Gnosis, γνῶσις
Gnosis is a platform for prediction markets. The white paper is well worth the read, if you are lazy the executive summary goes into details about the regulatory and legal issues.
In terms of my scorecard;
Originality: Prediction markets are not that new an idea, see Augur, Betfair. What caught my eye was the idea that they will have many, many markets; in fact so many that it will be difficult to find or process them. So they are developing an index for IPFS. Basically it gives the ability to search the blockchain and IPFS — now that is original. To my mind this project could just be that and still be worth surpporting. So it checks the originality box.
Team: This one is easy it’s a big team, some of the big names in Ethereum are involved. So this box is checked.
Platform: It’s based off of Ethereum, but wisely they point out it’s not dependent on Ethereum. The Token GNO is a ERC20 token.
Legal: There is a lot of detail on this in the white paper. In terms of the token its a typical ICO, no rights to company or dividends or a say in operations blah blah blah. Basically its not equity. Ticks this box.
Fraud: Unlikely. Ticks this box.
Liquidity: They seem to be talking to the major exchanges like Kraken and Poloniex so liquidity should not be a problem. Ticks this box.
Valuation: They are raising $12 500 000 or 9 000 000 tokens. This is an ambitious project, $12,5 million may not be enough. That said they already have alpha software that has been running for 18 months on the main net. So the amount raised should be enough to complete the project. Ticks this box.
In my mind, this ICO looks like a slam dunk, it ticks every box. Lots of hype surrounding it too. Here’s the rub: The ICO will be by way of a Dutch Auction. Basically the auction starts with a high price per token and drops in a systematic way every block, that is on average every 14 seconds. The auction halts when either $12 500 000 or 9 million tokens have been sold. At that point everybody pays the prevailing price when the auction was halted. So if you bid for 100 tokens at $30 per token at the start and the auction ends at a price of $1 you pay $1 per token. Since you sent $30 you get 30 tokens. The point is you cannot pay more than $30 per token. They have said that they will have a contract that allows you to specify when to submit your bid, so you don't have to wait until the required block number. You can just say I want x tokens at this block number (which means you are bidding at a particular price). Please note the tokens are being sold in term of Ether that is so many ETH per GNO not $ per GNO, the ETH price fluctuates in terms of the dollar, so the actual dollar amount paid may vary.
The argument is that a Dutch auction can’t be gamed: The best strategy is to pick a price you are happy with and just bid at that price. You either get at that price or at a lower price. It’s going to be interesting to see how this model works and whether it becomes the standard for all ICOs. From my experience of Dutch auctions, people get carried away and overpay, especially with assets like this, where we literally have no idea what they are worth.
But… there’s always a but, there is some concern about this auction. Since it ends on either getting $12.5m or 9m token sold, what if it ends early because the $12.5 million cap is reached? Who gets the extra tokens? An example, let’s say the token price is $30 then $12 500 000/$30 is 416666.7 tokens. In total 10m tokens are being issued of which 9 million are for sale. The answer is the Gnosis company gets the 9 million less 416666.7 tokens plus the 1 million that they are not selling.
The CEO has produced a nice spreadsheet illustrating this.
At $1.38 or .0276 ETH per GNO (ETH = $50) the company gets 10% and the token holders get 90%. Does this mean $1.38 is the right price? I don’t know! It’s kind of irrelevant what percentage the company holds, you have no executive rights or rights over software or patents or rights to determine who is on the board. Like most “legal” ICOs you are basically donating money to get the platfom up and running, because you believe it will be useful, or more likely you are buying the ICO hoping to make a quick buck!
I like this project. I think the team can pull it off. I think the project has ramifications in Insurance, Sports betting, Corporate governance and Financial markets.
Personally I think the way to play this: Invest in Ether. If Gnosis takes off it’s very bullish for Ether. At the same time I will definitely bid at $1.38 (0.0276 ETH) or possibly higher. I doubt, I will get any GNO though.
Note that $1.38 assumes an Ether price of $50.
