Gno.land Tokenomics

While a work in progress, this issue will serve as the center point for tokenomics discussion, design, testing, and implementation on the Gno.land GitHub. Many of these ideas have been further refined and confirmed from earlier issues such as #407 - Original Evaluation DAO Proposal, #503 - Original GoR Governance Proposal (2nd draft in comments), and the overall Game of Realms competition #390 - Game of Realms Overview. Thank you to @adr-sk (Andrew K.) and @dongwon8247 at Onbloc for your early governance and tokenomic contributions. Work is also underway regarding the Gno.land fee equation #649 - Fee Equation, please feel free to discuss with @zivkovicmilos, @thehowl, and me.

Overview

Gno.land is a L1 chain focused on directly rewarding Contributors for building and expanding the network. Gno.land utilizes the Gno language created by Cosmos Co-Founder Jae Kown and further worked on by the community through the Game of Realms competition. Gno is based on Golang, and will be overseen by New Tendermint moving forward. This document will focus directly on the Gno.land ecosystem, with a separate document in the future covering Gno and New Tendermint.

Through Gno.land and its novel consensus mechanism Proof-of-Contribution, Contributors will be rewarded with WORX points due to the Contributor DAO membership tier they earn and maintain. Tiers consist of Tier 7 on the low end to Tier 1 on the high end, each offering an increased WORX reward distributed on a regular time interval and increasing VotingPower per tier. Evaluation DAO, a subset of the larger Contributor DAO will propose and vote on Contributor DAO membership, moving Contributors up or down the Tiers, and eventually will help define exact WORX points per contribution. A user will be automatically added to Contributor DAO as a Tier 7 member by simply having any contribution submission accepted by Evaluation DAO.

Tendermint and IBC will be utilized for the node network/infrastructure, with Tendermint2 and IBC2 eventually taking their place.

Proof-of-Contribution Summary

Proof-of-Contribution is an in-development sybil resistance mechanism designed specifically for Gno.land. While similar networks divert the bulk of network fees towards validator nodes or potentially a token burn mechanism, Proof-of-Contribution rewards those building the network first and foremost. Opposed to hoping community advocates are rewarded by virtue of being amongst the earliest and most important community members, rewards for the effort they put into expanding Gno.land is directly analyzed to distribute GNOT rewards through the WORX point system. Proof-of-Contribution also ensures that the people who have spent the most time building the protocol and therefore the ones most attached to its long term success are directly involved in all governance.

$GNOT:

Supply: 1 billion (all minted at genesis)

Inflation: 0%

GNOT is the native Gno.land gas token, used to pay all fees associated with the network including transfers, IBC, ICS, and contract interaction. The initial fee split will be set to reward Contributors the most, followed by some portion towards validators. Due to all GNOT being minted on genesis with no inflation, 5-10% of all fees being fed back into the DAOs is being considered. Contributor DAO will be able to vote to change these fee distributions, but for now a working example is 70% Contributors, 20-25% validators, 5-10% ecosystem/DAO address. All of these fees will ultimately be received and distributed by Contributor DAO, including potential IBC/ICS fees once they are implemented post-launch.

GNOT Distribution

GNOT will be distributed via an airdrop, weighted based on historic ATOM holdings and voting history on Cosmos Proposal 69. The exact snapshot date will be announced closer to mainnet launch. CEX’s, app chains such as Osmosis, and other ATOM-holding platforms will qualify but need to provide a matching snapshot and a guarantee to fairly distribute to their ATOM-holding users based on our guidelines.

Prop 69 multiplier:

• Yes: x0 (fully slashed)
• Abstain/no vote: x0.7 - x0.8
• No: x1.1
• No with veto: x1.3

The original weighting is based on percentage of ATOM held vs total ATOM supply during the snapshot (the same percentage of GNOT vs total GNOT supply as ATOM held vs ATOM total supply). This GNOT total is then multiplied by the above modifiers based on Proposal 69 participation.

Multiple methods are possible in terms of GNOT remaining in escrow for extended periods of time. If any platform does not comply with the above, their GNOT may stay frozen in an escrow address indefinitely to provide a chance to meet the guidelines at any point in the future. Otherwise a callback program after an extended period of time, a distribution sub DAO, or a burn and re-mint (up to 1 billion GNOT) mechanism are possible alternatives.

Distribution Percentages

75% ATOM holders (weighted based on the above multiplier)

25% New Tendermint (with an amount to be later provided to the DAOs and early Contributors)

Core Team/New Tendermint will help to lead governance early on, with continual decentralization over time and the eventual “self-firing” of New Tendermint. It’ll be important that the first Contributor DAO and especially Evaluation DAO members are among the most experienced community members. To ensure that over time, equally proficient Contributors are voted in to continue a productive cycle.

Community Funding

A percentage of New Tendermint’s allocation will be committed to Contributors and the ecosystem through Contributor DAO and/or a community funding pool, roughly within a few months of mainnet genesis. Early Contributors will receive a smaller dedicated allocation as well, to be decided before mainnet genesis. It’s been determined that funding projects as needed will allow for more flexibility than a preset DAO distribution, allowing granularity in what, how, and when DAOs/projects are funded.

After launch, it is likely a community pool will be established with New Tendermint making the first transfer to this address. In this case, the pool would be opened to allow all GNOT holders to contribute as desired. This would be in addition to other sustainability and development mechanisms covered below in Token Value Capture & Utility.

Vesting

There is currently no GNOT vesting of any kind planned. While this will likely result in initial market volatility immediately after the airdrop, it removes any future cliffs and reduces future sell pressure.

Even without a vesting schedule, the GNOT escrow system will itself provide some level of gradual trickle effect for GNOT supply. 1 billion minted is not necessarily 1 billion handed out on day 1, as it may take some DEXs and ATOM holding protocols days, months, or even years to abide by the airdrop requirements. Some likely never will at all, which would result in the effective total GNOT supply falling below 1 billion before being re-minted, a clawback program, or the remaining balance going to a distribution sub DAO.

A positive tokenomic side effect of Contributor DAO acting like a reserve pool (receiving all funds before they’re distributed) is that any fees going there can be considered to be pseudo-locked in the DAO until distribution is voted on. During the lull between receiving the fees and proposing where they are sent, further GNOT will effectively be temporarily taken out of supply.

Due to the static supply, no GNOT will ever need to be burned and any exchanges not providing snapshot evidence will instead have their GNOT frozen (indefinitely or for X years until clawed back or sent to the distribution sub DAO). This way they may later change their mind based on their community's input.

Token Value Capture & Utility

GNOT is used for all payments and transactions within the Gno.land ecosystem, acting as the native token to pay fees for Gno.land interaction and Gno ICS/IBC. The fee system will have a continuous waterfall mechanism, with all fees generated going to Contributor DAO. Contributor DAO can then distribute these fees to a funding pool or dapp directly through proposals, or through a proposal to always send X% of fees to another sub DAO or project.

Proposed starting fee split:

• Contributors: 70%
• Validators: 20-25% (partially based on modeling results)
• Contributor DAO/Development Funds: 5-10%

Gno.land as a project has a large focus on what can be built on top of it, somewhat similar to Cosmos and its various app chains and SDK modules. Gno contracts and dapps built utilizing Gno.land will continue rewarding the creator wherever their contract ends up deployed, using IBC (and eventually IBC2) to automatically request fees when contracts are interacted with on another IBC-enabled chain.

At the time of writing, it is undecided if locking GNOT will be required to build a dapp or project on top of Gno.land, i.e. requiring X amount of locked GNOT to build an IBC compatible chain or similar applications vs fees alone. Another possibility is a certain amount of locked GNOT being required to advance up the Contributor DAO tier list, achievable using strictly GNOT earned through contributions. While both would remove further GNOT supply from the ecosystem, modeling is required to ensure that this does not cause the limited GNOT supply to become overly scarce. Gno.land is ultimately governed by the builders who’ll have control of these decisions after launch, just as they do with the fee split and other parameters.Whether or not Gno.land will launch with these mechanisms will be determined in the near future.

WORX/GNOSH

Contributors to Gno.land will receive points in exchange for accepted contributions, tentatively called WORX. Unlike GNOT, WORX points will not be supported on any exchange and will be impossible to transfer. It is strictly used to tally contribution effort to later distribute a GNOT reward, based on the resulting weighting per contributor vs total WORX distributed. At the end of each WORX reward epoch, GNOT fees set aside for Contributors will be distributed based on these calculations.

There are two major ways WORX rewards may work at launch, either using a flat rate per time period system or a more manual system based strictly on Evaluation DAO analysis.

Fixed Rate: This method would work by rewarding each contributor of the same tier an equal and fixed amount of WORX on a regular schedule, for example every 2 weeks. This would free up Evaluation DAO to shift its focus from defining the exact rewards to analyzing whether to accept or remove contributions and who to promote or demote up and down the tiers (past automatic tier 7 entry). A flat bonus would be added to the standard WORX amount for Contributors who make regular contributions, in order to incentivize long term participation. Since some contribution types may take months to complete, scans to determine who receives a bonus would likely occur no more frequently than once every 3 months. While overall far less precise in terms of rewarding each unique submission based on the effort required, a fixed rate would be simple to implement and result in a reliable reward similar to a traditional role. Plus with proper Evaluation DAO vetting, this would ensure that a person submitting 10 small contributions is not unfairly rewarded in comparison to a person with 1 contribution that is 10x as time consuming or complex.

Variable Rate: While submitting a contribution to Gno.land, the participant would select their basic contribution type from a drop down and select the WORX reward they expect to receive in return. This anticipated reward would likely be within a predetermined range, with wide-reaching categories such as feature commits having especially large ranges in either direction. Evaluation DAO would then analyze the contribution and adjust the final WORX reward amount through a proposal process, using either a multiplier or addition/subtraction function. Each Tier would now provide a reward multiplier to increase this base contribution WORX, opposed to providing a flat amount of WORX. While far more accurate, this would be a relatively labor intensive process for Evaluation DAO. Approval of contributions may also slow down due to the time spent working through each submission one at a time. While less necessary than with the fixed system, the bonus system mentioned above would be beneficial applied here as well.

Additional features being considered:

• NFT “scorecard” containing total contributions, start dates, delivery dates, and similar metrics used in below features as metadata. WORX totals could potentially be completely stored within a singular NFT that each contributor has opposed to being a token system, though it would likely augment a standard point/token system opposed to replacing it entirely.

• Expertise tags to go with the above NFT system, allowing for gated governance where only Developer Contributors could vote on certain proposals, HR Contributors only to remove a Contributor, etc.

Contributor DAO (aka worxDAO)

The heart of the protocol and core DAO voting on all major post-launch decisions such as parameter changes, validator acceptance/denial, ecosystem funding, contribution acceptance, etc. Everyone who submits a contribution would be part of this DAO once their contribution is approved by Evaluation DAO. All VotingPower is contained within Contributor DAO and is allocated based on what Tier the contributor falls within. worxDAO is the current working name for this DAO.

Contributions over time will increasingly be made up of far more than code commits, bug fixes, documentation, and other standard GitHub actions. The long term goal for Contributor DAO is a true decentralized organization, with everything from media creation/marketing services, legal, and countless other tasks covered under the Gno.land DAOs. As mentioned above, future features will include expertise badges such as “developer”, “HR”, etc. This will open the door to extremely effective gated governance additions, ensuring that only those with relevant expertise may weigh in on very complex, important, or technical proposals. Meanwhile, other proposals may still be left entirely open to all Contributors.

Membership Tiers

To balance incentives, decentralization, and security, Contributor DAO will be split into 7 membership tiers. Tier 1 will be the highest with Tier 7 on the low end. Each would require a certain number of contributions or a certain amount of time contributing, combined with and largely dependent on a yes vote from Evaluation DAO (at least for the higher tiers). More conversations are needed before determining if a certain period of inactivity will result in an automatic tier demotion, at least from the highest tiers to a mid-tier threshold.

• Each successive tier will either provide a flat amount of WORX per month or a multiplier that increases in tandem with tier level. This will depend on whether the Fixed Rate or Variable Rate are chosen as the initial reward system.

• Each successive tier will provide increasing VotingPower weighted out of the total available. Previously based on a geometric series equation where each tier gets 2/3rd as much VotingPower as the tier above it, the current equation changes 2/3rd to 51% and Tier 1 to a fixed 51% of VotingPower.

• The very highest tiers may include KYC as a step to finalize being accepted as the most reliable and experienced amongst the entire community. Exact requirements per tier are still being defined.

If locked GNOT ends up being required to advance through the tier levels, it will be modeled in a way where this is fully achievable via GNOT earned based on WORX weighting. No paywalls of any kind will be implemented, strictly “effort walls”.

Evaluation DAO

The highest-tier sub DAO of the overall Contributor DAO, given additional power over adjusting contribution rewards and voting on key functions such as Contributor tier promotion.

While the initial focus will be one of the two options based on whether the fixed or variable systems are implemented, they will be granted similar privileges in either case. They will be the ultimate judge of tier advancement or demotion and whether a submitted contribution is accepted or denied. Due to this incredible level of responsibility, great care will go into ensuring that the first cohort is made up of the best Contributors the community has to offer. The Game of Realms competition and GitHub is partially a trial to determine not just who receives the Game of Realms reward ATOM and backdated contribution credit, but who will be the first high tier and Evaluation DAO participants.

Governance & Voting

For the most part, VotingPower and governance is still largely handled as in #503 - Original GoR Governance Proposal. The most notable exception is that all governance has been rolled into Contribution, fully scrapping the GNOT Holder “Token House” concept. Now GNOT in no way influences governance, besides being used for any fees that may be incurred for specific proposal transactions.
The allocation of VotingPower for each tier decreases by 51% in a recursive manner, with the topmost tier representing a fixed 51% of total VotingPower. 49% would then be distributed based on the equation to the lower tiers.

Voting Power for Tier N = 0.51 * (Total Voting Power - Sum of Voting Power for all preceding Tiers)

M + M0.51 + M(0.51)^2 + M*(0.51)^3 + M*(0.51)^4 + M*(0.51)^5 = 0.49

• Tier 1: Top 0~14% in GNOSH holdings (51% total voting power)

• Tier 2: Top 14~28% in GNOSH holdings (24.99% total voting power)

• Tier 3: Top 28~42% in GNOSH holdings (12.1451% total voting power)

• Tier 4: Top 42~57% in GNOSH holdings (6.194101% total voting power)

• Tier 5: Top 57~71% in GNOSH holdings (3.16911151% total voting power)

• Tier 6: Top 71~85% in GNOSH holdings (1.616206868% total voting power)

• Tier 7: Top 85~100% in GNOSH holdings (0.825265623% total voting power)

NOTE:

The equation may be altered slightly to 5/11 or back to 2/3rd opposed to 51%, ensuring collaboration and oligarchy resistance. This would leave Tier 1 with the bulk of VotingPower without quite reaching a true majority on their own, so the fixed 51% for Tier 1 may be maintained.

Next Steps

• Early version of Evaluation DAO, using one of the two proposed systems. Also used for judging the GOR leaderboard before mainnet

• Gno.land fee equation finalization and simulation

• Defining how to reach each tier (potentially KYC for higher tiers)

• Define how much WORX is received by each tier level (flat rate) or the range for each contribution type (variable rate)

• Finalize VotingPower distribution per tier

• Slashing penalty for not voting (if still applicable)

• Contributor DAO formation (possibly post-genesis) followed by further refinement to Evaluation DAO

Future Plans

Gno.land is envisioned to become the “GitHub of Smart Contracts”, providing all tools and resources needed to create high quality, transparent/easily audible, and extremely efficient smart contracts with minimal learning curve. Monthly GNOT fees could be paid in order to rent storage, expanded functionality, smart contract access, or a number of other features to further expand utility and value offered back to the community.

Expertise tags (as mentioned earlier) to turn Gno.land into a true decentralized organization, able to take all actions of a traditional organization and succinctly respond to all proposals while retaining the benefits of decentralization/censorship resistance.