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digital
daily

digital daily: Organic Growth

Spinoffs were popularized as an investment strategy by Joel Greenblatt in 1999. This book articulates how breaking an organization into smaller units can create value. Few projects in the digital ecosystem have grown large enough, or for long enough, to consider methods like spinoffs. But that is beginning to change. Gnosis (GNO) is one of the longest standing DeFi protocols with a proven aptitude for product development, delivering two well-suited test cases for digital offshoots. First is Gnosis' implementation of "ring trading," which facilitates peer-to-peer transactions through regular batch auctions, reducing slippage and fees for on-chain trading when compared to automated market makers. Their approach is dubbed CoW for Coincidence of Wants. CoW Protocol's spinoff was completed in April 2022. Second is Gnosis Safe (SAFE), a "multi-sig" protocol on the verge of launching its own token. Multi-signature schemes add layers of safety to the irreversible process of transferring digital bearer instruments, and Gnosis Safe is the industry standard. Its raw, open-source code has been replicated countless times, and the protocol delivers a customer friendly version of these tools as a service. Both new tokens offer investors and users specific alignment without requiring a broader bet on Gnosis. Yet, in both cases, 10-20% of the newly issued tokens from COW and SAFE will be delivered back to holders of Gnosis tokens ("GNO") or the GnosisDAO. Gnosis is building an incubator with a track record of success. It hopes to capture value with well-worn methods applied to the digital ecosystem. Will the strategy catapult Gnosis into a position of dominance, tied to growing revenue streams from an array of independent services? It is certainly uncertain. But Gnosis is an excellent example of organic growth.

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