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Dear subscribers,

Let’s talk about Nouns DAO, one of the most interesting NFT projects out there:

1. One Noun NFT is sold every day, forever

2. Nouns have been selling for 80 eth ($100K) (in a bear market!)

3. These sales have generated 26K eth ($34M) for the Nouns treasury

So WTF is Nouns DAO? We did our research and spoke to Vapeape, a founding member of the DAO. Let’s dive into:

1. How Nouns DAO works

2. The wacky world of Nouns projects

3. Is Nouns DAO actually sustainable?

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How does Nouns DAO work?

Most NFT projects launch with a limited number of NFTs (e.g., 10,000). Nouns DAO is different - every 24 hours, a new Noun NFT is auctioned to the public:

So far, over 300 NFTs have been auctioned. Barring a few instances, the winning bid has consistently stayed above 80 eth ($100K). 

100% of the sale goes to the DAO treasury which is now at 26K eth ($34M). The founding team (10 “Nounders”) don’t get a cut of sales. Instead, they get every 10th Noun for free for the first 5 years. 

“The founding team started talking after this tweet from Punk4156. Our initial spec was essentially this tweet thread from June 2021.” - Vapeape

4156 ⌐◨-◨ @punk4156

After pronouns, there were Nouns.👇

June 2nd 2021

25 Retweets229 Likes

The founding team is made up of 10 individuals that include both top NFT collectors (e.g., Punk4156) and founders (e.g., dom, co-founder of Vine). They continue to maintain the infra (website, discord) and help the DAO execute proposals.

So why are people paying $150K for a Nouns NFT? 

Joining a community of top collectors and founders certainly plays a role. But the other aspect is CC0.

CC0 means “no rights reserved.” That means that anyone can use your Noun NFT to make stuff and spread the word about the project.

This brings us to…

The wacky world of Nouns projects

“Ultimately, it would be culture that takes crypto mainstream.” - Punk4156

The core utility of Nouns DAO is that every Noun holder can sponsor and vote on proposals for the Nouns treasury to fund. That 26K eth ($34M) treasury has been used to fund all types of projects:

1. Budweiser Super Bowl ad (1 noun): Give Budweiser a Noun to showcase in their Super Bowl ad.

2. Nouns documentary film (609 eth): Produce a documentary on Nouns with a feature in the Rose Parade.

3. Nouns coffee (105 eth): Create a coffee brand for Nouns.

4. Ukraine aid (100 eth): Send money to UNICEF to help Ukraine conflict victims.

5. eSports team sponsor (35 eth): Sponsor a DOTA2 esports team.

These projects seem random but all help to build the Nouns brand. The more brand awareness Nouns has, the more people want to be part of Nouns. 

Here’s how a project gets funded, using Nouns Coffee as an example:

“User Brkfstsndwch has built a coffee brand through his Nouns derivative project, Brkfst World. He has also built a good reputation in the Nouns community by helping out on other proposals.” - Vapeape

1. Brkfstsndwch shared the coffee proposal in Nouns discussion forums.

2. After reaching some consensus, the proposal was submitted for an on-chain vote for Noun holders (1 Noun = 1 vote).

3. The vote passed and the DAO transferred 105 eth to Brkfstsndwch and team. The team is expected to provide regular updates to the Nouns community.

105 eth is a lot of money, so there’s some risk involved:

“There is technically nothing stopping them from running off with the eth. However, we expect that people won’t want to burn their reputation and further access to funding from the DAO.” - Vapeape

But wait, is Nouns actually sustainable?

The core loop for Nouns is: Fund great projects, grow Nouns brand, more demand for Nouns NFTs. Let’s recap the pros and cons of this loop:

Pros

1. Huge treasury: 26K eth ($34M)

2. Decentralized governance: Any holder can sponsor and vote for a proposal.

3. Innovation engine: Nouns is a hotbed for innovation and funds many projects.

Cons

1. Cost of entry is high: Since it costs 80 eth ($100K+) to buy a Noun, the cynical view is that Nouns is an investment club for 300+ rich people. However, anybody can get their proposal funded if they can find a holder to sponsor it. Furthermore, derivative projects like Lil Nouns are lowering the cost of entry. 

2. Project ROI is unclear: It’s unclear if the DAO rigorously measures ROI for the projects that it funds. There’s no commitment that projects have to return money to the treasury.

3. Supply is unlimited: It’s unclear if the unlimited supply (“one noun every day, forever”) will put downward pressure on the price or make governance votes harder. 

To the latter point, Vapeape’s view is:

“It will take nearly 30 years to reach the typical 10K supply. Besides that, the protocol is upgradable and able to change the emission rate if the DAO chooses to.” - Vapeape

What’s next for Nouns DAO?

Nouns is one of the few NFT projects that feels truly decentralized, so the best way to get a sense of what the DAO is planning next is to check out the list of active proposals. 

I think it’s incredible how much Nouns has accomplished in a year — from sponsoring eSports teams to starting a luxury sunglasses brand. 

If this pace continues, it’s not a stretch to imagine Nouns being one of the first NFT projects to become a household brand.