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Published on Feb 23, 2022

Down the Rabbit Hole: Nouns DAO, a governing body for nouns ecosystem!

Sidharth
#Insights
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Down the Rabbit Hole: Nouns DAO, a governing body for nouns ecosystem!

Several NFT projects are available in the market, but they are just limited to being the avatar creation projects without any extended utilities. To change that scenario projects like NounsDAO came into existence. NounsDAO extends the utility of NFT projects by associating them with DAOs.

Nouns refer to the generative NFTs built on Ethereum representing people, things, and places. The Noun protocol is a collection of smart contracts that create and auction a Noun every day. On the other hand, the NounsDAO is the governing body of the Nouns ecosystem. As the NounsDAO receives 100% of the earnings from the daily auction, the treasury is ready to finance projects that help Nouns spread over the world.

What is Nouns?

As specified previously, Nouns refer to a generative NFT art project based on Ethereum.

People, places, and objects are all represented by nouns, which are 32x32 pixel characters. As the Noun has an open-source code, any developer/artist is free to build a Noun in any way they want on the Playground section of nouns.wtf and then the Nouns are trustlessly auctioned every 24 hours by the Nouns Protocol.

Here are the details regarding the Nouns generated and auctioned so far:

Source: https://dune.xyz/aaaaaaaaaa/NounsDAO

Here are the five traits based on which the Nouns differ from one another:

  • Background
  • Head
  • Body
  • Accessory
  • Glasses

Each Noun has a distinct ID to be used to examine its characteristics.

Nouns.wtf is established and managed by the founders of the projects, named ‘Nounders.’ These are the group of 10 builders who first initiated with the concept of Nouns and NounsDAO. Here is the list of these Nounders:

You can check Nouns created so far on OpenSea: https://opensea.io/collection/nouns

On-chain Nouns Artwork:

Nouns are saved on Ethereum directly, without pointers to other networks like IPFS. Noun components are compressed and saved on-chain using a bespoke run-length encoding (RLE), a lossless compression method.

The compressed components are transformed into a single base64 encoded SVG picture on-chain. Each portion is first decoded into an intermediate format before turning into a sequence of SVG rects using on-chain string concatenation. After the SVG has been generated in its entirety, it is base64 encoded.

How to create Nouns?

Here is how you can create a Noun NFT:

  1. Go to the Playgrounds section in nouns.wtf page.

2. Select the five traits, i.e., background, body, head, accessory, and glasses, or you can also keep them as random.

3. Click on the Generate Nouns option, and the Noun will be generated.

Nouns Protocol and Nouns Auction

As we already discussed, Nouns Protocol is a collection of smart contracts responsible for the creation and auction of Nouns.

The protocol has a Seeder contract that determines the traits of a Noun created. The contract can also be replaced for further upgrades to the trait generation. Currently, here is the pseudo-random number generation code for determining the next Noun traits:

keccak256(abi.encodePacked(block hash(block.number - 1), nounId))

How is the next Noun chosen for the auction?

  • The FOMO nouns section displays each Noun block generated for precisely 13 seconds.
  • At noun o’clock (when an ongoing Noun auction completes), the Noun block, which was currently displayed in the FOMO nouns section, then goes off for auction by the Noun Auction contract.
  • People have the right to like or dislike any current block to approve it or skip it and mint the following Noun for the auction. A winning vote is when 60% of the users connected like/agree a given Noun block.
  • However, as each Noun, only appears for 13 seconds, and if you miss out on any Noun for voting or disliking, then there might be a chance that you cannot see it again for the following 40,393,080 blocks, i.e., approximately 17 years.

Nouns Auction Settlement

Here is a graph of daily Nouns auctions:

Source: https://dune.xyz/aaaaaaaaaa/NounsDAO

Noun auctions also have to be settled with their completion due to how Ethereum works. The auction settlement transaction accomplishes four goals:

  • It transfers the current NOUN ERC-721 token to the auction winner.
  • Transfers 100% of the finalized ETH bidding amount to the NounsDAO treasury.
  • Mints the next Noun.
  • Starts the next 24-hour Noun auction.

Here is the statistic of the average Nouns floor price:

Source: https://dune.xyz/pseudoboss/Floor-prices:-Nouns-Punks-BAYC-Loot

Nouns DAO

The Nouns ecosystem's primary governing body is the Nouns DAO, built on Compound Governance. Each Noun is an inalienable member of Nouns DAO, with one vote in all governance decisions.

For each Noun in Nouns DAO, here are the details regarding their unique bidders and auction extensions:

Source: https://dune.xyz/aaaaaaaaaa/NounsDAO

The treasury of the Nouns DAO receives 100% of the ETH revenues from daily noun auctions. However, the Nounders still have chosen to compensate themselves in the other way, i.e., every 10th nouns for the project’s first five years will go automatically to their multisig to be vested and shared among these ten founding members. But this doesn’t impact the Nouns Auction, as every 24 hours, the following Noun goes for the auction.

Here are the details regarding the total NounsDAO treasury:

Source: https://deepdao.io/organization/37aba1a5-2f93-4c15-9171-5df14ac4e237/finance

While the Noun supply is limited, Nounders have given themselves a unique veto authority to ensure that no malevolent ideas are passed. This veto power will only be utilized as a last resort if a blatantly damaging governance plan has been passed.

Why is it created?

Imagine that there’s only the Nouns NFT and no DAO or treasury associated with it. It will solely be a delightful art project in the growing range of avatar projects. But the creation of the DAO adds an extended utility to the NFTs. In NounsDAO, the ETH acquired for the auctioned NFT gets transferred to the DAO treasury every day, thus creating a massive treasury for the DAO to fund projects on its own.

By experimenting, taking chances, and ultimately supporting every high-quality proposal that could lead to intriguing culture and software on the Nouns protocol, the Nouns DAO treasury can fund and develop a community of builders:

  • APIs that are both centralized and decentralized
  • Artwork that contributes to the cultural conversation in a new way
  • Integrations with other Ethereum primitives and decentralized applications
  • Apps for iOS and Android
  • Documentation and Hackathons

Contributing to Nouns DAO

The treasury is directed by Nouns using their voting powers (1 Noun = 1 vote). Nouns can create/vote on the governance proposals, which, once approved, perform transactions on the Ethereum blockchain.

Nouns DAO Proposal Cycle

The goal of the application process is to have the proposal on-chain and approved by the NounsDAO members through a vote. Before that, each step of the application process is an opportunity for the community to provide comments to improve the odds of being approved on-chain.

  • Proposal informally: Post your project idea on Discourse. This is a preliminary sketch of what your final proposal might look like. Make sure to provide all of the information needed for someone to comprehend what your project comprises. The main channel for receiving input will be Discourse. Once your concept is published, submit it to the #proposal-ideas channel (along with the Discourse link) in the discord server of Nouns for further exposure.
  • Community feedback: Proposals are available for recommendations and feedback from the community. To get feedback from the Nouns community, post your proposal on Twitter, Discord, and other social media platforms.
  • Identify a sponsor: To submit proposals, a minimum of 5% of the overall NOUN supply must be reached. To get your idea on-chain, find a member of NounsDAO to sponsor it. You will communicate with NounsDAO members throughout the application process, and they will naturally want to sponsor you because of the built-up interest in the project's growth.
  • Temperature check: Finalize your idea by considering the community input you've received thus far. Once you've prepared your proposal, ask your sponsor to share it in the #proposals channel of NounsDAO so you can get a sense of how well it's received. If you proposed to go on-chain, you should be pretty sure that it would pass.
  • Push proposal on-chain: Push the proposal onto the blockchain with your sponsor using the proposal creation tool at nouns.wtf/create-proposal.
  • On-chain voting: After the proposal has been placed into the blockchain, there is a 48-hour waiting period before the beginning of the voting period. The voting period is three days long. Voting will be available to holders of nouns or delegates. If at least 20% of the total` NOUN supply votes favor the proposal after the voting time has concluded, the proposed transactions will be conducted two days after the voting period ends.
  • Building: Make sure to update the community on your progress as you develop your idea. While there is no set methodology, weekly progress reports are standard. Weekly, provide brief descriptions of what you've accomplished in the discord, and the community will be pleased to commend you.

Submitting a Proposal to Nouns DAO

Any Noun owner who meets the minimal criteria of 0.5 percent of the total NOUN supply is eligible to submit a proposal to the DAO.

A proposal is a set of one or more transactions that the NounsDAO contract will carry out. Proposals can range in complexity from simple financing addresses to complicated structures that connect with other agreements.

Here are the stats regarding the proposals on NounsDAO so far:

Source: https://dune.xyz/aaaaaaaaaa/NounsDAO

Most NounsDAO applications focus on financing teams that improve the Nouns protocol. As a result, the most basic proposal template is to send ETH to one or more addresses from the NounsDAO treasury. To do so, follow the steps below:

  • Go to nouns.wtf/vote and select "Create Proposal" from the drop-down menu.
  • Select "Create Proposal" from the menu. The option "Add a Proposal Transaction" should appear. Take the following steps in the modal:

Step 1: The recipient's address is the address value.

Step 2: Value refers to the ETH that will be given to the receiver in ETH.

Steps 3 and 4 can be skipped - External contract contacts necessitate these processes.

Step 5: Double-check that the address and the value are both valid. Select "Add Transaction" from the drop-down menu if this is the case.

Repeat step 2 for each recipient address if your proposal requires several transactions.

Fill in the title and description of the proposal. Descriptions support markdown formatting, and you may construct and preview them using an online editor (such as dillinger.io).

Click the "Create Idea" button to submit your proposal. To submit, the wallet presenting the request must have a minimum of 1% of the total NOUN supply.

Governance recommendations are made on the blockchain and necessitate a transaction. A transaction charge is required for Ethereum transactions, and you will be required to pay the transaction fee when submitting a request. While Nouns' Governance contracts employ ways to limit the amount of gas necessary to propose, your proposal may require 400,000+ gas to submit.

Here are the details regarding the NounsDAO book value vs. Auction price for the past two years:

Source: https://dune.xyz/itzler/NounsDAO-Financial

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