Why is Gnosis planning to move from an independent L1 to an Ethereum Rollup?

Market Trends

24 October 2026

Gnosis moving to Ethereum Rollup is not about a "technical preference." The real reason is that the economics of being an independent L1 no longer add up. The Gnosis co-founder wrote it plainly in the governance proposal: Gnosis Chain's positioning as an independent L1 "has failed." The cost of securing its own chain cannot be covered by its own transaction fee income. It has long relied on DAO treasury subsidies, which dilute non-staking token holders by about 2.3% per year. The core motivation for this transition is to replace this continuously bleeding cost structure with a solution that inherits Ethereum's security while keeping its own applications and users.

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The cost of an independent L1 is too heavy for Gnosis to bear alone

An L1 needs its own set of validators to maintain consensus and security. Gnosis Chain's size is marginal in L1 competition: when the proposal was revealed, its TVL was about $91 million, and GNO's market cap was about $280 million. The transaction fees generated at this scale are far from enough to pay for network security. Where does the difference come from? Subsidies from the DAO treasury. This subsidy is essentially a hidden tax on all GNO holders, diluting non-stakers by about 2.3% per year. In comparison, Ethereum's annual issuance rate is below 1%, and part of it is offset by fee burning.

Besides security costs, GnosisDAO also has to continuously pay for infrastructure like block explorers, RPC endpoints, and incentives for third-party protocols. Liquidity also needs to be repeatedly bootstrapped and maintained. These expenses can be spread thin on a chain with network effects, but Gnosis Chain never reached that scale.

Why not just "become any L2" but instead bind to Ethereum

There is an easily overlooked judgment in the proposal: Gnosis explicitly believes that simply becoming an ordinary L2 does not solve the problem. At the time, there were already more than 100 L2s. Most had no substantial usage, and the few that were useful did not rely on technical differentiation but on existing distribution channels. The differentiation problem just moved from the L1 level to the L2 level.

So Gnosis chose the path of EEZ (Ethereum Economic Zone), a framework developed by Gnosis and ZisK, funded by the Ethereum Foundation. The specific problem EEZ aims to solve is: allowing contracts on the Rollup to directly call contracts on Ethereum mainnet within the same transaction and use the results, without going through a cross-chain bridge. Gnosis Chain will become the first production deployment instance of this framework.

This capability has direct significance for Gnosis's own product lines. Consumer products like Gnosis Pay, Circles, and VPN will be able to access stablecoin liquidity on Ethereum mainnet in the same atomic transaction after the transition. This is not "going to Ethereum for the sake of going to Ethereum." It is Gnosis judging that it needs Ethereum's liquidity depth, while existing bridging solutions are both slow and carry trust assumptions.

What is the cost? The proposal does not avoid it

The transition has a clear trade-off: the degree of decentralization will decrease. The proposal author admits that under the EEZ architecture, the design for fast block production does not allow for a large independent validator set, and some functions will be more centralized initially. Gnosis Chain's existing validator set will be retired, and the network will rely on Ethereum validators for settlement.

The direct impact on GNO holders is more specific. After the validator set is retired, about 350,000 GNO currently staked (about 27% of circulating supply) will be unlocked, and DAO treasury subsidies for staking will also end. The proposal does not give a definitive answer about GNO's economic role after the transition. Currently considered options include fee sharing or token buybacks, but the specific mechanism will be decided by future governance proposals after prover economics are observable in production. In other words, GNO holders face a transition period: the source of staking yield disappears, and the new value capture mechanism has not yet landed.

On the timeline, the first EEZ block is targeted for December 2026 or January 2027, and the full EEZ is expected to roll out gradually in 2027. Existing applications, balances, contract addresses, and the xDAI gas token will all be preserved. Users do not need to migrate assets.

How to judge whether this reasoning holds

Whether Gnosis's transition logic holds does not depend on "whether Rollup is the trend," but on two observable conditions.

First, whether EEZ's synchronous composability actually lands as planned. The proposal promises calling mainnet contracts within one transaction, initially one-way (contracts on Gnosis calling Ethereum), with two-way and cross-instance calls coming in later development. If this capability is delayed or reduced in scope, Gnosis just becomes an ordinary L2 relying on Ethereum for settlement, and the proposal itself said an ordinary L2 cannot solve the problem.

Second, whether a new economic model for GNO can form during the transition period. The selling pressure from unlocking 350,000 GNO, plus the yield vacuum after staking subsidies end, needs a new value capture mechanism to offset. If fee sharing or buyback plans do not land soon, the cost borne by GNO holders during the transition will exceed the benefits. This is the biggest uncertainty left by the proposal for future governance, and the most important thing to watch when judging whether this transition is "worth it."