Stability for Users, Value for Stakers: Inside the Gnosis Dual-Token Model.

This article explains how GNO and xDAI work together fueling the Gnosis chain.

Gnosis runs on a dual-token system:

• GNO, the governance and consensus token.
• xDAI, the stable gas token.

This design separates long-term decision-making and network security (GNO) from day-to-day usage and gas payments (xDAI). Together, they create a balanced ecosystem where one token captures network value and the other facilitates blockspace market operation for users.

GNO: Governance and Network Security

What it does:

• Governance: GNO provides holders with direct voting power in the Gnosis DAO, or the ability to delegate their votes.
• Consensus: GNO is used by validators to secure the chain’s consensus and earn rewards for carrying out this work.

GNO value & metrics explained:

• Cashflow from validating the network: ~4.82% of total GNO supply is staked, yielding around 9–10%. Validators receive relatively high returns compared to other chains.
• Governance value: an additional value for token holders: GNO votes determine proposals with ecosystem-wide impact. For passive holders, delegation unlocks influence without active involvement.
• Deflationary pressure from periodic token burns (e.g., via GIPs) adds a long-term value driver, though not on a fixed schedule.

Strategic takeaways:

• Active GNO holders may run validators for both yield and influence, balancing financial return with governance.
• Passive holders could consider delegation to trusted representatives to generate staking yields and governance value without the necessity to spend time and effort.
• Supply dynamics suggest that if staking participation increases, yields will gradually compress — making today’s validator returns relatively attractive.

xDAI: Stable Transactions on Gnosis

What it does:

• Stable Representation: xDAI is minted and burned via a bridge to Ethereum, representing locked DAI (in foreseeing future it will be replaced by USDS).
• Gas Payments: All transactions on Gnosis are paid in xDAI, decoupling user gas costs from GNO price volatility. A side note: gas costs are insignificant compared to Ethereum and even EVM rollups.

xDAI value & metrics explained:

• Pegged to DAI, xDAI’s price remains stable. Base fee burning doesn’t create scarcity because the peg neutralizes it.
• 129M xDAI supply supports the chain’s daily activity, with ~4.8M xDAI in fees paid since launch.

Strategic takeaways:

• For users and dApps, xDAI ensures predictable gas costs, which is particularly attractive for consumer-facing or high-frequency applications.
• For validators, xDAI provides an additional revenue stream alongside GNO rewards.
• The upcoming migration from DAI to USDS collateral could slightly shift market dynamics, but stability will remain the core feature.

Recent Dynamics and Momentum

• GNO staking participation has been slowly rising, but remains relatively low, keeping validator yields high. Charts suggest a gradual uptick, indicating growing trust in the network’s security model.
• xDAI usage is consistent at ~2 TPS, showing reliable adoption in payments and everyday transactions. The steady fee revenue highlights Gnosis as a chain with practical throughput rather than speculative activity.
• Compared to other chains, Gnosis is building momentum not through hype cycles but through consistent, steady growing network & validator economics driving stable utility.

Discussion & comparison

• Versus Ethereum: Gnosis mirrors Ethereum’s consensus model but separates governance (GNO) from gas (xDAI), offering a more specialized structure. Gnosis pioneered the idea to use stablecoin as a gas token and separate it from consensus token. Now, chains that are planned to launch by big stablecoin issuers are following this path.
• Versus other L2s and sidechains: Many rely on ETH or a volatile native token for gas, while Gnosis’ use of xDAI provides predictable costs. This positions Gnosis as especially attractive for applications requiring cost stability (payments, consumer apps, DAOs).
• Versus other governance tokens: GNO’s combination of staking yields, DAO influence, and deflationary supply sets it apart from tokens that only serve one function.

The Long-Term Flywheel

1. Staking & Security → As more validators stake GNO, the network becomes more secure, governance more distributed, and yields balance out.
2. Transaction Growth → Stable gas via xDAI encourages more users and apps, driving consistent fee revenue.
3. Value Accrual → Fees flow to validators (paid in xDAI), while governance and burns strengthen GNO’s long-term scarcity.
4. Reinforcement Loop → More activity leads to stronger validator incentives, which leads to greater network resilience and more attractive governance, feeding back into growth.

Value Summary

Gnosis’ dual-token model combines governance security (GNO) with transactional stability (xDAI). Together, they anchor the ecosystem: GNO accrues value through staking, governance, and supply reduction, while xDAI powers daily usage with predictable costs.

In practice, this model shows tangible traction:

• Only 4.82% of GNO supply is staked, keeping validator yields high at ~9.65% — a rare opportunity compared to chains with much higher staking participation.
• 330k GNO staked, securing validator operations and feeding governance participation, with additional deflationary pressure from periodic burns.
• 129M xDAI supply, representing bridged DAI, with more than 4.8M xDAI in fees paid and 4.7M xDAI distributed to validators.
• Transaction throughput around 2 TPS, showing steady adoption for payments and consumer-facing use cases, supported by predictable gas costs.
• Upcoming migration from DAI to USDS will modernize xDAI’s collateral base and may strengthen its liquidity profile across the stablecoin market.

By separating governance from gas, Gnosis ensures that GNO compounds long-term strategic value, while xDAI maintains stable user experience. This alignment creates a durable flywheel: more usage drives validator incentives, more staked GNO secures the chain, and stable fees keep the system attractive for real-world applications.