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“One Noun, Every Day, Forever.” ♾️

A little over two years ago, in August of 2021, a remarkable Web3 project started. Called Nouns, it combined cute, pixelated, and bespectacled characters with a grand experiment and bold question: Could a decentralized autonomous organization (DAO) based on an infinite art project — and armed with a treasury that grew each day — turn into a global brand and a force for good?

The Nouns DAO Fork 🍴

We’ll get into the technicalities later, but what you need to know right now is that today marks a momentous occasion in Nouns’ history. Today, more than half of the nearly 900 Nouns in existence have chosen to join a Fork, a replica of the project that will see them leave the original DAO, and see the DAO’s treasury lose more than half its funds in the process.

At face value, this sounds calamitous. But speak to holders on either side of the leave/remain divide, and you’ll find most agree: the Fork is good for the project. For the disgruntled leavers, it’s a chance to demonstrate their unhappiness, exit, recoup fund, and create a new version of Nouns if they so wish. For remainers, it’s a chance to purge the doubters while making it easier for the true believers to get things done.

Whichever side you’re on, it’s huge and will have ramifications for Web3, DAOs, and decentralized IP for years to come. Let’s get into the details.

The war chest 💰

The parameters of the Nouns project are simple: One Noun is trustlessly created and auctioned every 24 hours. The art is fully on-chain and in the public domain (CC0). All the funds from every sale go into the Nouns DAO treasury. One Noun equals one vote for proposals submitted to the DAO by Noun holders.

Nouns’ founders — the “Nounders” — are a group of crypto and digital art enthusiasts, engineers, and Web3 luminaries: seneca, gremplin, punk4156, eBoy, vapeape.eth, Solimander_, Dom, devcarrot, TimpersHD, and lastpunk9999.

The collective clout of the cohort meant early Nouns sometimes sold for hundreds of ETH (or hundred of thousands of dollars), and within two years, Nouns has accrued a treasury of over 28,000 ETH (~$50 million). It’s also voted on over 370 proposals for using those funds, from supporting fun Noun-elevating projects and charities to staking part of the treasury to help grow it.

In lieu of payment for their efforts, the Nounders receive every 10th Noun into a multi-sig wallet for the first five years of the project. And the Nounders retain a veto — never used or needed, so far — to prevent "51% attacks" where someone could buy enough Nouns/votes to push through proposals, and to prevent other malicious proposals that would undermine or endanger the project’s long-term prospects.

The V3 upgrade and the Fork 💾

As with any vibrant and growing community, there’s been some disagreement over how the treasury ought to be spent and on which uses of it are most likely to bolster the Nouns brand — and (hopefully) in the process, the price each auction closes at, which means more ETH in the treasury. There’s also been dissent over how much power the Nounders have.

Web3 technology and smart contracts have also advanced since Nouns’ inception, and the implementation of version 3 (V3) of the Nouns protocol (via Proposal #356) presented an opportunity for the dissenters to have a say. If 20% of Nouns holders agreed, a new Fork mechanism would let them spin off a new version of the DAO, taking a pro-rata-per-Noun slice of the treasury with them.

Forks aren't new to crypto projects (for example, Bitcoin Cash and Ethereum Classic), but they are new to DAOs. Forks allow those with conflicting views to go their own way while leaving the original project to its own devices.

In this instance, the Nouns Fork allows those who choose to join to exit the original DAO, return their Noun to it, and receive a duplicate Forked Noun instead. They can then choose to forgo their Forked Noun, and receive a 35.5 ETH payout.

With only hours to go, 464 Nouns (or ~55% of the 846 total Nouns) have joined the fork. That means the Nouns DAO will be left with ~13,500 ETH in the treasury, while the Nouns DAO Fork will leave with ~16,500 ETH for its treasury.

The end or a new start?

Because macro-conditions (among other things) have seen the daily sales price for Nouns fall, there’s a group of holders who stand to benefit by taking their 35.5 ETH and running (if they paid less, it’s an arbitrage opportunity that’s hard to resist). It’s expected most who choose to join the Fork will do exactly that, including those who stand to lose money, but who’ve lost faith in the project and want out.

So, while it’s possible the Nouns DAO Fork could spin up its own UI and daily auction, that seems extremely unlikely, especially if 2/3rds of its newly minted community and accompanying treasury vanish in the coming days.

That’s good news for the OG Nouns DAO, which expects to find itself better able to manage proposals and advance the project with those who doubt its longevity or leadership, or disagree with its trajectory, having departed.

Moreover, the Nouns DAO will now have 464 Nouns (or more) returned to its inventory, which it can use to promote the project, honor supporters, or otherwise grow the brand.

For many Noun loyalists, the Fork represents a chance to clean house, take stock, regroup, and refocus. In such a low liquidity market, it’s not surprising some people are choosing to cash out and leave. Still, it’s telling how many are choosing to stay despite broader market conditions and the scarcity of liquidity.

In a Twitter Spaces discussing the Fork, Noun holder Valko said, “To grow, you must prune.” He may yet be proven correct.

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Could this have been avoided? 👀

To avoid this sort of drama, many DAOs have implemented a “rage quit” function — pioneered by the MolochDAO — that lets dissatisfied members divest and be replaced by people more aligned with the DAO’s mission. Had Nouns introduced something similar sooner, things might have played out differently.

But as it stands, the Fork represents the Nouns DAO’s version of a rage quit feature, and many holders are choosing to exercise it. Some see it as a proof that DAOs are doomed to fail. For others, it’s a chance for the Nouns’ to spring clean. We’re in the latter camp, broom at the ready.

Why we’re staying 🏠

Nouns represents a grand experiment of what’s possible in decentralized IP. At Metaversal, we’re pro-CC0, and while we acknowledge it’s a work in progress, we believe decentralized IP models have a crucial role to play in the future of culture, creativity, and ownership.

We don’t think the experiment is over. In fact, we think it’s just getting started. We’re creator-first, and we believe the future of cultural production and consumption will be underpinned by decentralized ownership and permissionless collaboration.

Nouns mirrors many of our ideals, and we want to be on the frontlines, collaborating with the Nouns community, and helping drive more effective memeification of what we believe will one day be one of the cornerstone projects in the history of not just Web3, but also IP more broadly.

The Nouns DAO Fork represents a hard reset for the Nouns DAO, but promises to leave a group of participants more aligned with the project’s ambitions, and ours. We’re proud to be part of the Nouns DAO and surrounding communities, so we’re doubling down and reasserting our commitment to it.

One Noun, every day, forever. ✊

Connect for more 🔌

Congratulations, you’ve made it to Friday and to the end of this week’s newsletter. Go make yourself a delicious snack and put your feet up; you’ve earned it. Or maybe you haven’t… in which case, well, there’s always next week. We believe in you! 🥪

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Until next time, see you in the metaverse… or in the OG Nouns Twitter mentions. 📣