Nouns Will Survive 💫

Death of the Nouns? Nope!

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Metaversal is a Bankless newsletter for weekly level-ups on NFTs, virtual worlds, & more!

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Dear Bankless Nation,

Yes, Nouns DAO is facing its first fork.

This has led some to argue for the “unraveling of Nouns DAO,” and others to ask “do DAOs have a future?”

That’s hyperbole. I’ve been watching Nouns since the beginning, and the proof’s in Metaversal. I know better. 

For today’s post, then, let’s cut through all the noise and get you up to speed on what’s really happening and what you should be really watching going forward from an actual Nounish expert!

-WMP

P.S. Nouns glossary here if you need to catch up!

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Nouns Will Survive 💫

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What’s happening?

For anyone newer here, Nouns DAO is a community-owned brand that generates a daily, unique artwork — a Noun avatar NFT — and auctions it to raise ETH in order to fund creative experiments.  

Zooming in, the project’s in the news this week because it’s currently undergoing its first fork, i.e. a membership split. Notably, this is the first DAO-version of forking the cryptoeconomy has seen.

At the time of writing, over 350 of the +840 Nouns in existence have signaled their intentions to leave the DAO through this fork, and it’ll be possible for others to continue doing so through September 15th, when the escrow period will end and the split will be finalized. 

via nouns.wtf/fork

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The context

The Verbs are the team currently leading smart contract development for Nouns DAO. Their latest major release, Nouns V3, was a protocol upgrade that was implemented last month. 

The new V3 system introduces multiple new functionalities, including the Nouns Fork process.  

The grand idea here is that this Fork resource should serve as a last-resort minority protection mechanism, or in the very least provide a way for “groups [to] amicably part ways on a conflict of visions” within Nouns DAO. 

The Nouns Fork system is triggered if at least 20% of current Nouns opt in - via Nouns Fork spec

And make no mistake, since the Nouns launched in August 2021 there have been conflicts of vision here. That’s why some of the people who are leaving in the first fork are doing so, namely because they disagree with how the DAO has been allocating funds to date and so forth. 

Yet there’s also another faction, the arbitrageurs or “arbers,” who’ve been buying up Nouns on the cheap for months in anticipation of receiving more ETH than they spent through the first Nouns fork. 

Since the split’s set to succeed, the forkers soon will have a choice: continue on with a new forked Noun NFT in a new Nouns DAO fork, or use the “rage quit” functionality to withdraw their pro rata cut of ETH. 

For the arbers this is a simple trade, so this faction’s expected to use the rage quit functionality en masse. How many of the currently +350 forking Nouns are from dissatisfied members and how many are from arbers isn’t currently clear, though if I had to guess I’d say somewhere around 2/3rds are arbers.

What happens next

Amid this first Nouns fork, the treasury of Nouns DAO has dropped from +28,000 ETH to +17,000 ETH, as ~11,000 ETH is now earmarked for the forked DAO and its rage quitters. 

In recent days, I’ve seen a growing perspective in Nounish circles of this split being a win-win-win situation. The gist is that the dissatisfied can move on, the arbers can make their coveted trades, and the remaining Nouners proper can get back to doing what they love, i.e. backing creative experiments. 

Mind you, there has been a funding standoff in Nouns recent months over the Nouns Fork. Arbers were blanket voting “Against” any spends to preserve the treasury to the utmost for their rage quits, while Nouners that still believed in the Nounish mission were still trying to continue business as usual.

That’s why many of the folks that are remaining in Nouns DAO seem to feel relieved and even rejuvenated right now. For the diehards and the dreamers left, “Nouns energy feels back” as Onion just noted. 

But there are some big open questions.

For example, now that the Nouns Fork functionality is live, will Nouns DAO continue to be plagued by arbers, or will this initial big split have been enough to reconsolidate the effort for years to come?

Additionally, will the remaining Nouners take proactive efforts to mitigate treasury raids in the future, like raising the Nouns Fork quorum to 40%? And how will the Nouners left standing decide to distribute the +350 Nouns that have been returned to the treasury by the forkers?

For his part, Nounder 4156 has noted interest in a “careful” redistribution:

“Burning treasury Nouns would be a missed opportunity to grow our network value. I'm personally going to advocate for (and work on) the careful distribution of treasury nouns to helpful, interesting, and positive sum individuals and orgs within and outside the crypto community.”

The big picture

Your takeaways here? 

Yes, the Nouns will survive. Ironically, that which people think endangers them — the Nouns Fork mechanism — is actually that which ensures them. For instance, imagine the “true” Nouns are swarmed by raiders in the future, they themselves can fork out, pause auctions, and then determine how to move forward accordingly.

That’s the power of Nouns V3. And toward that end, no, DAO governance isn’t fundamentally broken. DAO governance continues to be an area of big experimentation and innovation, and Nouns V3’s a taste of that. 

Moreover, the Verbs team is already making advances on a new NFT-based governance system, Nouns Governor, so the technical and the cultural work at hand continues for Nouns DAO and will continue for the foreseeable future. The talent and dreams remaining is too incredible to sleep on, so do so at your own risk. 

Finally, if you want to track the action around the first Nouns fork, be sure to check out www.mogu.wtf/fork by martin. Not only is it a great resource in its own right — the first explicitly Nounish block explorer — but it’s also an example of the kind of creative endeavors Nouns DAO has historically backed!

via mogu.wtf/fork

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Action steps:

• 😲 Track the 1st Nouns Fork: Watch nouns.wtf/fork or mogu.wtf/fork

• 🆕 Catch up on my previous weekly roundup: NFT News Flash

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Not financial or tax advice. This newsletter is strictly educational and is not investment advice or a solicitation to buy or sell any assets or to make any financial decisions. This newsletter is not tax advice. Talk to your accountant. Do your own research.

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Disclosure. From time-to-time I may add links in this newsletter to products I use. I may receive commission if you make a purchase through one of these links. Additionally, the Bankless writers hold crypto assets. See our investment disclosures here.