Published on: November 05, 2021
Nouns are generative pixel-based character NFTs that grant owners access to the NounsDAO.[1] The NounsDAO’s primary function is to govern the Nouns Treasury. Nouns were created by the ‘Nounders’, a group of 10 builders who initiated Nouns.
The Nounders’ are: @cryptoseneca, Gremplin of CryptoToadz (@supergremplin), @punk4156, Kai Vermehr, Steffen Sauerteig (@eboyarts), Svend Smital (@punk4464), Solimander, Vine creator Dom Hofmann (@dhof), @devcarrot, Oliver Timperley (@TimpersHD) and @lastpunk9999.[1–2]
How it works
Nouns are 32×32 pixel characters based on people, places or things.[3] Nouns are generated and auctioned off every 24 hours via the Nouns website and stored directly on Ethereum (Opposed to centralised networks). Once an auction is completed the Noun is transferred to the highest bidder and 100% of the sales proceeds are deposited into the Nouns Treasury. This allows Noun owners to participate in NounsDAO governance.
The role of the NounsDAO is to determine how to utilise the Nouns treasury, with a focus on funding projects that will promote the proliferation of Nouns into the world.[4] Developers and artists have the freedom to utilise Nouns in any way they like because all Nouns are released under the public domain and the code is open source. The DAO has expressed interest in funding projects such as a Nouns mobile app, Nouns-based middleware, Noun games and other Noun-based projects.
At the time of writing, the Noun Treasury holds >$60M USD, creating a significant opportunity for developer funding [5]. Given 100% of auction sales are deposited into the treasury we can estimate the average price of a circulating Noun is 156.6 ETH. This is slightly higher than the last five sales which closed for an average price of 123.6 ETH. At present Nouns seems to be roughly priced by the book value of the treasury which is 142 ETH per Noun.
Nouns NFTs
NounsDAO does not have a native ERC-20 token. Instead, the Nouns NFT, an ERC-721 token, provides the utility usually associated with an ERC-20 governance token. As of writing, there are 95 unique Nouns in circulation, held by 66 different wallets.
There’s no maximum supply of Nouns and new Nouns are minted every 24 hours in perpetuity. As mentioned, once a Noun is minted it’s sold via a 24-hour auction.
The ‘Nounders’ receive every 10th Noun as compensation for creating Nouns. Every 10th Noun is sent to a multi-sig wallet owned by the ‘Nounders’ for the first five years of the project. This is the equivalent of the ‘Nounders’ owning 20% of the Nouns supply for the first 5 years.
Despite having an uncapped supply, Nouns are still very scarce. Based on the above vesting schedule, there will only be a total supply of 2,027 Nouns in five years.
The above-estimated treasury was calculated assuming Nouns will continue to be sold at auction for an average price of 123 ETH. Building off this assumption we can estimate Nouns will have a treasury of 47,821 ETH after 1 year. This is only an estimation and as more Nouns are released this could mean lower prices.
Glossary
ERC-721
Refers to a token standard that can be found on the Ethereum blockchain.
Nounders
Founders of Nouns.
Nouns DAO
Governance of Nouns ecosystem.
Noun seed
How Noun’s traits are determined.[7]
Playground
An area where users can generate Nouns off-chain.[8]
Recent Developments
Noun Auctions
The first auction happened on Aug. 9, kicking off the beginning of the Noun generation experiment.[9] The Noun protocol will continue to host, generate and auction off Nouns daily. When one auction ends another one begins with a newly minted Noun NFT, with auctions featured on the nouns.wtf homepage and bids can be made via Ethereum.
Growing NounsDAO treasury & Nouns Town
With the NounsDAO treasury raising significant ETH, Nounders have highlighted a desire to fund projects like 3D Nouns Generator, Nouns Party and Nouns iOS App.[10] The team have also expressed significant interest in investment in more artworks, hackathons or increased integrations.[11]
On Oct. 13, Nouns released Nouns Town, the official merchandise shop for Nouns.[12] All orders are placed with ETH, with stickers available for all Noun Protocol NFTs, as well as hats and other merchandise.
Nounify
Released on Nov. 1, Nounify allows users to add Noun characteristics to a selection of existing NFT artworks on the Ethereum blockchain. Users can search with their token ID, add their chosen Noun characteristics and then export the image in png format. Nounify was made with the intention to be used for profile pictures.[13]
What’s Ahead
Nouns remain in its infancy, with decisions for future development powered by the NounsDAO and forum. Some notable upcoming events to look out for include:
- Nouns Party: The Nouns Party vault will continuously accumulate Ethereum liquidity from nouns.wtf auctions. Once the vault hits a certain level the community wins a Noun, which will be divided into Noun shares so everyone gets a slice.[14]
- Brave sponsored NFT ads proposal: A partnership proposal for an advertising campaign on the Brave browser was successfully passed.[15]
- Nouns retroactive funding & small grants group: Noun could fund community-approved projects via its large treasury and proposals are put to the forum weekly.
- Nouns Town: The store is still new and with more items to be added, keep an eye out for further updates regarding Nouns Town.
- Treasury spending: In the outline for Noun’s vision, the initial creators outlined a desire to use the treasury aggressively and fund projects such as 3D Nouns Generator, Nouns Party, Nouns iOS App and more.[11] There’s also discussion in the community about creating a Nouns Comic.
Bullish
- Community: Nouns have a strong community presence for decision making and contributing to core projects. The Discord is very active among admins, Noun members and many Nounders are active crypto community members.
- Warchest: Nouns have a massive war chest of >$60M in the DAO treasury. Having a large funding base ensures NounsDAO has enough resources to fund future developments and build out its platform or brand.
- Potential for lower entry points: Although not currently planned, there could be potential for Nouns to introduce lower-cost entry points for potential users who want to participate in the ecosystem.
Bearish
- Unclear value proposition and vision: Nouns has done an excellent job of accumulating funds for the DAO. However, there is no clear strategy on how to allocate or utilise funds for the benefit of DAO members and there is no consistent vision. There is no clear path forward for Nouns and the community appears to want to execute multiple different projects and products.
- High barrier to entry: Currently, the early Nouns are selling for exorbitant prices, pricing out many from participating. As stated above, there is potential for Nouns to release lower entry price NFTs or products to include more users.
- Veto power & non-random traits: In the early stages of the project, Nounders have special veto power to “ensure no malicious proposals can be passed while the noun supply is low”.[1] This means they technically have the ability to control the large treasury, although any malicious activity is unlikely due to the high profile of many of the founding members. Additionally, the NFT trait generation is not truly random, and traits can be predicted when minting a Noun on the pending block.[1]
Sources
1 Website
2 GitHub: contributors
3 A Brief Introduction to Nouns
4 Docs
5 Nouns treasury
6 Nounalytics
7 Github
8 Playground
9 Twitter
10 Funding Real World Public Goods with the Nouns DAO Treasury
11 The Nouns Virtuous Cycle
12 Nouns Town
13 Nounify
14 Nouns Party
15 Proposal 14: Brave Sponsored Takeover
All information contained in this Crypto Spotlight Report is not to be considered financial advice of any kind, and you should obtain independent legal, financial, taxation and/or other professional advice in respect of any decision. You acknowledge that any information provided is generic in nature and does not take into account your specific circumstances.