Gnosis token holders are not happy with the decision by Gnosis to merge with a major infrastructure builder. In a decision revealed recently, Gnosis’s founder shared their plans. The founder of Gnosis, Martin Koppelmann said that Gnosis would facilitate the merger of their platform with that of xDai. Gnosis is an Ethereum development heavyweight. xDai is a well-known Ethereum sidechain for developers. It is also one of the oldest layer 1 options.

This business development would integrate the two entities to make the “Gnosis Chain” by combining technical expertise and a significant financial injection. The synergy could assist the two entities to emerge at the top of the bloated market for layer 1s. At present this overcrowding is compelling chains to devote large amounts of money to incentives for both developers and users.

However, unhappy xDai’s stakeholders do not like this development. Based on the terms of the merger, they are concerned that this merger is nothing but a hostile takeover by Gnosis. xDai defends its position by emphasizing that this development will provide much-needed funding. These funds from Gnosis will cater for business development, marketing and funding, according to xDai. It may also help xDai stay relevant. In an interview with CoinDesk, Igor Barinov, the project manager at xDai said that if this action is not taken, they would remain a chain for hipsters.

Backlash from Token-holders

This public outcry may show us what other companies contemplating the same may have to face. All this comes at a time of anticipation. Many expect that decentralized mergers and acquisitions are likely to become more and more common this year. There was growing expectation because of 2020’s numerous mergers and partnerships. These were led by Yearn.Finance. The mergers involved significant amounts of money in a decentralized finance ecosystem. This therefore created expectations that protocols would now work to buy other protocols, The expectation was that these purchases would use token purchases or governance action routinely. Since then though, mergers have mostly not been executed.

Why have other businesses failed in merging?

Mergers in this space have largely failed because it isn’t that simple in this space. In traditional M & A, the process is far different. Organizations are combined, the business is rebranded and stock is swapped. Trying to merge several governance tokens, whilst factoring in their respective exchange rates is extremely complex. This complexity is a huge challenge. Trying to come to an agreement about deal terms in light of these factors, in a decentralized autonomous organization (DAO) can therefore be more challenging than that of traditional organizations that are decided on by a board of directors.

Luckily in the case of xDai and Gnosis, it seems the deal-making process went quite smoothly. Gnosis’ CEO said that was all thanks to their respective teams working together and sharing the same values.

The Advantages

Gnosis has exceptional clout in the market. This is partly because it came from the Ethereum development giant, ConsenSys. ConsenSys is not only well funded but also well connected. These connections helped the need for interoperability and integration between several infrastructures and tools. It also helped with providing a treasure-trove of GNO tokens. These are key assets that xDai lacked. xDai’s strength lay in its technical strengths.

In conclusion

POAP, DAOSquare, and Coloney projects on xDai have all come out with support for this development. xDai team members confessed about how hard it was to see negative criticisms over the internet regarding the development. They expressed frustration at how critics were focusing on the smaller issues and not the bigger aspect. They feel confident about this development and what the future bodes for the business and industry.

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