What Are Nouns? The Ethereum NFT DAO Building Open-Source IP

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Pix­el art NFTs are noth­ing new—one of the first NFT col­lec­tions, Cryp­toP­unks, pio­neered the blocky 8‑bit design style.

But Nouns is shak­ing things up with a nov­el dis­tri­b­u­tion method and open-source IP that has led to the col­lec­tion’s sig­na­ture pix­e­lat­ed specs pop­ping up every­where from beer cans to movies.

Here’s how Nouns works, and how it has built a mul­ti­mil­lion-dol­lar decen­tral­ized brand.

What are Nouns?

First and fore­most, Nouns is an NFT col­lec­tion, whose own­ers are part of Nouns DAO, a decen­tral­ized autonomous orga­ni­za­tion.

Non-fun­gi­ble tokens (NFTs) are cryp­to­graph­i­cal­ly unique cryp­to tokens that are often used to rep­re­sent a piece of dig­i­tal art. Nouns are an exam­ple of a pro­file pic­ture (PFP) col­lec­tion, a set of NFTs that are typ­i­cal­ly used as a user’s pro­file image on social media platforms.

Nouns are also a cre­ative exper­i­ment on Ethereum designed to improve how on-chain com­mu­ni­ties inter­act. The Nouns DAO does this by using its trea­sury to build and sup­port pub­lic goods.

A lit­tle over a year has passed since the first Nouns NFT (a pix­el art char­ac­ter with a fox head and pink glass­es) was auc­tioned on Ethereum. In that time, the Nouns DAO has steadi­ly grown and now holds just over 29,000 ETH (about $45 mil­lion) in its treasury—a war chest used to fund a diverse range of ini­tia­tives from char­i­ty dona­tions to nam­ing a new species of frog.

Who invented Nouns?

The Nouns con­cept was inspired by a Twit­ter prompt from an anony­mous found­ing mem­ber, Punk 4156. After inter­est grew for the idea, he fol­lowed it up with a series of tweets out­lin­ing the frame­work that would invari­ably become Nouns.

Short­ly after, a group of ten Nounders (what Nouns calls its co-founders), includ­ing Vine founder Dom Hof­mann, began work­ing through a shared Dis­cord and cre­at­ed the DAO, using Punk 4156’s out­line as a guide to solid­i­fy the con­cept.

What’s so special about Nouns?

Each Noun NFT is a lit­tle pic­ture of a humanoid that has been algo­rith­mi­cal­ly gen­er­at­ed to order, then stored as a 32-pix­el by 32-pix­el pic­ture direct­ly on the Ethereum blockchain.

The fact that Nouns are stored direct­ly on Ethereum’s scarce block­space, rather than con­tain­ing a link to an image host­ed else­where (for instance on decen­tral­ized web host­ing ser­vice IPFS), is a notable dif­fer­ence between Nouns and many oth­er NFT projects.

The algo­rithm that under­lies the Nouns pro­to­col forges these NFTs from a ran­dom com­bi­na­tion of back­grounds, body types and clothes. Some of these Nouns have flip­book cal­en­dars for heads. Oth­ers sport jumpers with geo­met­ric shapes.

You can play around with poten­tial Nouns in the Nouns Play­ground, a tool that lets you com­bine var­i­ous traits stored in the protocol.

Unlike the lim­it­ed sup­ply and exclu­sive nature of PFP NFTs like Cryp­toP­unks or Bored Ape Yacht Club, a new Noun is gen­er­at­ed ran­dom­ly every 24 hours and put up for auc­tion. Once each auc­tion clos­es, anoth­er unique Noun is mint­ed (based on a series of pre­de­fined traits), and the process repeats, for­ev­er. The Nouns smart con­tract auto­mat­i­cal­ly sends 100% of the pro­ceeds direct­ly to the DAO Treasury.

What is the Nouns DAO?

Every Nouns own­er can join the Nouns DAO to help shape and gov­ern the project by vot­ing on pro­pos­als fund­ed by the Trea­sury. The DAO, which uses a fork of Com­pound Gov­er­nance, gives all mem­bers one vote per Nouns NFT. Although these votes are non-trans­ferrable, as with using prox­ies for board meet­ings, mem­bers of the DAO can del­e­gate oth­er peo­ple to vote on their behalf should the per­son or enti­ty del­e­gat­ing still own the Noun used to vote.

Although there’s no cap on the num­ber of Nouns a sin­gle enti­ty or per­son can own, a min­i­mum of two Nouns are required to sub­mit pro­pos­als. And the found­ing mem­bers receive rewards in the form of Nouns (10% of the sup­ply, or every tenth Noun, for the first five years).

Every Noun hold­er can spon­sor and vote on pro­pos­als for the trea­sury to fund. The idea is that the more unique and inter­est­ing said projects are, the more brand aware­ness Nouns gains, and the more peo­ple will want to join.

To date, the Nouns DAO has fund­ed pro­pos­als including:

  • 🏈 Fea­ture Nouns in a Super Bowl com­mer­cial – The pro­pos­al involved offer­ing one Nouns NFT from the DAO to a com­pa­ny that would fea­ture the icon­ic Nouns glass­es in a 2022 Super Bowl com­mer­cial; the NFT even­tu­al­ly went to Bud Light, which duly aired the com­mer­cial dur­ing the much-cov­et­ed ad slot. As part of the deal, Bud Light also changed its Twit­ter pro­file pic­ture to a Nouns NFT.
  • 🎥 Nouns Around Town Doc­u­men­tary – Pro­posed by the mak­ers of Robot Chick­en, the pro­pos­al and project secured 609 ETH in fund­ing and cen­ters around mak­ing a comedic film about the Nouns DAO’s attempt to have Nouns fea­tured in the Rose Parade.
  • Nouns cof­fee – Cre­at­ed by a team with a back­ground in the glob­al cof­fee indus­try, the Nouns cof­fee pro­pos­al secured 105 ETH in fund­ing to cre­ate the first ever Noun­ish con­sum­able brand and place it in cafes and gro­cery stores.

How to buy a Nouns NFT

Nouns are offered at auc­tion on the Nouns web­site, with a new Noun gen­er­at­ed and offered for sale every 24 hours. They are also avail­able on sec­ondary mar­kets such as OpenSea and Rari­ble.

As of Octo­ber 30, 2022, the Nouns floor price is over 60 ETH (about $93,000). One rea­son for the big stick­er price is that the sup­ply of Nouns is very lim­it­ed, because just one Nouns NFT is released a day. Where NFT col­lec­tions like Bored Ape Yacht Club and Cryp­toP­unks typ­i­cal­ly num­ber in the thou­sands of units, there are just 491 Nouns at the time of writing.

Did you know?

Despite its high floor price, Nouns is just the 232nd largest NFT project with $23.3 mil­lion in sec­ondary mar­ket sales, accord­ing to data from Cryp­toSlam. By com­par­i­son, Axie Infin­i­ty, the largest NFT project, has gen­er­at­ed about $4 bil­lion in sec­ondary mar­ket sales.

Nouns and open-source IP

Nouns is open-source and is released under a Cre­ative Com­mons CC0 “No Rights Reserved” license. This means that any­one can use the Nouns name and imagery to cre­ate any­thing, as it’s in the pub­lic domain.

Even if you don’t own a Nouns NFT, you can cre­ate Nouns mer­chan­dise, and peo­ple have cre­at­ed deriv­a­tive NFT col­lec­tions such as Noun­dles, Lil’ Nouns, 3D Nouns, and NounPunks.

You’re also free to add new traits for future Nouns. The only caveat is that the Nouns code­base, includ­ing the art with­in it, is prin­ci­pal­ly gov­erned by the Nouns DAO, which votes on which traits are includ­ed in the col­lec­tion. The DAO receives all of the ETH used to buy Nouns.

As of this writ­ing, the trea­sury holds about $45 mil­lion. This mon­ey is used for “the long-term growth and pros­per­i­ty of the Nouns project.” Nouns hold­ers can vote on pro­pos­als sub­mit­ted by oth­er Nouns holders.

Dis­cus­sion for Nouns takes place on Dis­cord and the forum site Dis­course. The lat­ter is where intense dis­cus­sion around pro­to­col gov­er­nance takes place.

Suc­cess­ful votes on the gov­er­nance pro­to­col, which is mod­eled after Com­pound Gov­er­nance, include a motion to estab­lish brand pres­ence in Brazil (expect merch) and design and dis­trib­ute a month­ly Nouns com­ic for dis­tri­b­u­tion across the U.S. (expect anthro­po­mor­phic Nouns). Nouns DAO is also one of the crowd­fund­ing back­ers of fea­ture film “Calla­di­ta,” in what’s thought to be the first on-chain pro­pos­al for a DAO to fund a fea­ture film; the deal will see a Nouns NFT fea­tured on-screen in the film.

The future of Nouns

Despite its name, the Nouns DAO is not entire­ly decentralized—yet. The Nouns Foun­da­tion, an “own­er­less” Cay­man Foun­da­tion Com­pa­ny set up by the Nounders, has the abil­i­ty to veto pro­pos­als it doesn’t like, such as those that “intro­duce non-triv­ial legal or exis­ten­tial risks to the Nouns DAO or the Nouns Foun­da­tion.” This refers to trea­sury raids, bribes, unwant­ed updates to the Nouns smart con­tracts, or attempts to con­trol the Nouns auc­tion process to get a vot­ing majority.

It remains to be seen whether hand­ing intel­lec­tu­al prop­er­ty rights to a com­mu­ni­ty straight away, and focus­ing on the gov­er­nance of a brand, makes a mate­r­i­al dif­fer­ence to its value.

But so far, Nouns NFTs have become a rec­og­niz­able part of the NFT ecosys­tem, and the Nouns gov­er­nance struc­ture has worked impres­sive­ly well, tak­ing the project beyond lit­tle pixel­lat­ed blobs with tacos and air­planes for heads.

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