” That means a group’s estimation or prediction is more correct than an individual’s. We mentioned that any event’s finalization has an associative token with it to trade it, and the value will depend on the changes in the event.
The working mechanism of Gnosis can be better explained with an example. Suppose that a user implemented an event question, let’s say, “Who will win the next FIFA World Cup?” and the options are Denmark, Brazil, France, and others. The inclusion of other options implements the fact that none of the given options may win the world cup. The sum of probability hence becomes 100%.
After the market is opened, the “other” option’ tokens will have the possibly highest price because the probability of all other options is probably higher. As any options get eliminated, the prediction market prices will fluctuate. In other words, if Denmark gets eliminated, there will be a sudden drop in its associated token; it will be nearly worthless.
After the winner is announced, the prediction market will be closed. Let’s say France won the world cup that year, and the France token holders will be able to claim their rewards. In this case, making the right predictions will make you earn money. Trading outcome tokens can also make money out of this prediction market as the values fluctuate due to market conditions.
Gnosis Decentralized Exchange Guide: DutchX
DutchX is a launched and decentralized platform for trading ERC-20 tokens. The platform was acquired by dxDAO on 28 June 2019. Reputation holders manage this DEX today.
In this DEX, buy and sell transactions are carried out by the auction protocol. Auction at DutchX works as follows:
- Sellers determine the pair they want to trade. They specify the tokens to sell and buy.
The seller deposits the token he wants to sell on the stock market.
- Pair requires reaching a deposit threshold of $1,000 on the exchange. Once this threshold is reached, the auction will start automatically. The previous closing price of the relevant pair determines the starting price of the new auction. This price will be double the last close.
- According to the calculation that the auction algorithm depends on, the price of the parity moves to reach equilibrium. As the price drops, those who want to buy the relevant token start bidding.
- The auction is completed when all of the tokens offered for sale are sold. Bidders pay. Thus, higher bidders can request more tokens.
That DutchX administers an auction-based trading protocol is seen as an advantage especially as it reduces the risk of front running, low liquidity problems, or third-party involvement. Especially since every buys or sells offer will proceed, the situation of inhibiting the trading processes due to liquidity is eliminated.
But, what about the fee structure on Gnosis DutchX? Here are the details:
- The transaction fee structure on the platforms is provided with the local token MGN. Each transaction is subject to a transaction fee. But the fees are used entirely within the system, no third-part fee is paid.
- Fees from each transaction are added to the next batch as a bonus. So every fee you pay will be returned to you in your next transaction.
- Every transaction generates MGN tokens on the platform. Transaction fees for MGN token holders will be much lower.
- Half of the transaction fees can be paid with the native token OWL.
Learn more about decentralized exchanges.
Gnosis Cryptocurrency Wallet Guide: Gnosis Safe
Gnosis Safe, which allows you to easily manage your assets in the Ethereum network, is a useful app with web, desktop and mobile versions. The main features of the wallet can be summarized as follows:
- Multi-signature: The algorithm that validates transactions with multiple devices is based on maximizing security. You can include hardware wallets, EOA-based wallets, and paper wallets in the confirmation process. Your transactions are more secure with the combination you specify.
- Assets diversity: Gnosis Safe supports all ETH, ERC20 (Tokens), and ERC721 (Collectibles) assets on the Ethereum network. Its user-friendly interface also lists the value of all your assets in fiat.
- Wallet integration: You can easily integrate any hot wallet into your wallet. This includes MetaMask, Trezor, Dapper, Torus, Opera, and Fortmatic.
- dApp integration: Gnosis Safe, which can integrate with many dApps in the Ethereum network with a single click, allows users to benefit from DeFi services very easily.
Learn more about cryptocurrency wallets.
3 Layers of Gnosis: Core, Service, and Application Layers
Gnosis uses three different layers to function. The first is named “Gnosis Core Layer,” which is the layer where the core smart contracts for Gnosis to run exist. The second is “Gnosis Service Layer,” utilized for applications like bots and stable currency and provides resources for consumer apps. Lastly, “Gnosis Application Layer” includes front-end tools to choose customer segments or target specific prediction markets.
Gnosis Core Layer
The core layer is said to be the most foundational layer of them all since all of the necessary smart contracts for the system to run are embedded here. Those smart contracts allow token creation and settlement, various oracle solutions, and market mechanisms. Without them, the prediction markets on Gnosis wouldn’t exist.
According to the most recent information, there are currently more than 25 smart contracts, all free to use for everyone. Furthermore, the extensions and the possible developments that will occur in the future will be free too.
Like in many prediction markets, Gnosis’ smart contracts revolve around two central contracts, namely event and market contracts. The event object reflects a real-world event, and the market object reflects the connection between the event and the market maker. The aforementioned contracts are used to create market and event and market objects.
In the event contract, the primary function is to create new event contracts. Those can further function as a resolution mechanism for markets after the event is finalized. Each event contract has three properties, namely oracle, outcome tokens, and collateral tokens.
For an event to be resolved, the event contracts require information about what occurred in real life. For example, the question might be where the new Tesla branch will be opened in the USA, and oracles collect real-life information. Later, the outcome is set for the event in the contract.
As a result, each event contract needs to relate to an oracle contract. In the Gnosis ecosystem, any contract can function as an Oracle. That means any oracle solution you may think of created in Ethereum can also be used for Gnosis.
The finalization of events can occur in categorical event or scalar event format. The former refers to a defined list of outcomes, whereas the latter refers to a range. And for each event outcome, a token is created. Those tokens are ERC-20 compatible. In other words, each contract in this context will be tied with a minimum of two outcome token contracts.
For scalar events, those two are for long positions and short positions. For categorical events, the outcome token number will be the same as the number of defined outcomes. For example, if the issue were about who will win the Grammy for a specific genre, there would be as many tokens as the nominees.
The market contract is used to create new market contracts, and those can be used to exchange outcome tokens. This exchange occurs between you and a market maker. Not every event contract has to be associated with a market contract, but it is known that it enhances usability.
Each market contract has the event’s properties, market maker, and market fee. That is, a market contract has to be related to an event that is required to be funded to start the trading. For the outcome tokens to be traded, the market contract calls a market maker. A market maker in this context refers to a bot.
In the cases where an automated market maker is used, there is a risk of losing all the funding after the outcome is finalized. Everyone can trade against the market maker by purchasing all the won outcome tokens.
That could be followed by releasing the market maker with all the lost outcome tokens by the point everybody learns the market’s conclusion. Thus, a market creator can put a fee (optional) after they create a market maker. This fee refers to a spread between the asking price and the bid. This functions as compensation for the market creator’s funding to start the liquidity.
Gnosis Service Layer
We have mentioned that the core layer is the most fundamental part of Gnosis, and the service layer can be considered as a supporting layer for the core. A variety of paid tolls are used for the sake of the whole Gnosis ecosystem. Moreover, it facilitates the use of third-party technology within Genesis. For example, a payment mechanism can be considered a third-party technology, and its implementation of it would be available thanks to the Gnosis service layer.
Some services used within the Gnosis ecosystem also take place in this layer (e.g. stable currencies and chatbots). The Gnosis team claims that the offered services will be increased by communicating with the core layer through some developments.
Gnosis Application Layer
The last layer is the application layer, and this is the place where the user interface programs take place. User interface programs typically focus on one prediction market. Moreover, Gnosis includes some specific programs within its ecosystem, but third-party developers offer most of the programs.
It is also important to note that service and core layers are developed on the top of the application layer. This means that it is possible for a user to change the event interfaces’ appearances in the application layer.
GNO Tokens: Functions & Tokenomics
Gnosis’ cryptocurrency is GNO, which is an Ethereum-based token. The main purpose of the GNO token is to generate OWL tokens through staking. Earning rewards by locking GNO for a specific period is possible, but this period is limited to a one-year maximum. The amount of reward you will get is defined by the duration of locking.
GNO is used for the operation and maintenance of the Gnosis network. As users participate in the speculation and other market events, the GNO token’s value fluctuates; increase or decrease mainly depends on how the speculation is going. The following are the tokenomics of the GNO token.
- Price: 310 USD
- Maximum supply: 10 million GNO
- 24-hour trading volume: 758,002 USD
- Fully diluted market cap: 3.10B USD
New ERC-2O GNOs are produced with predictions on the platform. For example, a token is generated for each probability of the event to be claimed. Each token is produced, and a fee is charged at a certain rate. The fee is usually denominated in OWL, and OWL is valued at around $1 as a stablecoin.
Here is a brief diagram explaining the relationship between GNO and OWL tokens:
OWL Tokens: Functions & Tokenomics
We have mentioned that it is possible to stake OWL tokens. OWL tokens’ aim is to pay the fees of the Gnosis prediction market. In time, it will be possible to use OWL to pay fees within the predictions market’s trading fees.
OWL tokens are tied to USD, working as a stablecoin. In other words, each OWL token is worth 1 USD. Gnosis platform adjusts the price as it fluctuates, so it stays 1 USD.
Learn more about the most popular stablecoins of 2022.
The following are the tokenomics of the OWL token.
- Price: 1.03 USD
- Maximum supply: 10 million OWL
- 24-hour trading volume: no data
- Fully diluted market cap: 4,584,037 USD
Gnosis platform users can generate OWl tokens by staking their GNOs. The main function of OWL is to structure the transaction fees on the platform. However, users can also pay transaction fees with many different Ethereum tokens on the platform. It is possible to say that users are encouraged to pay fees with OWL. Each of the OWL tokens used will mean that the staked GNOs will generate new OWLs. Also, users who do not pay with OWL will have to face the built-in penalty. Because the main purpose of the platform is to continue the production of OWLs by using OWLs. Fees not paid as OWL are collected and burned by the platform.
The values of OWL and GNO get their value because of their function in the Gnosis network. To generate OWL, users will need to stake GNO. The maximum supply of GNO is 10 million, so it maintains its value. The reason for fees to be paid with OWL is an incentive mechanism to encourage its use of it. There will be a penalty if the OWL is not used. For each OWL token used, a new OWL will be generated.
Prediction Markets in Crypto
Up to now, we have discussed Gnosis and how does it works in great detail. However, prediction markets in the crypto world are not limited to Gnosis; there are many different prediction markets. As mentioned earlier, prediction markets can be explained as markets aimed to trade the outcome of the events, and the market prices depend on what others think about the outcome of the event.
Here are some of the popular prediction markets in the blockchain world:
All of the prediction markets in the crypto context are decentralized finance (DeFi) protocols. The mentioned “event” can be many different things in prediction markets. These include epidemics, climate change issues, match results, and so on. The prediction markets are running through the use of smart contracts, which are characterized by getting executed automatically, meaning that there is no need for input from a centralized authority.
Can I make money on prediction markets?
You have to rely on your luck and analytical skills in this matter. If you make enough consistent and logical guesses, why not? But if you make wrong guesses, you will lose a lot of money.
What is a prediction market in crypto?
Prediction markets are marketplaces designed to exchange event outcomes. Market pricing can reveal what the general public believes the likelihood of an event is.
What is Gnosis (GNO)?
Gnosis is a prediction market in the crypto context, and it provides an open-source prediction marketplace in the Ethereum network. It is a decentralized finance product and is maintained by the GNO token.
What is GNO?
GNO is the native cryptocurrency of the Gnosis network, and it is an Ethereum-based token. The main purpose of GNO is to generate OWL tokens through staking. It is possible to lock GNO for up to a year to generate OWL and earn rewards.
How do I buy Gnosis?
It is possible to buy Gnosis GNO through various crypto exchanges including Bittrex and Kraken. It can be purchased through any platform that supports it.
Where can I store my GNOs?
You can use various cryptocurrency wallets including Ledger Nanos S
MyEtherWallet, Metamask, Gnosis Safe Wallet, and more to store your GNO.