Nouns is a collection of generative 2D pixel NFTs (ERC-721) that are based on people, places, and things. Each day, a new Noun is generated. The Noun is then auctioned for 24 hours. Once the auction ends, the Noun ERC-721 token is sent to the winning bidder, the Nouns DAO treasury receives the proceeds (denominated in Ethereum), and the next Noun is generated. The time at which the auction ends and when a new Noun is selected to be generated is known as “Noun O’Clock”.
This process is pseudo-random in that the Noun that is generated is based upon the block in which the prior auction is settled. So each Ethereum block has the potential to generate a unique Noun. Given the inner workings of Ethereum, Noun auctions must be settled after they are completed. There are no rules governing Noun trait scarcity so each Noun is equally rare. Overall, Nouns are composed of the following traits:
- Backgrounds (2)
- Bodies (30)
- Accessories (137)
- Heads (234)
- Glasses (21)
One Noun is auctioned every 24 hours, in perpetuity, through https://nouns.wtf/, an interface created by the Nouns DAO to streamline the process. After an auction ends, the Noun NFT is automatically and trustlessly sent to the highest bidder and the proceeds from each auction are sent to the Nouns DAO Treasury. One of the more interesting mechanics of Nouns is that after an auction completes, the community must pick a block to settle the old auction, mint a new Noun, and start the next auction. Again, every Ethereum block has the potential to mint a unique Noun and the auction must be settled on that exact block, or that Noun which was to be generated disappears. New blocks appear every ~13 seconds so the process happens very quickly. Ultimately, the community must gather votes, execute the transaction, and get it mined in the next block all within 13 seconds. This leaves participants with about 6 seconds to cast their votes.
Updates to the Nouns Generation Process
One problem with this approach, however, is that highly desirable Nouns may be passed over in the event that the overall settlement process does not finish within the small window of time. Recognizing this shortcoming, a community proposal was approved that enables users to vote on which Noun ought to be minted next. By visiting https://fomonouns.wtf/ users can get a glimpse of the next potential Nouns and vote on whether to settle in a given block and mint a particular Noun. If a Noun receives a sufficient number of votes, then it immediately settles the auction in the same block to mint the desired Noun.
This iteration is also important because it enables the minting of Nouns with more desirable traits and ones that will generally attract higher bids in the auction. The end result is that there is wider community engagement and increased revenue generation for the treasury.
Nouns DAO Governance and Treasury
All proceeds from the daily Noun auction are sent to the Nouns DAO treasury (Etherscan). Every 10th Noun (e.g. Noun #0, #10, #20, etc.) minted for the first five years, however, will be sent to a multisig wallet controlled by the founders (Nounders) of the project. As of the time of this writing, the Nouns DAO treasury contains 27,150 ETH ($27,772,704). Part of the appeal of owning a Nouns NFT is that each Noun becomes a member of the Nouns DAO. This membership is irrevocable and entitles one vote in all governance matters.
The core goal of the treasury is to cultivate a community of builders to fund high quality projects, such as commissioning artwork, developing Nouns middleware and tooling, running hackathons, building web and mobile apps, and integrations with Ethereum dApps. One particularly interesting result of Nouns governance was the development and recent launch of the Nouns App (https://www.nounsapp.wtf/). This interactive iOS application allows users to conveniently track auctions and build custom Nouns PFPs.
Anyone Nouns holder can submit a proposal. In order for the proposal to be pushed to on-chain voting, however, a minimum of 5% of the total Noun supply must endorse it. In addition, the DAO generally requires that any proposal endorsed should be reasonably expected to pass voting when moved on-chain. Once on-chain, voting members are given 48 hours to review the proposal before votes can be cast. Voting lasts 72 hours and a minimum of 20% of the total Noun supply is required to reach quorum. The proposal is then executed 48 hours after the voting period has ended. For a complete list of previous proposals see: https://nouns.wtf/vote
Secondary Market Activity
Nouns have been historically one of the most successful and sought after projects in the NFT space. Despite current macro headwinds, the floor price of a Noun is is roughly 112 ETH (~$120,000). In addition, secondary market sales have remained relatively stable throughout 2022, with over 2,600 ETH in total sales volume over the last 90 days at the time of writing.
Given the success of the Nouns DAO treasury, the impact of governance voting, and the permanent voting rights that each Noun guarantees, Nouns remains highly sought-after and to this point, has endured market volatility much better than many of its fellow counterparts. It will be interesting to track the different proposals being passed through governance and see how well they do once launched. The treasury is vast and a strategic deployment could help solidify Nouns place within the ecosystem and beyond.