Professional Documents
Culture Documents
August, 2020
(Follow up to Original Meeting on June 10, 2020)
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(the “Funds”) managed by Arca (the “General Partner”) are offered to selected investors only by means of a complete offering memorandum and related subscription
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including this presentation.
An investment in any strategy, including any strategy described herein, involves a high degree of risk. There is no guarantee that the investment objective will be
achieved. Past performance of these strategies is not necessarily indicative of future results. There is the possibility of loss and all investment involves risk including the
loss of principal. Securities of the Funds are not registered with any regulatory authority, are offered pursuant to exemptions from such registration, and are subject to
significant restrictions.
The information in this presentation was prepared by the General Partner and is believed by the General Partner to be reliable and has been obtained from public sources
believed to be reliable. General Partner makes no representation as to the accuracy or completeness of such information. Opinions, estimates and projections in this
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considered definitive or a guarantee that the approaches, strategies, and investment portfolio will, in fact, possess these characteristics. These descriptions are based on
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Founded by three Wall Street veterans, the Arca team has combined decades of product creation,
investment management, risk management, and compliance experience.
However, the GNO token is not utilized in any value accreting way in the suite
of Gnosis products. It also trades at a significant discount to book value.
Gnosis now has the opportunity to reinvigorate its community and work
towards building financially sustainable products with active user bases, while
returning value to GNO token holders.
ISSUE PROBLEM
The GNO token has underperformed its benchmarks, and has failed to
deliver value to ICO participants
GNO Returns
Data Calculated through August 20th, 20201
GNO vs ETH
Data Calculated through August 20th, 2020
GNO/ETH Return:
Since ICO -82.28%
Since Gnosis Market Open -88.56%
1. Using cash on balance sheet that exceeds token market cap, institute a tender offer
for circulating tokens, returning money to GNO token holders that was lent to
Gnosis 3+ years ago. Those who do not tender and who believe in Gnosis's future
should be rewarded with more GNO tokens via a 10:1 token split.
2. Institute revenue generating and strategic cost cutting plan, consistent with
Gnosis' statement of becoming Free Cash Flow positive, removing reliance on
Treasury assets contributed by GNO token holders
3. Develop clear milestones and issue quarterly reports, making Gnosis an industry
leader in disclosures
I. 2017 ICO
II. Decentralized Exchange
III. Prediction Market
IV. Finances
The Gnosis Dutch auction created a centralized supply for GNO tokens,
with no clear path on how or when that supply would be distributed.
Gnosis chose to conduct its ICO in April of 2017 using a Dutch auction in order to make the
sale more fair by preventing large investors from buying a majority of the supply allowing for
distribution of the tokens in a decentralized fashion.
The auction was designed to either raise $12.5m or sell 90% of the supply, with the team
retaining the remaining tokens.
However, buyers did not bid low for the token and the auction ended in 15 mins, raising
$12.5m but only selling ~400k tokens1
According to an analysis of the token sale, 2 addresses purchased 40% of the tokens - i.e.,
160,000 of the of the original 400,000 - despite the 1,000 addresses that participated in total.
2017 ICO
Total Supply: 10,000,000 (pre-mined)
Tokens Sold in ICO: 460,0002
Price per token sold: $28.90
Current Price: $42.99 (48.78%)
Sources:
1.Messari.io, Gnosis Profile
2.Mesari Mainnet Presentation on June 3, 2020
Strictly Confidential. Not for Distribution.
2017 ICO: Aftermath
The Gnosis Team kept the remaining 95% of the supply. This did not
adhere to industry best practices and raised questions about the
decentralized nature of the project.
A few days after the sale, Mark Koppelmann announced that 10% of the tokens
would be retained for the team and ConsenSys, and of the remaining tokens,
99% of the supply would be locked:
Sources:
Gnosis Medium Blog
Gnosis Token Sale Analysis
Twitter Strictly Confidential. Not for Distribution.
Decentralized Exchange: DutchX
In the original white paper, published in April 2017, building a decentralized exchange is
only mentioned in one short snippet:
GNODEX will be the decentralized, scalable state channel based exchange to trade
predictive assets. The development already started, however, due to its complexity it is
expected that an MVP will take at least a year of development. Gnosis seeks to combine
forces with other teams to build the basic layers required to offer a decentralized exchange,
with Gnosis adding layers required to offer trading of prediction market outcomes.1
However, the white paper was then updated in December 2017 and discusses the
DutchX Exchange as a major focus of development, with the purpose of the dex
changing completely:
Source:
1. Gnosis White Paper Published April 2017
2.Gnosis White Paper Published December 201 Strictly Confidential. Not for Distribution.
Decentralized Exchange: DutchX
Source:
1.Dapp Radar Strictly Confidential. Not for Distribution.
Decentralized Exchange: DutchX
After spending over a year to build and launch this exchange, including
seeding projects to build user interfaces for the exchange (such as Fairdex),
the project was declared dead by the team itself.
Source:
Twitter
Gnosis Medium Blog Strictly Confidential. Not for Distribution.
Decentralized Exchange: Take Two
After deciding that DutchX would not receive adoption, Gnosis has
moved on to building a new decentralized exchange.1
● Originally dubbed the "dFusion protocol", the new dex was recently
launched in April and rebranded as the "Gnosis Protocol”
○ With fees deducted from the token being traded, this has clear advantages in
ease of use, yet then converting fees to OWL is unnecessary friction
Source:
1.Twitter
2. The Block Strictly Confidential. Not for Distribution.
Decentralized Exchange: Gnosis Protocol
Source:
1.Dune Analytics Strictly Confidential. Not for Distribution.
Decentralized Exchange: Gnosis Protocol
Source:
1.Dune Analytics Strictly Confidential. Not for Distribution.
Prediction Market: Little Traction
After three years of development, Gnosis just launched the prediction market product
promised in the initial white paper. Since inception, Omen has seen just $1,144,515 in
total volume and 1,115 total users.
The majority of this volume is from the release at the beginning of July. The
average daily volume since launch is only $13,737.06.1
Source:
1. Dune Analytics, Digital Assets Data
Gnosis has a high burn rate for a non-revenue producing company. These projections are
based on Arca’s prior understanding of Gnosis’s expenses ($6m), although now we
understand it to be higher ($7.5m).
GNO 2019 Estimated Burn
● DaoStack (invested in Jan 2018) creator of the dxDao used by the DutchX
Exchange (which was eventually spun out)
Unlike its other business activities, Gnosis has not reported these investments
publicly nor shared their reasons for investing, as is typical with VC
investments.
The Gnosis team actively uses their Gnosis: MultiSig 3 Wallet for
activities that are well outside industry treasury management best
practices.
*Given Gnosis’ Ethereum address, we believe they likely participated in Compound’s initial
liquidity mining
Sources: Etherscan: Raiden, Compound 1 and 2, Opyn, Messari Strictly Confidential. Not for Distribution.
Progress to Date - Does This Add Value?
Sources:
Dune Analytics Strictly Confidential. Not for Distribution.
Gnosis Safe Wallet (Cont’d)
Sources:
1.Twitter
2.DefiPrime Blog, Q&A Strictly Confidential. Not for Distribution.
Omen Prediction Market: Little Traction
Source:
1.DappRadar
2.Dune Analytics Strictly Confidential. Not for Distribution.
Sight Prediction Market: Little Traction (Cont’d)
● “Successful” prediction markets include the Hollywood Stock Exchange and the
Iowa Electronic Market, of which the former does not use real money and the latter
is an ongoing research project with CFTC approval.
● Smith & Crown Research sums up the problem with prediction markets as an
information aggregation and forecasting tool: “While prediction markets, like polls
or surveys, are a promising, perhaps even superior, tool for aggregating
information and generating forecasts, providing someone a tool does not alone
confer the know-how required to properly utilize it. Pollsters conducting polls or
psychologists employing surveys arguably better know how to properly apply
these tools for ends of inquiry, and better understand their tools’ limitations.”1
In essence, prediction markets have not proven successful outside the realm
of gambling, and those that do exist to service those markets face stiff
regulatory action.
Source:
1.Smith & Crown research Strictly Confidential. Not for Distribution.
Additional Business and Product Lines
Source:
Feb 2019 Fund 1 Update
May 2019 Fund II Update
Aug 2019 Fund III Update
Radial systems event space
Full Node Coworking
Strictly Confidential. Not for Distribution.
Arca’s Proposal
Supply Metrics
Total GNO: 10,000,000.00 100.00% Current Assets
Allocation to Founders + Consensys 800,000.00 8.00% USD Cash Balance $9,125,000.00
Allocation to Team 400,000.00 4.00% ETH Balance $66,892,800
Tokens sold in public ICO at $28.90 460,000.00 4.60% Total Treasury $76,017,800.00
"To create Network Effects" 40,000.00 0.40%
Gnosis Foundation 8,300,000.00 83%
This will allow Gnosis to run as a lean startup, rework the token’s use
cases and redistribute the remaining tokens in order to create network
effects on existing products.
Source:
Etherscan
Messari.io, Gnosis Profile
Mesari Mainnet Presentation on June 3, 2020. Strictly Confidential. Not for Distribution.
Arca’s Proposal: Comparable Industry Analysis
Most GNO competitors in the Prediction Market and DEX Sectors trade well
above NAV of their treasury with the clear exception of Gnosis.
Sources:
CoinMarketCap
Arca internal Calculations.
Strictly Confidential. Not for Distribution.
Arca’s Proposal: NAV Calculation
The Net Asset Value of Gnosis’s ETH & Cash Reserves is $75,525,000.00
(calculated August 20th, 2020). Subtracting one year of runway, this
leads to a value of $89.12
per token.
NAV Calculations Per Share
USD Value of Gnosis's Ethereum Treasury
Calculated August 20th, 2020 $66,400,000.00
Gnosis Cash Balances + $9,125,000.00
Sources:
Proposed token distribution, Appendix II
Etherscan
Mesari Mainnet Presentation on June 3, 2020. Strictly Confidential. Not for Distribution.
Arca’s Proposal: Conclusion
Those who believes in Gnosis’s future, and choose not to tender, should be rewarded
with more GNO tokens via a 10:1 token split. Doing so will allow Gnosis to solve a number
of its problems:
● Allows for distribution of Treasury tokens after the tender, for which there is
currently no plan, without the market punishing GNO holders
● Begins process of decentralizing project’s ownership
● Rewards those that do not tender, as the token price will unlikely fall more than the
amount of the split
● Shows the market that Gnosis plans on being more forthcoming and transparent
about future plans
● Demonstrates confidence to the market that Gnosis believes its tokens are
undervalued
● Holds Gnosis accountable to rework the economics of the remaining tokens to
incorporate GNO into its products
Source:
Messari Mainnet Presentation on June 3, 2020. Strictly Confidential. Not for Distribution.
Next Steps
Source:
Coindesk Strictly Confidential. Not for Distribution.
Appendix
The redistribution of tokens will act as a bonus to the Gnosis team and
allows them to participate in the proposed token buyback.
We used the present value of the tokens being distributed to the team
over the next 5 years for the supply side of the NAV calculation.
It is unclear whether the team tokens will be vested on a yearly basis or a lump sum at
the end of the 5 years. We used the yearly basis in our PV calculation as it is more
beneficial for the team and a discount rate of 10% in our calculation.
$60,000.00 Bug Bounties (max. distributed) $60,000.00 Bug Bounties (max. distributed)
$0.00 Full Node coworking space $0.00 Full Node coworking space